Maximise your tax allowances before 5 April

With the tax year ending on 5 April 2025, now is the time to review your financial strategy and ensue you’re making the most of your allowances. By acting before the deadline, you can leverage tax-efficient opportunities, minimise liabilities and maximise your wealth. Independent Financial Adviser, Jason Lloyd, explains how.

Make use of your ISA allowance

Individual Savings Accounts (ISAs) remain one of the most tax-efficient ways to save and invest. For the 2024/ 2025 tax year, the annual ISA allowance is £20,000. Any gains you make within an ISA shield you from Capital Gains Tax (CGT), making it a valuable option, especially for higher or additional rate taxpayers. Furthermore, you pay no tax on interest or dividends earned within an ISA.

If you’re married or in a registered civil partnership, you and your partner can contribute up to £40,000 into your combined ISAs, doubling your tax-free savings potential.

You might also consider the ‘bed and ISA’ technique, where you sell non-ISA investments to realise a capital gain and reinvest the proceeds within an ISA. This can be effective but may involve a temporary period out of the market. This strategy requires careful timing and professional advice.

Boost your pension contributions

Contributing to your pension is another effective way to maximise tax relief. For most individuals, the maximum tax-relievable contribution for the 2024/ 2025 tax year is £60,000 or 100% of your earnings, whichever is lower. However, high earners should be mindful of the tapered annual allowance:

• If your income exceeds £260,000, your allowance reduces by £1 for every £2, down to a minimum of £10,000.
• If you’ve flexibly accessed your pension, the money purchase annual allowance (MPAA) caps contributions into your pension at £10,000 per year.

Even if you don’t have an earned income but are under 75, you can still contribute up to £2,880 into a pension, with tax relief boosting this to £3,600. Pension contributions from both personal and workplace schemes count towards your annual limit. Ensure you stay within your limit to avoid unnecessary tax charges.

Plan for financial gifting

Another allowance worth considering is using your entitlement to make tax-free financial gifts which reduces future Inheritance Tax (IHT) liabilities.

How much can I gift?

• You can gift up to £3,000 each tax year without it being subject to Inheritance Tax (IHT). If unused in the previous tax year, this allowance can roll over, allowing you to gift £6,000 without tax consequences.
• Smaller gifts of up to £250 per person can be made to multiple recipients, provided you don’t combine these with your £3,000 annual exemption to the same recipient. So, for instance, you can’t give one child £3,000 as a gift and then gift another £150 later that year, unless you have rolled over your previous gifting allowance.
• Larger gifts, such as those intended for property deposits for children, may also be exempt from IHT if you live for at least seven years after making the gift.

Make the most of your Capital Gains Tax (CGT) allowance – use it or lose it!

The Capital Gains Tax regulations offer an annual exemption, allowing you to make tax-free gains of up to £3,000 in the 2024/25 tax year. This allowance doesn’t roll over, so if you don’t use it by 5 April, it’s lost.

Strategies to consider

• Spouses and registered civil partners can transfer assets between themselves to utilise their annual exemptions, effectively doubling your tax-free gains.
• ISAs or pensions: Investments held within these are CGT-exempt, offering additional ways to protect your wealth.

Review your Personal Allowance

Your Personal Allowance allows you to earn up to £12,570 tax-free annually. Couples can optimise tax efficiency by transferring income-generating assets to the partner in the lower rate tax bracket.

Additionally, if one partner’s income falls below the personal allowance, the Marriage Allowance could allow up to £1,260 of the unused allowance to be transferred to the higher earner, resulting in a tax saving of up to £252.

This approach is particularly useful for couples with a significant disparity in income and is always something we discuss with clients as part of any comprehensive financial review before the tax year ends.

Seek expert professional advice

Navigating tax regulations and allowances can be complex and getting it wrong can prove costly. By seeking professional financial advice and discussing your options with us, we will ensure you are presented with tailored strategies to maximise your financial opportunities and avoid unnecessary pitfalls.

David Hulse, Head of our Independent Financial Advisers said:

“Acting early ensures you have time to explore every option available to you. We’re here to help you make informed decisions that align with your goals.”

Jason Lloyd, Independent Financial Adviser, adds:

“Tax-efficient strategies like ISAs, pensions, and financial gifting can have a transformative impact on your financial health. Don’t let the deadline pass without taking full advantage.”