End of Tax Year Checklist

With the end of the tax year fast approaching (5th April), have you maximised your tax allowances? Here are a few areas to consider.

1. Pensions

Pay into your pension – receive tax-relief on contributions paid in up to 100% of your earnings (capped at the annual allowance of £60,000) or £3,600, whichever is greater.  The below illustration shows the benefit of tax relief on contributions:

Source: Phoenix Wealth

Restore allowances – making pension contributions can restore a lost personal allowance or help avoid the child benefit tax charge.

Limited company – pension contributions from a limited company are an allowable business expense, therefore reducing the corporation tax bill.

Carry forward – unused annual allowance from the 3 previous tax years can be carried forward when making pension contributions.

Match your employer’s pension contribution – some employers will pay more into your workplace pension if you agree to increase your contributions too, known as ‘contribution matching’.

Children’s pension – a parent/legal guardian can open a pension for their children.  Anyone can then contribute up to £2,880 net each tax year, which becomes £3,600 with tax relief.

State Pension boost – you need a complete national insurance (NI) record to qualify for the full State Pension.  Any gaps that are unlikely to be filled from work (or qualifying benefits/care credits) can be covered by a voluntary NI contribution.  You still have time to cover any gaps going back to 2006.  However, from April 2025 you will only be able to go back 6 years.  Check your State Pension forecast online: https://www.gov.uk/check-state-pension

2. Investments

ISA allowance – save up to £20,000 into an ISA each tax year.  Any interest or investment returns are completely tax-free.  You can hold a cash ISA, stocks and shares ISA or a mixture of both (but the total paid in cannot exceed £20,000 each tax year). This is ‘use it or lose it’, meaning you cannot carry forward any unused ISA allowance into the new tax year.

Junior ISA for under 18’s – save up to £9,000 each tax year into a Junior ISA for children, which they can access from 18.

Lifetime ISA – if you are over 18 but under 40, you may wish to consider a Lifetime ISA for a first-time property purchase, or retirement.  Check out our earlier blog: https://beechwoodfs.co.uk/2023/06/16/lifetime-isa-a-25-government-bonus-towards-first-home-or-retirement/

Capital Gains Tax (CGT) exemption – this is the amount of gain you can realise each tax year before paying CGT.  This year’s allowance is £6,000, which reduces to £3,000 from 6th April.  This is a use it or lose it allowance.  If you are married, you can do an interspousal transfer, meaning you can transfer investments to your spouse/civil partner so they can use their annual exemption also.

3. Tax Planning

Register losses – you have 4 years to register any capital losses with HMRC.  These can then be carried forward indefinitely to reduce any future gains (after you have used your annual CGT exemption).

Marriage allowance – if your spouse does not use all their personal allowance, they can transfer up to £1,260 to you, provided you are a basic rate taxpayer.  This can save income tax up to £252 in the tax year.  Claims can be backdated up to 5 years.

Gifts – there are a number of annual gift allowances that you can use in trying to reduce the size of your estate and therefore potential inheritance tax (IHT) on death.  These gifts are outside of your estate immediately, rather than having to wait 7 years.  Each tax year you can gift away:

• £3,000 – if you don’t use the full £3,000 exemption, you can carry it forward for one year only.
• Up to £250 as many times as you like under the small gift’s allowance.  Note this cannot be combined with any other gift allowance.
• Marriage – £5,000 to a child getting married and £2,500 to a grandchild getting married.
• Regular gifts from unspent excess income.

Please note that these are the rules under current legislation, which can change.  This is for information only and does not constitute a personal recommendation.  Please speak to one of the advisers at Beechwood to get the best advice for your circumstances.