Every week we take a look at what is trending in the accountancy and tax press and share items that we think will interest you. However, these are only outlines and where they relate to tax planning should not be acted upon without looking into them more completely as everyone’s circumstances are particular to them. You need to take specific advice appropriate to your own circumstances.
While every effort is made to deliver accurate, informative and balanced articles this content is general in nature and should not be used as the sole basis for making decisions.
Use Them or Lose Them
The 2024-25 tax year is coming to a close and some simple tax saving opportunities will soon slip away.
Can you maximise your tax exemptions and reliefs before 6 April, including inheritance tax gifting, crystallising gains to reduce CGT liability and topping up pension contributions.
The Chancellor’s Spring Statement is on 26 March and while not expected, there could be more tax announcements at that time.
However, the main focus right now should be the allowances you will lose after 5 April.
- 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.
These amounts leave the estate immediately and are not subject to the seven-year rule so can be a very effective way of reducing IHT liabilities.
- 2. Pension withdrawals up to the tax band limit
Pension withdrawals outside of the 25% tax-free cash are taxable income and with the state pension taking up most of the personal income tax allowance, even a modest private pension income is likely to be taxed at least at the basic rate.
If you must withdraw money from your pension and it is going to be taxable, keep the right side of the next income tax rate threshold. Could a withdrawal this side of 6 April end up being taxed at a lower rate that if you withdrew it in the next tax year.
- 3. Reducing taxable income – over £100K personal allowance withdrawal
If your earnings are over or likely to be over £100000 and you are losing part of your personal allowance as a result consider the following before 6 April:
- pension contributions or charitable gift aid payments ;
- investing in tax-efficient investments such as SEIS or EIS;
It is getting late to use all of these this year but you could plan ahead for next year. For another year consider:
- transferring income-generating assets between spouses/civil partners;
- investing in assets which generate capital growth rather than income
- altering the timing of income to maximise use of lower rate bands.
- 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.
The tax benefits are accentuated in salary sacrifice payroll arrangements that also afford relief against employee National Insurance payments.
The maximum that you can save into a pension in a tax year while still benefitting from tax relief is the lower of £60,000 and your net relevant earnings.
However, it may be more tax efficient for your company to make the contributions.
- Giving to charity
Spouses should consider making sure that any charitable donations are made by the spouse with the higher marginal tax rate to maximise income tax relief.
Individuals can gift quoted shares or an interest in land to a charity. This has the advantage of income tax relief being available on the market value of the asset as well as the disposal being exempt from capital gains tax.
- Couples can save tax on savings income
Some individuals have a starting rate band of £5,000 for savings income, subject to the level of total income, and also a £500 dividend income.
A personal savings allowance is also available to basic and higher rate taxpayers but not to additional rate taxpayers. The allowance is £1,000 per year for basic rate taxpayers and £500 per year for higher rate taxpayers who need to use an ISA.
Spouses and civil partners should make sure they are using both of their personal savings allowances.
- 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.
Consider holding investments in tax-protected wrappers like ISAs or pensions.
You can transfer investments that are exposed to CGT or income or dividend tax into an ISA or pension before the end of the tax year, possibly using up some of your annual CGT exemption in the process.
- 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 £40,000 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.
Age discrimination
The average compensation in age discrimination cases in 2023/24 was £103,000. When does harmless banter become age discrimination.
Policies need to be put in place and implemented to counter any possible claims.
Making sure managers and supervisors are complying with the rules is crucial to dealing with the issue.
In one case, the employer lost a claim for age discrimination after the employee was the victim of discriminatory banter at work. He was referred to as ‘half-dead Dave’ at work due to his age.
This behaviour was not stopped by his supervisor who, in fact, encouraged the use of the nickname.
Do you need to get an HR professional to advise you on your own circumstances.
HMRC uses anti-spoofing software
HMRC is running a trial to see how effectively it can detect potential fraudulent deepfake calls using artificial intelligence?
