The Importance of Pre-Year-End Tax Planning: Financial Year 2024/25

24th January 2025

As the 2024/25 financial year draws to a close, individuals across the UK have a prime opportunity to optimise their personal tax liabilities. Effective pre-year-end tax planning can make a substantial difference, enabling taxpayers to take full advantage of available reliefs, allowances, and strategies. Here, we explore some key considerations for this crucial period.

  1. Maximising Annual Allowances and Reliefs

Each tax year offers a range of allowances and reliefs that can be used to reduce tax liabilities. Key ones to consider include:

  • Personal Allowance: Plan your income to ensure that your tax-free personal allowance (£12,570 for most taxpayers) is not lost. Income exceeding £100,000 reduces the personal allowance by £1 for every £2 earned above this threshold.  There may be possibilities to bring your assessable earnings under this threshold and preserve your Personal Allowance if your income is over £100,000.
  • Capital Gains Tax Allowance: Use your £6,000 CGT annual exemption before the tax year ends to offset gains on investments or property (excluding your primary residence).
  1. Timing Gift Aid Donations

Gift Aid donations to charities not only support worthwhile causes but also provide a tax benefit. Higher and additional rate taxpayers can claim relief on donations, reducing their income tax bill. Ensure any planned donations are made before 5 April 2025 to qualify for this year’s tax relief.

  1. Optimising Pension Contributions

Pension contributions offer one of the most effective ways to reduce taxable income, but payments into pensions have to be made before the end of the Tax Year:

  • Annual Allowance: For 2024/25, the standard annual allowance is £60,000. If you have unused allowance from the three previous tax years, consider “brought forward” contributions. Unused allowance relating to Tax Year 2021/22 will drop away after 06 April 2025 if not used. Note that exceeding the annual allowance can lead to a tax charge.
  • Tapered Allowance: High earners should assess whether they are affected by the tapered annual allowance, which reduces the limit for those with adjusted income over £260,000.
  1. Strategic Business Expenditure

For those who are self-employed or own a business, timing expenses can be a powerful tax planning tool:

  • Bring forward planned expenditures into the current financial year to reduce taxable profits.
  • Ensure that any allowable expenses are fully accounted for, such as home office costs, travel expenses, and professional fees.
  1. Making Gifts for Inheritance Tax Planning

If inheritance tax (IHT) is a concern, consider making gifts to reduce the value of your estate:

  • Use the annual gift allowance of £3,000 per person, which can be carried forward one year if unused.
  • Make regular gifts from surplus income, ensuring they meet HMRC’s “normal expenditure out of income” rules.
  1. Additional Strategies to Consider
  • Marriage Allowance: Eligible couples can transfer 10% of the personal allowance from the lower earner to the higher earner, saving up to £252 in tax.
  • Loss Relief: If you’ve incurred losses on investments or in business, ensure these are reported and offset against gains or income.
  • ISAs: Ensure that you have fully utilised your ISA allowances where possible.
  • Tax advantaged investment schemes: Ensuring that the timing of investments into EIS/ SEIS/ VCT is made before 05 April 2025 in order to claim Income Tax reducers in the correct period and particularly where carry back is intended.

Conclusion

Pre-year-end tax planning is essential for ensuring you utilise all available reliefs, allowances, and strategies to minimise your tax liabilities. By acting before 5 April 2025, you can optimise your finances and avoid missing valuable opportunities. Consulting with Thompson Jenner ensures that your approach is tailored to your specific circumstances, helping you navigate the complexities of the UK tax system with confidence.

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