Pre 5th April Tax Planning Opportunities

As we approach another personal tax year end, we turn our thoughts to tax planning opportunities and actions that should be considered before 5 April. The list below is not exhaustive; however, it should provide some food for thought.

Pension Contributions

Higher rate and additional rate tax can be saved on pension contributions. However, be wary of the limits on the tax relief available to avoid a tax charge. For most, the annual limit is currently £60,000, with the option to utilise any unused allowances for the previous three tax years. Your annual allowance may be lower than £60,000 if you have a high income or have flexibly accessed your pension pot.

Managing Income Levels Tax-Efficiently (2024/25)

Pension savings and charitable gift aid donations can produce particularly significant tax savings for those:

• With income over £50,270, to avoid the higher income tax rate.
• With income over £60,000, to escape the high income child benefit charge.
• With income over £100,000, to preserve the tax-free Personal Allowance, and
• With income over £125,140, to avoid additional rate tax.

There are often significant savings to be had where one spouse earns much less than the other, by transferring income producing assets to the lower earner. This can make use of various tax-free allowances and ensure income is taxed at the lowest rates.

Capital Gains Tax (CGT)

Individuals are entitled to realise capital gains of up to £3,000 in 2024/25 without having to pay CGT. Gains above this threshold are usually taxed at:

• 18% (Basic Rate from 30 October 2024; 10% prior to that date, unless residential property)
• 24% (Higher or Additional Rate from 30 October 2024; 20% before, unless residential property)

For assets qualifying for Business Asset Disposal Relief (BADR), the rates increase from 10% to 14% for disposals from 6 April 2025, and again from 14% to 18% with effect from 6 April 2026. It is therefore essential to plan asset sales carefully to take advantage of the lowest tax rates.

Individual Savings Accounts (ISAs)

For 2024/25, individuals can contribute up to £20,000 to ISA accounts, which give tax-free income and capital gains.

The limit of £20,000 is across all ISA products including the cash ISA, Lifetime ISA, Innovative Finance ISA and Stocks and Shares ISA (the limit for contributions to a Junior ISA for 2024/25 is £9,000).

From 6 April 2025, a new allowance will be available but any unused allowance from the previous year will be lost.

Inheritance Tax (IHT)

Future changes to IHT may be on the cards and it was announced that from April 2026 Agricultural and Business Relief’s for IHT are to be curtailed to 100% relief on the first £1m of qualifying assets and then 50% relief on the excess. We recommend you make use of your £3,000 annual gift allowance, or £6,000 if you have not used the prior years gift allowance.

If you have excess income there is a extremely valuable relief for making regular gifts our of surplus income which are exempt from IHT. This relief is potentially without limit but certain conditions have to be met. Click here for further information.

Tax efficient end of tax year remuneration planning

Ensuring the extraction of monies/profits from a personal limited company is taken as tax efficiently as possible, by way of salary, dividends, interest and/or pension contributions, utilising available annual allowances, reliefs and lower tax rates, where applicable. Consider taking a bonus before 5 April to reduce exposure to Employer NIC rises which from 6 April 2025 is increasing to 15%, and the current £9,100 threshold, at which employer NIC becomes payable, is reducing to £5,000 a year at the same time.

Click here to view our Tax Planning Document

Get In Touch

For further information on any IHT, CGT or Income Tax planning options, please contact your local Whitings LLP office today.

Disclaimer - All information in this post was correct at time of writing.