As the tax year-end approaches, now is the time to take advantage of available reliefs and allowances to maximise tax efficiency.
In this week’s Tax Tuesday, we flag seven key areas for business owners and individuals to consider before 5 April 2025.
- Maximise your ISA
If you have some spare cash, an obvious tax planning point might be to maximise your ISA allowances for the 2024/25 tax year (currently £20,000 per person).
If you are 18 or over, but under 40, you can open a Lifetime ISA to save for your first home or retirement. You can put in up to £4,000 each year, until you’re 50, but you must make your first payment into your ISA before you’re 40. The government will add a 25% bonus to your savings, up to a maximum of £1,000 per year. The £4,000 Lifetime ISA limit counts towards the £20,000 ISA allowance.
- Maximise your personal pension contributions
You might also want to consider increasing your pension savings before 5 April 2025. Making additional pension contributions can provide valuable tax relief, particularly for higher earners.
Under the current rules, the government adds to your pension contributions at the 20% basic rate. For instance, if you save £4,000 in a personal pension, the government tops this up to £5,000.
If you are a higher rate taxpayer there is a further £1,000 tax relief when your tax liability is calculated, reducing the net cost to £3,000.
If your income exceeds £100,000, pension contributions can help reduce the impact of the personal allowance taper, potentially saving tax at an effective 60% rate.
- Make voluntary National Insurance Contributions
A retiring person needs to have 35 ‘qualifying years’ in order to claim the full state pension. Individuals with gaps in their National Insurance Contributions (NIC) record can make Class 3 NIC payments to boost their State Pension. The deadline for making voluntary NICs for years dating back to 2006 is 5 April 2025, so it’s worth checking your contributions now.
- Capital Allowances for Business Owners
The Annual Investment Allowance (AIA) allows businesses to deduct 100% of qualifying capital expenditure (up to £1 million) from taxable profits. This does not apply to motor cars, but there is a special 100% tax relief for new zero-emissions vehicles.
In addition to the AIA, limited companies buying new (not second-hand) equipment are entitled to fully expense the cost of most acquisitions against business profits. There is no financial limit on expenditure qualifying for this “full expensing” relief.
- Consider any Furnished Holiday Lets
The Furnished Holiday Lettings (FHL) regime will be abolished from 6 April 2025. This means owners will lose access to favourable tax treatment, including capital allowances.
If you own an FHL, consider making capital improvements before the changes take effect. It may also be worth considering the cessation of your FHL trade prior to 6 April 2025, so that your ability to claim Business Asset Disposal Relief in the normal period of three years post cessation can be preserved.
- Use your Capital Gains Tax exemption
The Capital Gains Tax (CGT) annual exemption is currently £3,000. If unused before 6 April 2025, it cannot be carried forward. You may wish to consider realising gains before the year-end to utilise this tax-free amount.
- Stamp Duty Land Tax – Rates Changing Soon
Stamp Duty Land Tax (SDLT) thresholds will revert to previous levels on 1 April 2025, meaning higher costs for property buyers in England and Northern Ireland. If you are considering a property purchase, completing before this deadline could lead to significant savings.
| Threshold to 31 March 2025 | Threshold from 1 April 2025 | |
| For first-time buyers of residential property | £425,000 | £300,000 |
| Single residential property | £250,000 | £125,000 |
How can we help?
Navigating tax planning can be complex and, with upcoming changes, it’s crucial to act now.
Our team is here to help you make the most of your allowances, optimise your tax position and ensure compliance with the latest regulations.
Whether it’s reviewing your investment strategy, maximising tax reliefs or preparing for legislative changes, we can provide tailored advice to suit your needs.
Contact your usual relationship principal, email tax@haroldsharp.co.uk or call 0161 905 1616.