The period leading up to the end of the tax year is one of the best times to review your personal, family and business tax affairs. It is an opportunity to make the most of the reliefs and allowances available to you.
But it’s vital to review your tax position and act in good time, by 5 April 2025, the end of the 2024/25 tax year.
Here is our quick checklist of areas that you might consider this year, and each point is explored in further detail in our full Year End Tax Guide here.
For companies
- Have you maximised deductions? The impact of marginal relief means maximising deductions is particularly important for companies where profits fall between thresholds.
- Do you have unclaimed capital allowances? The Annual Investment Allowance (AIA) now stands at £1 million. Along with general Writing Down Allowances, this will provide relief sufficient for many companies.
- Do you have qualifying R&D expenditure? Assess whether your company is carrying out activities that might qualify under the new R&D rules.
- Have you considered salary sacrifice? As employer NICs bills rise, remuneration packages that manage NICs costs by using salary sacrifice become very attractive options.
- Have you reviewed your profit extraction strategy? Recent tax changes continue to make profit extraction strategy for director-shareholders in family companies a complex matter. So care is needed to plan for salary, dividend, bonus and director loan arrangements.
- Have you considered the tax impact of the basis period reform? The change applies to self-employed and partnership businesses which do not use a 31 March or 5 April year end.
- If you have a furnished holiday letting business, have you decided on your future plans for the business in light of tightening rules? Moving to long-term residential letting, disposal or gifting the property to family are all options to consider.
- Do you rely heavily on double cab pick-up vehicles in your business? It will be worth deciding if you can use the transitional year before the new rules apply to your advantage by accelerating the purchase or lease of such vehicles before this date.
- Have you reviewed the change to the Employment Allowance? New rules on the Employment Allowance (EA) increase the maximum EA from £5,000 to £10,500 from 6 April 2025. This has the potential to lessen the impact of the increase in employer National Insurance contributions (NICs) taking effect from the same date.
- Have you reviewed the ownership structure and succession plans for your family business? Major changes to the rules announced in the Autumn Budget 2024 bring a new outlook for planning, especially as regards Business Asset Disposal Relief (BADR) for Capital Gains Tax; and Business Property Relief and Agricultural Property Relief for Inheritance Tax.
For individuals and families
- Have you reviewed your entitlement of the personal allowance? If your income is more than £100,000, it may be possible to reduce taxable income and keep the Personal Allowance, by making personal pension contributions, or donations under Gift Aid.
- Have you considered the timing of dividends? The Dividend Allowance has become much less generous than previously, falling to £500 from 2024/25. The timing of dividends should be considered to ensure the Dividend Allowance is fully maximised.
- Have you considered your income distribution with your spouse or managing your jointly owned assets? Distributing income with your spouse can allow the use of their Personal Allowances, Savings Allowances and Dividend Allowances fully; and manage exposure to higher rates of tax.
- Have you made use of the CGT annual exemption? Each spouse has an annual exemption, which can be used before any CGT has to be paid. The exemption is £3,000 for 2024/25. The annual exemption cannot be carried forward to future years: it must be used or lost.
- Have you made use of your ISA allowances? You and your spouse can contribute up to £20,000 each to an ISA for tax-free growth and income. With Junior ISAs for children you can invest up to £9,000 per child. The Lifetime ISA (LISA) provides a 25% government top-up on contributions up to £4,000, if you’re under 50 (it must be opened before you turn 40).
- Have you considered using pension contributions to reduce adjusted net income? Contribute up to £60,000 (or 100% of earnings if lower) to reduce adjusted net income for the High Income Child Benefit Charge; access to Tax-Free Childcare; and the Personal Allowance taper. You can use the annual allowance from the past three tax years through carry forward rules for you and your spouse. Also ensure you’re maximising employer-matched contributions, and reduce taxable income through salary and bonus sacrifice. Furthermore, utilising your children’s allowance means that each child can benefit from a £3,600 pension annual allowance – contribute up to £2,880 each year on their behalf and they will benefit from 20% ‘tax relief’ with a government top-up.
- Have you reviewed your access to Child Benefit payments? If both partners can keep income below £60,000, it’s possible to keep Child Benefit payment in full. It is important to get the detail and timing right, but broadly, making personal pension contributions, making payments under Gift Aid or reallocation of profits between spouses in business, can assist with this.
- Have you considered tax efficient investment options? Tax efficient venture capital schemes including the Enterprise Investment Scheme, Seed Enterprise Investment Scheme and Venture Capital Trusts offer generous tax incentives, which we cover in further detail in our year end tax guide.
- Have you considered your inheritance tax planning? Give up to £3,000 per person tax-free this year, with an additional £3,000 carry-forward from the previous year if unused. You can also make unlimited small gifts of up to £250 per recipient. Plus, gift up to £5,000 to children, £2,500 to grandchildren, or £1,000 to others as wedding / civil partnership gifts. Inheritance tax planning is covered further in our year end tax guide.
Get our full year end tax guide
I hope this checklist gives your some inspiration and ideas for optimising your tax position ahead of the end of the tax year. Don’t forget to download our full Year End Tax Guide, with further commentary and tips on these points and more.
Oscar heads our tax department and provides advice on tax structuring, planning and compliance services to entrepreneurs and their businesses.
