As we get closer and closer to the end of the personal tax year on 5 April, now is the time to review your finances and ensure you’ve made full use of all available tax reliefs and allowances available to you to save money on your next tax bill.
Whether you’re an employee, self-employed or an investor, a little preparation now can go a long way. So, with that in mind, here are some key areas for you to check to make sure you’re in the best possible position before the tax year ends.
Have you claimed your allowable expenses?
When you run a business, you’re entitled to deduct the value of your allowable expenses from your pre-tax profit, leaving you with a smaller tax bill. Making sure you’ve claimed everything you’re entitled to can make a significant difference to your tax liability.
Allowable expenses cover a wide range of costs that are “wholly and exclusively” for business purposes. These include:
- office and workspace costs
- travel and mileage costs
- professional fees and subscriptions
- marketing and advertising
- staff salaries and benefits
- stock and materials.
By keeping accurate records and ensuring all receipts and invoices are stored safely or digitally, you can make sure you’re not paying more tax than necessary. If you’re unsure whether an expense qualifies, seek professional advice before the tax year ends to maximise your deductions and avoid any mistakes.
Have you topped up your ISA allowance?
Individual savings accounts (ISAs) offer you a tax-efficient way to save and invest, as any interest, dividends or capital gains earned within an ISA are completely tax-free. As long as you are a UK resident over the age of 18, you have an ISA allowance of £20,000 each year, which can be spread across multiple vehicles.
- Cash ISAs – ideal for risk-free saving.
- Stocks and shares ISAs – for those looking to invest.
- Lifetime ISAs (LISAs) – for first-time buyers and retirement savings.
- Innovative finance ISAs – for peer-to-peer lending investments.
Any unused allowance cannot be carried from one tax year to the next, so if you haven’t yet used your full allowance for the year, consider adding to your ISA before 5 April.
Have you used the pension allowance?
Pension contributions are important for saving for the future. Fortunately for you, you should be able to benefit from pension tax relief, which sees the government top up your contributions, up to a certain amount.
- Basic-rate taxpayers (20%) receive £25 for every £100 contributed (because 20% of £125 is £25).
- Higher-rate taxpayers (40%) can claim additional relief through their tax return to receive an extra £66.67 for every £100 they contribute. That reduces the cost of a £100 contribution to just £60.
- Additional-rate taxpayers (45%) can claim even more, reducing the cost to £55 per £100 saved. For every £100 contributed, tax relief will result in an extra £81.82.
You can contribute up to £60,000 per year (or 100% of your earnings, whichever is lower) and still receive tax relief. You can contribute more than that, but you won’t get tax relief on the extra contributions. If you haven’t used your full allowance in the past three years, you may also be able to carry it forward.
Have you used your capital gains tax allowance?
If you sell assets such as shares, property (not your main home) or other investments, you could be liable for capital gains tax (CGT). Each individual has a CGT allowance of £3,000 for the 2024/25 tax year. But that allowance doesn’t roll over into the next tax year, so if you’re planning on selling several assets, you may want to sell them each side of 5 April to boost your tax savings.
Have you considered gifting to reduce inheritance tax?
Inheritance tax (IHT) is levied on the value of an estate above a certain amount, which can significantly impact the amount the heirs, descendants and beneficiaries receive when you pass away. One popular strategy to limit inheritance tax, is to claim the various gifting allowances the government offers.
- You can give away £3,000 per year tax free.
- You can also make small gifts of up to £250 per person, as long as you have not used another allowance on the same person.
- Gifts of £5,000 (to children), £2,500 (to grandchildren) or £1,000 (to others) are also exempt from IHT.
It’s important to note that gifts are only completely tax free if you live another seven years after making them. If you die before that time, the IHT rate should be lower, however.
If you haven’t used your allowances and are able to, consider gifting before 5 April. If unused, you can carry this allowance forward by one year, but no further.
Have you checked your tax code?
Your tax code determines how much tax is deducted from your salary or pension, but errors are common and an incorrect code could mean you’re paying too much or too little tax. You should, therefore, check the code on your payslip or the HMRC online portal to ensure you’re not overpaying or underpaying tax. If you think your tax code is wrong, contact HMRC to have it corrected before the new personal tax year begins.
End the tax year on a strong note
With the end of the personal tax year fast approaching, now is the ideal time to ensure you’ve made the most of every available allowance and relief. From confirming your allowable expenses to maximising your ISA and pension contributions, a few targeted actions could significantly reduce your tax bill and put you in a strong position for the new tax year. If you’re still unsure where to start or need tailored guidance, we’re here to help. Get in touch for friendly, professional advice to make sure your finances are in the best possible shape before 5 April.
Are you ready for the new personal tax year? Get in touch with us for friendly and professional advice.