Things to Consider Before the Start of the New UK Tax Year – 5th April 2025

As the 2024/25 tax year draws to a close, now is the perfect time to review your finances and ensure you make the most of available tax allowances and reliefs before the new tax year begins on 6th April 2025.

Here are some key areas to consider:

1. Pension contributions and tax relief – Pension contributions offer tax advantages both for individuals and companies. The annual allowance for pension contributions is £60,000 for most individuals. If you have unused allowances from the previous three years, you may be able to utilise them and make larger contributions or carry them forward.

• Utilise your capital gains tax (CGT) allowance – For the 2024/25 tax year, the CGT annual exemption is £3,000. Any gains above this amount may be subject to tax at 10% or 20% (18% or 28% for residential property). If you are planning to dispose of assets, consider doing so before the tax year ends to make use of your allowance as you will have another £3,000 tax free allowance from 6 April 2025.

• Dividend allowance changes – The dividend allowance is set to decrease to £500 from April 2025. If you rely on dividends from investments or a company you own, you may want to plan distributions before the new tax year to make the most of the current £1,000 allowance.

• Salary and bonus planning – Reviewing salary and dividends before the end of the tax year can help minimise tax liabilities. If you are close to a tax threshold, discussing the position with your accountant is important to see if anything can be changed to allow your extractions to remain in a lower tax band.

• Check tax code and PAYE notices – HMRC have recently been sending out notices stating what tax code individuals should be using in the 25/26 year. Ensure your tax code is correct to avoid overpaying or underpaying tax. Reviewing your latest PAYE coding notice can help ensure you are on the right tax code for the new financial year.

• Review inheritance tax (IHT) planning – The annual gift exemption allows you to give away up to £3,000 tax-free each year. Additionally, small gifts and other exemptions can help reduce potential IHT liabilities. If you haven’t made use of your gifting exemptions, now is a good time to do so.

• Charitable donations and gift aid – Higher-rate taxpayers can claim additional relief on donations through their tax return. If you are a higher rate tax payer and haven’t made charitable donations in the year but plan to do so, it would be beneficial to do before 5 April 2025.

• Maximise your ISA allowance – Whilst we do encourage our clients to speak to an IFA about investments, one area to save your money continues to be very popular. The Individual Savings Account (ISA) allowance remains a valuable way to shield savings and investments from tax. For the 2024/25 tax year, the annual ISA allowance is £20,000. If you haven’t used your allowance yet, consider making contributions before 5th April 2025, as the allowance cannot be carried forward.

• Self-assessment preparations – If you are self-employed or required to file a self-assessment tax return, start gathering financial records now. Submitting your return early can help you manage your cash flow and avoid last-minute stress. If you have payments on account due by 31 July 2025 but your total income for the 24/25 year looks lower than the 23/24 year, it is possible these payments on accounts can be reduced.

1. Review business expenses – Ensure that any allowable expenses are spent and/or planned before the year-end. This includes business expenses that can reduce taxable income but also larger asset purchases which you can claim capital allowances on.

Taking proactive steps before the tax year ends can help you manage your upcoming tax liabilities.

It is important to speak with your accountant or financial adviser to make sure you are making the most of the available tax benefits before 5th April 2025.

If you need further assistance, feel free to contact us at Dominic Hill Chartered Accountants.

info@dominichill.co.uk

01323 649 509