The 2024-25 tax year is ending, and some simple tax saving opportunities will soon slip away.
It’s getting a bit late for many year-end tax saving ideas but here are a few that you could still implement.
- Inheritance tax annual gifting allowances
There is an annual gift allowance of up to £3,000 per tax year (£6,000 for a couple) which is not subject to IHT even if you do die within seven years, as it will be treated having left the estate immediately.
The annual allowance can be brought forward for one tax year if not used, which means a possible £12,000 per couple could be available to gift before the end of the tax year on 5 April. That can be given to one individual or split across several.
Another option is to use the ‘normal expenditure out of income’ exemption to IHT, which allows you to make regular gifts over long periods of quite substantial amounts as long as they come out of income and do not impact your usual standard of living.
- 2. Reducing taxable income – over £100K personal allowance withdrawal
If your earnings are over or could be over £100,000 you may lose some or all of your personal allowance. consider the following before 6 April:
- pension contributions or charitable gift aid payments ;
- investing in tax-efficient investments such as SEIS and EIS;
- Pension contributions – using your annual allowance
Tax relief is given at your marginal rate of income tax although that money will remain inaccessible until age 55 currently, or 57 from April 2028.
You are limited to the lower of £60,000 or your net relevant earnings. However, if you have a company, it may be more tax efficient for the company to make contributions, but you need to be quick, so speak to your IFA.
- Giving to charity
Charitable donations should be made by the spouse with the higher marginal tax rate to maximise income tax relief.
- Capital gains tax allowances
It may be beneficial to sell enough assets each year to use the CGT annual exemption, which is now just £3,000 per tax year. Assets can also be transferred between spouses free of tax, and so make use of both spouses’ annual exemptions and any capital losses.
- Use your ISA allowances
The annual ISA limit for 2024/25 is £20,000, and this cannot be carried forward if not used. Couples can therefore invest £40000 per annum.
Junior ISAs for children under 18 have a separate annual allowance of £9,000. Normally, income arising on funds given to children by a parent remains taxable on that parent if over £100 a year. As ISA income is not taxable, this allows you to give cash to your children without having to pay tax on the income generated.
Spring Statement
The Chancellor’s Spring Statement is on 26 March and while not expected, there could be more tax announcements at that time.
