As we approach the end of another financial year, it’s an opportune time to review your financial objectives for tax year-end on the 5th of April.
Here are some ways to make your money work harder for you and your loved ones:
- Make Pension Contributions: Making contributions to your pension is not just a smart financial move but also comes with significant tax advantages. You can contribute up to 100% of your earnings, capped at £60,000 annually, and enjoy income tax relief at your marginal rate. If earnings allow it, you may also carry forward your pension allowance from the previous three tax years.
- Use Your ISA Allowance: Leveraging the tax-free structure of your individual Savings Account (ISA) allowance can shield your income, growth, and dividends from HMRC. Maximise your potential by utilising the current tax year’s allowance of £20,000 or consider a Lifetime ISA for additional benefit toward your first home or retirement. Please note there are restrictions for lifetime ISAs.
- Save for Your Children’s (or grandchildren’s!) Future: Secure your descendant’s financial future by investing in Junior ISAs (‘JISAs’) and pensions on their behalf. Starting early offers the advantage of decades of investment growth, and you can contribute up to £9,000 in a JISA or £3,600 (gross) into a pension on an annual basis.
- Match Capital Gains and Losses: Your capital gains tax allowance has gone from £12,300 in 2022/23, down to £6,000 this tax year, and to only £3,000 in the 2024/25 tax year. If you have a General Investment Account or investments outside of a tax-efficient environment we suggest discussing this with your adviser to ensure you mitigate paying excessive tax.
- Utilise Your Annual Inheritance Tax Allowances: Mitigate Inheritance Tax by taking advantage of the annual gift allowance of £3,000 per tax year. With carryback, couples can potentially gift up to £12,000 before the 6th of April. You can also give £250 to as many individuals as you wish, provided they are not also receiving the annual gift allowance.
- Gifting Surplus Income: Gifting surplus income can be a valuable strategy to reduce your Inheritance Tax (IHT) liability. However, there are specific criteria and considerations to keep in mind to ensure it falls under the “gifts out of surplus income” exemption.
- Boost Your State Pension: Ensure a more comfortable retirement by filling gaps in your National Insurance record. Paying voluntary National Insurance contributions can potentially cover the period from 2006 to 2016 and can be used up until April 2025. The deadline is the 5th of April each year.
- Consider Paying Yourself a Dividend: If you own a company, explore the tax-efficient option of withdrawing profits through dividends rather than salary payments for the year 2023/24 and beyond.
- Explore Alternative Investments: For those wishing to take on higher risk investments, the Seed Enterprise Investment Scheme (SEIS),Enterprise Investment Scheme (EIS), and Venture Capital Trusts (VCTs) offer valuable tax benefits. While they are more suitable for experienced business owners and investors, they do allow for inheritance, income tax, and capital gains tax reliefs. Please note that these are considered high-risk investments, and we urge you to speak with your financial adviser before considering these options.
- Wills & Power of Attorneys: If you do not have an up-to-date Will or Power of Attorneys we recommend you discuss this with a solicitor. We are happy to recommend one, but if you already have an existing relationship, it may be worth contacting them.
Remember, these steps are part of a comprehensive financial strategy that can enhance your financial well-being. This article does not constitute individual advice and we suggest speaking with your financial adviser in the first instance if you want to explore anything further.
Should you have any questions or require further assistance, please do not hesitate to contact us at [email protected] or call 01202 676983.
The value of your investments can go down as well as up.
Don’t invest unless you’re prepared to lose all the money you invest. SEIS/EIS and VCT investments are high-risk investments and you are unlikely to be protected if something goes wrong.
Financial Conduct Authority does not regulate wills, estate and tax planning.