With the end of the tax year approaching on 5th April, it’s a good time to review your finances to ensure you’re making the most of the allowances available to you. Many of these allowances reset each year, meaning if they are not used before the deadline, they are lost.
At Strategic Solutions, we work closely with our clients to ensure their finances are structured in the most tax-efficient way possible. Here are five key areas to consider before the end of the tax year.
- Use Your ISA Allowance
ISAs are one of the most tax-efficient ways to save as they are free from Income Tax and Capital Gains Tax. The annual ISA allowance is currently £20,000 (this is due to reduce to for under 65’s to £12,000 for cash ISA’s only from April 2027), which can be invested into a Cash ISA, Stocks & Shares ISA, or a combination of both. For children, a Junior ISA (JISA) can also be opened, allowing contributions of up to £9,000 per year with the same tax benefits.
Interestingly for children that turn 18 they are able to contribute £9,000 before their 18th birthday into a JISA and then contribute £20,000 into an ISA in the same tax year after their birthday.
- Review Pension Contributions
Pensions are another highly tax-efficient way to save for the future. The annual pension allowance is currently £60,000, or up to 100% of your earnings (which ever is lower), and contributions receive tax relief at your marginal rate.
Some individuals may also be able to use the ‘carry forward’ rule, allowing unused allowances from up to the previous three tax years to be utilised – if earnings allow.
- Consider Your Capital Gains Tax Allowance
When selling certain assets, Capital Gains Tax (CGT) may apply. Each individual has an annual tax-free allowance of £3,000 which can be used against gains. Couples can also transfer assets between spouses without triggering CGT, allowing both allowances to potentially be used.
- Make Use of the Dividend Allowance
Investors and shareholders can receive £500 of dividend income tax-free each tax year. Any dividends above the allowance are taxed depending on your income tax band, so making use of the allowance can help create a more tax-efficient income.
- Consider Inheritance Tax Planning
Making gifts during your lifetime can help reduce the value of your estate for Inheritance Tax (IHT) purposes. Individuals can gift £3,000 each tax year, and unused allowance can be carried forward for one year. There is also the seven-year rule, meaning larger gifts may fall outside of your estate if you live for seven years after making them.
Reviewing your finances before the 5th April deadline can help ensure you are making the most of your available allowances and planning effectively for the future.
If you would like to discuss your financial plans or review your tax allowances, please feel free to get in touch with the team at Strategic Solutions at info@ssfs.co.uk.