Annual Review To Save More Tax – 5th April 2025
Thinking about straightforward actions that might be taken before 5 April to save tax.
As the days begin to extend and completion of the tax year (5 April) strategies, it is a great time to consider whether any action should be taken to make certain that available tax reliefs and allowances are fully utilised.
This is a broad subject, but there are some basic steps that can be taken into consideration by the bulk of taxpayers.
Income tax opportunities
In addition to the annual personal tax allowance (₤ 12,570 for 2024/25), which can be set against any kind of source of income, bear in mind that specific tax-free allocations are available to lower the taxed quantities of dividends and interest. Consider whether their use can be maximised by, for example, advancing or postponing income from one year to an additional new financial year. This might be done by closing an account and opening up a new one. For spouses or civil partners, shareholdings or accounts could be transferred to ensure these are utilized.
Interest or capital gains can be protected within a money or a supplies and shares ISA.
Capital gains tax
The yearly capital gains tax (CGT) exception has reduced to its present level of ₤ 3,000. This exemption cannot be continued, so think about whether possessions could be taken care of and reacquired to utilize it. The share identification guidelines can limit such purchases (see HMRC’s Capital Gains Handbook at CG51560) if the same possessions are reacquired within thirty day period. Nevertheless, this regulation does not apply if the possessions are reacquired within an ISA or by a partner or civil partner.
If possessions such as shareholdings one should think about whether a disposal can crystallise that loss, which could then be set against a gain on the disposal of an additional possession or possessions.
Inheritance tax
The idea of inheritance tax might not seem an immediate issue for many, however there are simple actions that can be taken to reduce a future prospective liability.
Presents of money or assets made by a benefactor who survives for at the very least seven years after the transfer will not be taken into account in determining the value of their estate on death. Gifts within three years of death are included in full and a gliding range applies between 3 and 7 years. There is also an annual exception of ₤ 3,000 each, so presents below that amount are omitted from an estate and, unlike income tax and CGT, this yearly exemption can be carried forward for one year if not used. Spouses and civil partners have their very own exemptions.
In addition to other exceptions for little presents and presents on marital relationship, there is additionally an exception for gifts constructed of income, which is typically overlooked. Such gifts should belong to the benefactor’s normal expenditure, so a one-off gift would be not likely to certify unless there is proof to show that this was planned to be the very first of a series of such presents. The present must be made from income rather than capital and the benefactor has be able to reveal that they still have adequate income to keep their regular standard of life. Record-keeping is important below and such gifts need to most likely be confirmed by an accompanying letter with the benefactor keeping a copy.
In addition to presents between partners and civil companions, some presents– such as for the upkeep of old or ill loved ones, and to charities or political events– are also exempt without any limitation enforced.
Verdict
A simple testimonial of prospective income and capital gains for the year and a check of the eligible tax reliefs might uncover chances to save tax instantly or in the future.
Practical tip
Keep in mind that pension costs continue to draw in tax benefits at the taxpayer’s highest rates, and these can be much more tax-efficient if income surpasses the ₤ 100,000 limit at which ₤ 1 of personal allowance is lost for every single ₤ 2 of additional income. This leads to a high marginal price of tax for those with income between ₤ 100,000 and ₤ 125,140.
Article Written by Martin J Craighan
Director of Salford Tax Specialists Ltd
31.01.2025.
All rights reserved.
