Maximising Your Tax Allowances 2024/25

It’s that time of year again and you have not got long now to make use of your allowances before the end of the tax year, 5^th April 2025, just over 8 weeks to go. Maximising your tax allowances is an important aspect of financial planning. This is your last chance to take advantage of the following tax planning opportunities:

Personal allowance

This is the threshold of income an individual can earn each year before being subject to income tax. For the tax year 2024/25, the allowance is £12,570. Utilising the full allowance is of utmost importance, as it directly influences an individual’s tax liability.

ISA allowance

Having an ISA is a tax-efficient way to invest your money, as you are not charged tax on the interest or growth earned. There is a limit you can put into an ISA in a tax year. The ISA allowance for 2024/25 is set at £20,000, while the ISA limit for Junior ISAs is £9,000.  By maximising your ISA allowance, you can grow your investment tax-free, enhancing your wealth.

Pension allowance

Is the standard limit on the total amount of pension contributions that can be made each tax year, whilst still receiving tax relief. The limit is currently £60,000 (known as annual allowance). Your annual allowance could be lower if you have a high income. You will only pay tax if you go above the annual allowance. By increasing your pension contributions, can improve retirement savings and reduce the overall tax.

Dividend allowance

The Dividend Allowance is the amount of dividends you can earn tax-free in a year. For the 2024/25 tax year, the tax-free dividend allowance has been reduced to £500. By managing investments to utilise this allowance, you can enhance your investment returns and minimise tax liabilities.

Capital Gains Tax annual exemption

This is the amount you can earn in profits, before tax is due. You only have to pay Capital Gains Tax on your overall gains above your tax-free allowance (called the Annual Exempt Amount). The Annual Exempt Amount this tax year is £3,000 for individuals and £1,500 for trusts. Effectively using this allowance can reduce your overall tax liability and boost investment returns.

IHT planning

For individuals with sizeable estates, the end of the tax year is an ideal time to review inheritance tax (IHT) implications. Strategies such as making gifts, charitable donations, setting up trusts, and other estate planning measures can help minimise estate taxes and preserve more assets for your beneficiaries.

‘This is especially important in light of the recent budget announcement that, starting April 2027, pensions will be included as part of your estate for IHT purposes.’

Maximise your financial benefits before the tax year ends: how a financial planner can help

As the tax year draws to a close, it’s a particularly busy time for financial advisers, insurance providers, and pension planners. Acting promptly is crucial to ensure you don’t miss out on valuable allowances and exemptions.

Taking advantage of these allowances can significantly reduce your tax liability, helping your money work harder for you over your lifetime. By optimising your financial strategy, you can keep more of your hard-earned money.

Stay informed and proactive taxation

Levels and reliefs can change at any time and are dependent on individual circumstances. It’s essential to stay informed and proactive throughout the year.

Comprehensive financial planning

Expect ongoing support from your financial planner as part of a comprehensive financial plan. We look for opportunities year-round, aligning with your long-term goals and risk tolerance.

Comment

If you have any questions or need clarification, our experienced Financial Planners are here to help. Contact us today to ensure you’re making the most of your financial opportunities.