The end of the tax year is fast approaching, so it’s time once again for that all-important financial spring clean. Below, we’ve dusted off the to-do list and shared our tips on the actions you might need to take by 5th April.
ISAs
- You can save £20,000 into an ISA per person, per tax year, free of Income Tax and Capital Gains Tax
- If you have a ‘Flexi’ ISA and you’ve made a withdrawal during this tax year, you can re-contribute the amount you withdrew to the same ISA, but you must do so prior to 6th April
- Lifetime ISAs can be opened for those between 18 and 40, and contributed to until age 50, with the £4,000 allowance using some of the full £20,000 ISA limit. A bonus of 25% is added by the Government but these funds can only be used towards a first house purchase or, if not, must be retained until age 60; otherwise the government claws back the bonus paid plus an added early withdrawal penalty
- For under 18s, the Junior ISA allowance is £9,000. Accounts are operated by parents until 16, then the child. Withdrawals from the account cannot be made until the child reaches 18 or older
- For children aged between 16 and 18, there’s the option to save a further £20,000 into a Cash ISA, in addition to using the Junior ISA allowance. These can be subsequently transferred into a Stocks & Shares ISA
ISAs can be held in cash or invested in stocks and shares – which is right for you depends on when you’re likely to want the money
pensions
- The total you can pay into a pension in this tax year is £60,000 – this includes your own contributions, those from employers and others on your behalf
- The £60,000 allowance is reduced if you have total income from all sources exceeding £260,000. If your total income exceeds £360,000 in this tax year, the pension allowance is £10,000. This lower limit also applies if you’ve accessed pensions flexibly already
- If you’ve fully used your allowance for the current year, you can look back at up to 3 tax years and sweep up any unused pension allowances, starting at the earliest one (2021/22 for the current year which will drop away come 6th April)
- Large pension built up exceeding £1m before 5th April 2016? If you haven’t done so already, you might still benefit from applying for Fixed or Individual Protection 2016 to give you a higher tax free cash entitlement. The final deadline for applying for Fixed or Individual Protection 2016 is 5th April 2025
- The extended deadline of 5th April for State Pension top ups is also looming if you want to cover missing NI contributions between 2006-2016 (or more than the standard 6 years), We’d recommend contacting the Future Pensions Centre helpline sooner rather than later as it is notoriously busy. See our blog here for the finer details
Income Tax
- The Personal Allowance you receive tax free is £12,570 – it’s been frozen at this level for a while
- If your income goes over £100,000, you start to lose your Personal Allowance by £1 for every £2 you go over. This is known as the 60% tax trap. But personal pension contributions and gifts to charity may help you to reclaim your Personal Allowance
- There is also the Personal Savings Allowance for interest from bank accounts, bonds and other similar investments. This is £1,000 for Basic Rate taxpayers and £500 for Higher Rate payers, but nothing for Additional Rate payers. Make sure you’re using your spouse’s allowance too for the next tax year
- Everyone gets a Dividend Allowance of £500 for this tax year
- As savings accounts now pay interest at 4% to 5%, splitting income between spouses / civil partners to use each of your tax bands and allowances is much more valuable than it has been over recent tax years. This might not save you any tax for this tax year, but taking action now could reduce your tax bill for 2025/26
Capital Gains Tax
- Got taxable investments? You can realise capital gains of £3,000 before paying tax. After that, it depends when you sold in this tax year; before 30th October 2024 the tax rate is 10% for Basic Rate taxpayers and 20% for Higher and Additional Rate taxpayers; sales post 30th October are taxed at 18% for Basic Rate tax payers and 24% for Higher and Additional Rate tax payers
- If you’re married or in a civil partnership, you can transfer assets to your spouse / civil partner to sell and utilise their annual exemption and lower rate tax bands
- If you’ve business assets to sell which will qualify for Business Asset Disposal Relief, bear in mind the tax rate is currently still 10% but increases to 14% from 6th April 2025 and 18% from April 2026
Inheritance tax
- The amount which can be passed on death before paying tax is £325,000 each, with an additional £175,000 for a residential property if passed to direct descendants. This additional allowance is however tapered to zero if your total estate is over £2.35 million
- Passing wealth to your spouse / civil partner doesn’t use the allowances, in fact they could claim your unused ones, but be aware that you’re making their estate larger for the residential property allowance tapering threshold
- These limits have been frozen until 2030 so gifting wealth during your lifetime may be more attractive, if affordable
- Everyone can gift £3,000 per year without a test for Inheritance Tax If you haven’t used the last tax year’s allowance, you can bring that forward one year. This means a married couple could gift £12,000 in one year with no Inheritance Tax
- You can also give any surplus income away and it could be immediately outside your estate if it meets the rules and you record everything carefully
- In addition, you can gift to as many people as you like £250 so long as they didn’t also benefit from any other of your allowances
- Pensions are also coming into estates from April 2027 however the exact details aren’t known yet. Follow our blog series Unpacking Pensions: April 2027 and Beyond – we’ll keep you up to date as and when further information is released
Get in touch
This information is not a personalised recommendation, you should always speak to your adviser to get tailored advice before taking action. Contact us here.
Tax efficient investments may involve putting your money at risk, past performance of an investment doesn’t guarantee what will happen in the future. The value of a portfolio can go down as well as up, so there’s a chance you’d get back less than you put in.
Tax planning advice is not regulated by the FCA.
This information represents our understanding of law and HM Revenue & Customs practice as at 17 Feb 2025 and may change if legislation changes.