The initial trial for the voice ID technology began on 24 February and will run for six weeks. HMRC plans to sign up 3,000 PAYE taxpayers to the pilot, using helpline advisers at call centres to ask people if they would like to opt in to the trial.
The system, developed by Nuance, which is owned by Microsoft, claims to have a 99% authentication success rate, and takes two seconds to authenticate a legitimate call, and 15 seconds to determine if a call is fraudulent.
Making Tax Digital Letters
The first letters will hit the post in April with landlords, sole traders and self-employed with income over £50,000 first to receive them.
The rules kick in from 6 April 2026, but this will be the first time individuals have been told personally by HMRC that they will have to comply with the new MTD reporting requirements.
From April 2025, HMRC will write to customers whose 2023/24 self-assessment tax return shows their income from these sources was close to, or over, £50,000. This letter will let them know that they may need to use Making Tax Digital for Income Tax.’
From April 2025, there will be two sign up options to enrol in MTD:
Option 1 is to sign up for the 2025-26 tax year and these early adopters will also have the benefit of access to a specialist HMRC customer support team to help them through any teething problems.
Option 2 is to sign up for the 2026-27 tax year.
Farms going bust with IHT changes
The change to agricultural property relief (APR) from 6 April 2026, will see 100% relief from IHT restricted to the first £1m of combined agricultural and business property. Above this amount, farmers will pay up to 20% IHT, paid in instalments over 10 years, interest free;
A couple can pass on up to £3m free of inheritance tax.
Only 40% of farms nationwide are expected to fall below the proposed tax relief caps.
The proposed changes could dramatically affect farming families and businesses.
It has been reported that 60% of farmers state that their business will not be financially sustainable in the future if the Chancellor goes ahead with the IHT overhaul announced in the Budget last autumn.
HMRC app
HMRC is running an advertising campaign to encourage downloads of the HMRC app.
The campaign is part of HMRC’s wider digital first approach to persuade taxpayers to use the app instead of making a phone call to one of its call centres. The four-month campaign runs until the end of March.
The app provides details about tax codes, national insurance number, work history and pay
As part of the drive to push people online, HMRC is also ramping up communications about the app when it sends letters to taxpayers with the message that downloading and using the app will ‘save paper and help the environment’.
In 2024, two million new users signed up to the app, bringing total users to 7m since it launched in 2017, but there are over 20m taxpayers who still need to be convinced to use it.
The HMRC app is available for Android and Apple users.
EV owners £195 road tax bill
EVs currently benefit from a road tax exemption, meaning that there is no charge for motorists when taxing their electric vehicles.
From April 2025 onwards this will be changing, and EV owners will be charged up to £620 in road tax.
New electric cars will be charged £10 for the first year’s tax, while those priced under £40,000 (when new) will be charged £190 per year from the second year with cars costing more than £40000 paying £600 in the second year.
If an EV was first registered before 31 March 2017, motorists will be expected to pay £20 per year. If it was registered between 1 April 2017 and 31 March, 2025, it will be £195 per year from the start of this April.
EV owners should consider re-taxing their cars before April.
Company Director Identity Checks
The ID system at Companies House will only be mandatory from late 2026. For the time being, it is the choice of companies whether they use the system.
The service is free of charge and will be voluntary for all new registrations at Companies House from 25 February 2025 but verification must be handled by an authorised corporate service provider (ACSP), which can be an accountancy or law firm, who will be able to handle the verification process on behalf of clients.
There will be a transition period for existing companies for a year from this autumn until Q4 2026. Companies House said that during the transition period, companies will only be required to provide identity verification credentials for their directors and PSCs when their confirmation statement is due within this period.
The verification requirement has been introduced to try to clamp down on rogue operators and bogus directors, particularly those registered as directors of multiple companies.
Questions?
If you have any questions about any of these, you know where to find us. If you prefer, just give me a ring on 07770 738770 or email me at alan.long@thelongpartnership.co.uk.
