As the UK tax year draws to a close on 5th April 2025, now is the ideal time to review your finances and ensure you’re making full use of the available allowances. Acting early can help you reduce your tax liability and make your money work harder. Here’s a guide to some key allowances you may want to consider before the tax year ends.
1. ISA Allowances – Use It or Lose It
The ISA allowance for 2024/25 remains at £20,000 per individual. ISAs provide a tax-efficient way to save or invest, as any income or gains generated within the wrapper are tax-free.
- Cash ISA: Suitable for short-term savings.
- Stocks & Shares ISA: Ideal for longer-term growth potential.
- Innovative Finance ISA: For peer-to-peer lending.
- Lifetime ISA: Up to £4,000/year for first-time buyers or retirement (age restrictions apply).
ISA allowances do not roll over, so if you don’t use it by 5th April, you lose it.
2. Pension Contributions – Boost Retirement and Save Tax
You can receive tax relief on contributions up to the lower of £60,000 (the annual allowance for most) or your earned income. Unused allowances from the previous three tax years can also be carried forward (if eligible).
- High earners should be aware of the tapered annual allowance.
- Pension contributions can be especially tax-efficient for business owners.
Contributions before year-end could also help reduce a potential child benefit tax charge or mitigate higher rate tax.
3. Capital Gains Tax (CGT) Allowance – Reduced for 2024/25
The CGT annual exempt amount has been reduced to £3,000 for the tax year 2024-25. Consider using this allowance before year-end by realising gains, especially on non-ISA investments.
- Bed & ISA: Sell assets and re-purchase them in an ISA to protect future growth from CGT.
- Use spouse exemptions: Transfers between spouses are CGT-free, allowing for efficient planning.
4. Dividend Allowance – Further Reduced
The dividend allowance is now just £500 for the 2024/25 tax year (down from £1,000 in 2023/24). If you own shares or a business paying dividends, it’s important to plan accordingly.
- Consider ISA wrappers or redirect income to a lower-earning spouse if appropriate.
5. Inheritance Tax (IHT) Planning – Use Gifting Allowances
Each individual can gift up to £3,000 per year IHT-free. If unused from the previous tax year, you may carry forward last year’s allowance too.
- Small gifts (up to £250 per person) and wedding gifts also have exemptions.
- Regular gifts out of income can also fall outside the estate if properly documented.
Time Is Ticking... Make the Most of Your Allowances Before the 2024/25 Tax Year Ends
The end of the tax year can be an excellent time to tidy up your financial affairs. Whether you’re looking to maximise tax efficiency, invest for the future, or simply make use of what you’re entitled to, speaking to a financial adviser or planner can help tailor strategies to your needs.
- Deadline: 5 April 2025 Don’t leave it too late – proactive planning now could make a big difference.
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