With the end of the tax year (5th April) fast approaching, there is no time like the present to ensure you have reviewed your finances and made the most of the reliefs and allowances available to you.
Here is our quick guide to all things tax planning …
Income Tax
We have seen income tax thresholds and personal allowances frozen again so keep in mind that an increase in taxable income may push you into a higher tax bracket than in previous years. As a taxpayer reaches income of over £100,000, their personal allowances is tapered by £1 for every £2 up to £125,140 meaning that a portion of your income above £100,000 is effectively taxed at 60%!
As a reminder, the tax rates for 2024/25 and 2025/26 are:
| Income | Tax Rate |
| Up to £37,700 | Basic Rate – 20% |
| £37,701 – £125,140 | Higher Rate – 40% |
| £125,140 and above | Additional Rate – 45% |
If your income breaches £100,000 or one of these thresholds, there are a number of simple ways in which you can reduce your taxable income.
You can obtain tax relief on any qualifying Gift Aid donation to a UK charity made by 5th April 2025 or any donation made by 31st January 2026 if filing a UK tax return. There is also relief available for gifts of quoted shares or land to charity.
Making the most of your £60,000 annual pension allowance is a straightforward way to reduce your tax liability in a year and save for your future. This is capped at 100% of your earnings if you earn below £60,000 and is tapered beyond earnings of £260,000.
You may also be able to carry forward the previous three years allowances to the extent they are unused to fund a large contribution. Pension contributions will reduce your overall taxable income which may well preserve your personal allowance, place you in lower tax bracket or help you retain certain benefits such as child benefit.
Finally, The ISA allowance of £20,000 has remained in place so ensuring you have utilised this will see you benefit from tax-free interest and growth within your ISA. The limit for Junior ISA limit remains at
Capital Gains Tax
Following Rachel Reeves’ announcement in October last year, capital gains tax is now charged at increased rates of 18% at the basic rate and 24% at the higher rate. There is also a 4% surcharge on residential property disposals at the higher rate to consider.
It would be worth considering the structure of ownership of some assets you hold, especially if you are married. Married couple benefit from a no gain/no loss transfer of assets between both parties meaning that you could utilise both of your £3,000 annual exemptions against the sale of a jointly owned asset reducing the overall tax burden.
This could be particularly helpful if one spouse has capital losses in the year or losses brought forward from previous years.
Do not forget that crystalising a sale on assets currently sitting in a loss-making position will reduce the overall gains charged to tax in a year and may well qualify for other reliefs such as income tax relief via a negligible value claim.
There may also be certain capital gains tax reliefs available to you on the gift of a qualifying asset whereby the gain is not immediately charged to you but instead held-over to the future sale of the asset.
Tax Efficient Investments
Should you be looking to make investments while also benefitting for a variety of tax reliefs, it may be worth considering the EIS/SEIS and VCT schemes.
Investments in these schemes attract up-front tax relief of up to 50% on the amount of investment (depending on which scheme you uses) as well tax free growth/income. There are also a quite of other tax reliefs such as capital gains tax deferral, loss relief and inheritance tax relief on these investments.
The complex nature of these schemes will require some careful thought but are certainly worth considering and we would be happy to help talk you through these and put you in touch with the appropriate financial adviser in our investment team to assist with this.
Inheritance Tax
The nil rate band for IHT remains at £325,000 with a further £175,000 Residential Nil Rate Band available when you pass your home to a direct descendent. Reducing the taxable value of your estate will serve to reduce the bill your executors may be handed after you are gone.
A simple way to do this is through gifting each year. You can gift up to £3,000 in total each year to anyone for your choosing and you can carry forward any unused allowance to the next tax year.
Furthermore, you can give up to £250 to any number of different people each year, provided they have not already received any funds from the £3,000 annual gift allowance. If gifting an asset, the base cost of the asset will be the market value at the date you transfer it meaning that any future growth will be taxable in the hands of the beneficiary, not your own estate, even if you die within seven years of making the gift.
An excellent way to provide tax free gifts is through the tax free regular fits out of excess income method whereby you gift your excess income each month/quarter to anyone of your choosing and these do not count as potentially exempt transfers caught by the seven year rules.
Please do consider gifting carefully as some gifts may trigger a taxable event for capital gains tax purposes.
Please do not hesitate to contact us should you have any queries on the above or if you are seeking advice on your personal tax affairs.
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Author: Alexander Beck
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