The UK tax year always ends on 5th April and starts on 6th April.
With less than a week to go until the start of the new 2024/2025 tax year, Stevie Heafford, Tax Partner at HW Fisher, highlights five ways individuals can prepare, including the allowances they should maximise before the 6th April.
1. Make the most of tax free ISA allowances
Each year the government allows individuals to save a certain amount of cash tax free through an Individual Savings Account (ISA). There are four types of ISA you can choose from: cash ISAs, stocks and shares ISAs, innovative finance ISAs, and Lifetime ISAs.
The tax free ISA limit for the 2023/2024 tax year is £20,000. This amount can either be saved in one type of ISA, or split amongst multiple types, however, only a maximum of £4,000 can be paid into a Lifetime ISA.
Remember that tax free savings can also be made for children under the age of 18 through a Junior ISA (JISA). The savings limit for the 2023/2024 tax year is £9,000.
2. Consider topping up your pension
Individuals in the UK have an annual allowance that they can save in a pension pot in a tax year before they must pay tax. This is currently £60,000, or 100% of earnings, whichever is lower.
You may also be able to carry forward any annual allowance that you did not use from the previous 3 tax years.
3. Reduce your Inheritance Tax bill
Making gifts throughout your lifetime is an effective way to ensure that you are leaving as much behind to your loved ones as possible. For this, there is an annual exemption of £3,000 which can be rolled forward up to one tax year.
4. Don’t forget your Capital Gains Tax allowance
Capital Gains Tax (CGT) is payable on the profit an individual makes when they sell an asset that has increased in value. You have to pay CGT on your overall gains above the tax free allowance, also known as the Annual Exempt Amount.
For the 2023/2024 tax year, the Capital Gains tax-free allowance is £6000. This figure is set to half in the new tax year (2024/2025) to £3000, meaning it might make sense for some people to sell their assets before the 6th April, rather than wait.
5. Get organised!
The start of a new tax year is an excellent opportunity for individuals to take a fresh look at their finances and plan for the year ahead.
Key dates for your diary include:
If you would be interested in receiving tailored expert advice from Stevie, you can get in touch here.
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