Year-End Tax Planning: Smart Steps to Save Tax Before 5 April

Maximising Income Tax Reliefs

Every taxpayer is entitled to a personal allowance (£12,570 for 2024/25), which can be offset against any source of income. But beyond that, there are additional tax-free allowances that apply to dividends and interest income. If you or your spouse/civil partner have unused allowances, consider shifting investments or adjusting how income is received to make full use of them.

For example, interest income might be deferred or advanced by closing and reopening an account. Transferring shareholdings between spouses can also help utilise available allowances and minimise the tax bill. If you haven’t already, consider using ISAs, which allow tax-free interest and capital gains, to shelter investments.

Capital Gains Tax: Use It or Lose It

The Capital Gains Tax (CGT) annual exemption has been significantly reduced to £3,000. Unlike some other allowances, this cannot be carried forward — so if you haven’t used it yet, consider whether it makes sense to dispose of assets before 5 April. This could include selling and repurchasing shares, though be aware of the 30-day rule, which prevents you from buying back the same shares within that period (unless within an ISA or by your spouse). If you hold assets that have lost value, selling them to crystallise a loss could reduce tax liability on other gains.

Inheritance Tax Planning: Don’t Overlook Gifts

Even if inheritance tax (IHT) feels like a distant concern, taking action now can save your estate from a large tax billin the future. Gifts made more than seven years before death are not counted towards your taxable estate, making them a useful planning tool.

Everyone has an annual exemption of £3,000 (£6,000 if last year’s allowance was unused), allowing tax-free gifts each year. Additionally, gifts made from regular income (rather than capital) can also be exempt if they are part of a pattern of normal expenditure. To qualify, the donor must keep sufficient income to maintain their lifestyle, and it’s advisable to document these gifts carefully with records and letters.

Other exempt gifts include small gifts, wedding gifts, and charitable donations, as well as gifts between spouses and civil partners, which are free from IHT. Reviewing your estate now could save your heirs a significant sum in the future.

Final Thoughts: Last-Minute Tax-Saving Tips

A quick review of your income, capital gains, and available allowances before 5 April could uncover tax-saving opportunities. One area often overlooked is pension contributions. These attract tax relief at the highest marginal rate and can be particularly valuable for individuals earning over £100,000, where personal allowance starts to taper off. Contributing to a pension could effectively reduce taxable income and lower the overall tax burden.

If you need guidance on tax-efficient strategies before the tax year ends, Zeus Accountants is here to help. A little planning now could make a big difference to your tax bill later!

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