Tax Planning Tips for 2024/25

With the 2024/225 Tax Year ending soon, you’ll want to make sure you’re making the most of your allowances before they reset. Here are some key ways to reduce your tax bill and grow your wealth.

How To Maximise Your Tax Allowances Before 5 April 2025

1. Use Your ISA Allowance
   Invest up to £20,000 in an ISA this tax year to shield gains from capital gains tax (CGT) and income tax. Couples can save up to £40,000 combined. Consider a ‘bed and ISA’ strategy to move investments into an ISA for tax-free growth, but seek financial advice first.

2. Boost Your Pension
   You can contribute up to £60,000 or 100% of earnings (whichever is lower) into a pension, with tax relief. High earners may have a reduced allowance. Non-earners under 75 can still contribute £2,880, with tax relief boosting it to £3,600.

3. Give Tax-Free Gifts
   Gift up to £3,000 annually without inheritance tax (IHT). Smaller £250 gifts are also exempt. Larger gifts may be IHT-free if you live for seven years.

4. Use Your CGT Allowance
   Sell assets strategically to use your £3,000 CGT-free allowance before it resets. Transfers between spouses can help reduce tax. Gains on ISAs and pensions remain CGT-free.

5. Optimise Your Income Tax Allowance
   The £12,570 personal allowance resets each year. Couples can transfer assets to the lower-earning partner to reduce tax. The marriage allowance lets you transfer up to £1,260 of unused allowance to your spouse, if a basic rate taxpayer.

National Insurance Contributions: Pay for Missed Years

If you’re eligible for the new State Pension but have gaps in your National Insurance (NI) record, you may be able to make voluntary contributions to boost your entitlement. The deadline to pay for missed years between April 2006 and April 2018 has been extended to 5 April 2025. Checking your NI record now can help you determine if making payments will increase your pension. Contact us for guidance if you’re not sure whether this is right for you

Furnished Holiday Lettings: What the Abolition Means for You

Starting from April 2025, the Furnished Holiday Lettings (FHL) regime will be abolished for UK landlords. This will align a landlord's tax obligations with those of other property businesses, removing several tax benefits. One of the key changes is that owners will no longer be able to claim capital allowances. Instead, capital allowances will be replaced by a much less generous relief titled ‘replacement of domestic items relief’.

However, if capital allowances are claimed by 5 April 2025, these will be safely ‘banked’ for tax purposes, so it is essential FHL accommodation owners act now to maximise their tax savings. Please speak to us if you would like more information and explore any opportunities available to you.

Reduce Your Taxable Income Before the Threshold

If your income is between £100,000 and £125,140, you need to know that your personal allowance will reduce, potentially leading to a marginal tax rate of 60%. To mitigate this, consider strategies such as:

• Making pension contributions

• Donating to charity

• Deferring income to 2025/26

• Transferring income-generating assets to your spouse

Protect Your Child Benefit with Tax Planning

If you or your spouse's taxable income exceeds £60,000, you may be subject to the high-income child benefit charge, which gradually reduces the benefit. Once taxable income reaches £80,000, the benefit is lost entirely. To preserve this benefit, you should consider reducing, deferring, or transferring income.

If you’re not currently claiming child benefit, it’s worth reconsidering following the increase in thresholds for 2024/25. You may even be eligible for a back payment for up to three months.

Maximise Your Tax-Free Income as a Director/Shareholder

With the new tax year approaching, now’s the time to review your remuneration strategy. A well-structured mix of salary, dividends, and interest could allow you to receive up to £19,070 tax-free in 2024/25 and 2025/26 - and double that for couples. Ensuring your income is tax-efficient can make a significant difference to your overall tax liability.

Make the Most of Your £500 Dividend Allowance

The tax-free dividend allowance remains at £500 for 2024/25 and 2025/26. Make sure you fully utilise this allowance before 5 April 2025 to minimise your tax liability. If your spouse is not already a shareholder, considering spouse planning could help double the available tax-free dividends.

Make Tax-Efficient Investments with Government Backed Schemes

If you have surplus cash, consider investing in Government-backed platforms like the Enterprise Investment Scheme (EIS), Seed Enterprise Investment Scheme (SEIS), or Venture Capital Trusts (VCTs). These schemes offer income tax relief ranging from 30% to 50%, and tax-free capital gains on disposal.

Additionally, you may be able to carry back investments made in 2024/25 to 2023/24, accelerating your tax relief

Non-Dom Tax Regime: Prepare for the Abolition

The UK is abolishing the non-domicile tax regime from 6 April 2025, significantly impacting tax liabilities for affected individuals. Major changes include reforms to income tax, capital gains tax, inheritance tax, and trust taxation. If you are a UK resident non-domicile or have spent time abroad, now is the time to review your tax affairs. Speak to our specialists to explore your options ahead of the transition.

Double Cab Pick-Ups: Take Advantage of Current Tax Treatment

From April 2025, double cab pick-ups will be classified as cars rather than vans for tax purposes, leading to higher benefit-in-kind (BIK) charges, reduced capital allowances, and leasing restrictions. However, transitional rules may allow you to retain van tax treatment if you purchase or lease before 6 April 2025. If you use or provide these vehicles for business, consider acting before the changes take effect.

Agricultural Property Relief: Extended Scope for Inheritance Tax

From 6 April 2025, Agricultural Property Relief (APR) will include land under environmental agreements with government bodies, increasing inheritance tax benefits. However, not all schemes will qualify, and further APR changes take effect in 2026. If you own agricultural land, now may be the time to reassess your tax planning.

Business Asset Disposal Relief (BADR) & Investors’ Relief: Use Them Before They Reduce

BADR and Investors’ Relief currently offer a reduced CGT rate of 10% on qualifying gains but will decrease in value from April 2025 and again in April 2026. If you’re planning to sell a business or shares, careful timing could maximise your tax savings. Be aware of anti-forestalling rules for certain transactions. Contact us to discuss how to optimise your relief.

Salary Sacrifice: A Way to Offset Rising National Insurance Costs

From April 2025, employer NICs will rise from 13.8% to 15%, and the earnings threshold will drop, increasing costs for businesses. Salary sacrifice schemes, where employees exchange part of their salary for benefits, can help reduce NIC liabilities while improving employee compensation. If you’re an employer looking to manage rising costs, now is the time to explore this option.