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April 5th is closing in

17 March 20256 min read

Maximise Your Tax Benefits Before
April 5th

With April 5th just around the corner, it’s time to focus on maximising your tax reliefs for the 2024/2025 financial year, now is the perfect time to review your finances and ensure you’re taking advantage of all available tax reliefs. Let’s explore how you can make the most of the opportunities available to you!

Personal Allowances and Reliefs

 

Personal Allowance

Everyone has a Personal Allowance of £12,570 for the 2024/2025 tax year. This is the amount you can earn before paying any income tax. It’s important to note that this allowance decreases by £1 for every £2 you earn over £100,000, meaning those with an income of £125,140 or more have no Personal Allowance.

With careful tax planning, there are ways to preserve your Personal Allowance when your income is approaching the £100,000 mark or above.

Marriage Allowance

If you’re married or in a civil partnership, and one partner earns less than the Personal Allowance while the other is a basic rate taxpayer, the lower earner can transfer 10% of their Personal Allowance (£1,257) to their partner.

Example: If you earn £8,000 and your spouse earns £35,000, you can transfer £1,257 of your unused allowance to them. This reduces their tax bill by approximately £251 per year.

Pension Contributions

Contributing to a pension is one of the most tax-efficient ways to save for retirement. There are important differences between personal and employer contributions, each with their own benefits:

Personal Pension Contributions

When you contribute personally to your pension, you receive tax relief at your highest rate of income tax:

  • Basic rate taxpayers (20%): HMRC adds £20 for every £80 you contribute
  • Higher rate taxpayers (40%): Can claim an additional 20% tax relief through their tax return
  • Additional rate taxpayers (45%): Can claim an additional 25% tax relief through their tax return

Example: If you’re a basic rate taxpayer contributing £100 to your pension, it actually only costs you £80 after tax relief. If you’re a higher rate taxpayer, the same £100 contribution would cost you just £60 after claiming all available relief.

Employer Pension Contributions

When your employer contributes to your pension, these contributions:

  • Are free from income tax and National Insurance for you
  • Reduce your employer’s corporation tax bill as they count as an allowable business expense

The annual allowance for pension contributions is £60,000 for 2024/2025, but you can also use any unused allowance from the previous three tax years.

ISA Options and Benefits

Individual Savings Accounts (ISAs)

Your ISA allowance for 2024/2025 is £20,000. Any interest, dividends, or capital gains from investments within an ISA are completely tax-free.

Example: If you invest £20,000 in a stocks and shares ISA that grows by 5% annually, you’ll earn £1,000 tax-free in the first year. If the same investment was made outside an ISA, a higher rate taxpayer would pay £325 in tax on these gains.

Lifetime ISA (LISA)

If you’re aged 18-39, you can open a Lifetime ISA to save for your first home or retirement. You can contribute up to £4,000 per tax year, and the government adds a 25% bonus to your contributions.

Example: If you contribute £4,000 to your LISA in the 2024/2025 tax year, you’ll receive a £1,000 government bonus, giving you a total of £5,000. That’s essentially free money toward your first home or retirement!

Junior ISA (JISA)

You can save or invest up to £9,000 per tax year for a child under 18 in a Junior ISA. The money grows tax-free and becomes available to the child when they turn 18.

Example: If you contribute £3,000 a year to a JISA from your child’s birth until they turn 18, assuming a 5% annual growth rate, they could have over £83,000 tax-free when they reach adulthood – a significant head start for university costs or a house deposit.

Charitable Donations and Gift Aid

When you donate to charity through Gift Aid, the tax relief works differently depending on your tax rate:

  • The charity can claim basic rate tax (20%) on your donation directly from HMRC
  • Higher or additional rate taxpayers can claim additional tax relief through their Self Assessment tax return

Example: If you donate £100 to charity through Gift Aid:

  • The charity can claim an extra £25 from HMRC (representing the 20% basic rate tax you’ve already paid), making your donation worth £125 to them.
  • If you’re a basic rate taxpayer, there’s no further action needed – the charity has already received the full tax relief.
  • If you’re a higher rate (40%) taxpayer, you can claim back an additional £25 through your tax return, making the net cost to you just £75.
  • If you’re an additional rate (45%) taxpayer, you can claim back an additional £31.25 through your tax return, making the net cost to you £68.75.

Business Tax Reliefs

Business Expenses

Make sure you’re claiming all legitimate business expenses, including:

  • Office costs (stationery, phone bills, internet)
  • Travel expenses
  • Staff costs
  • Training courses related to your business
  • Marketing and advertising

Annual Investment Allowance (AIA)

The AIA allows businesses to deduct the full value of qualifying plant and equipment up to £1,000,000 from profits before tax.

Example: If your business purchases £20,000 worth of new equipment, you can deduct the full amount from your taxable profits, potentially saving £3,800 in tax if your company pays corporation tax at 19%.

Research and Development (R&D) Tax Credits

If your business is involved in research or development, you might be eligible for R&D tax credits. For SMEs, this can reduce your tax bill by an additional 86p for every £1 spent on qualifying R&D activities.

Example: If your small business spends £10,000 on qualifying R&D, you could receive a tax reduction of £8,600 or, if you’re loss-making, a cash payment of up to £3,345.

 

Property Tax Changes to Consider

 

Stamp Duty Land Tax Changes

An important change coming after the tax year end: from 1st April 2025, SDLT nil-rate thresholds will revert to lower levels.

Property Type Nil-Rate Threshold Until 31st March 2025 Nil-Rate Threshold From 1st April 2025
First-time buyers £425,000 £300,000
Single residential property £250,000 £125,000

If you’re planning to buy property, completing your purchase before April 2025 could save you thousands in tax.

Need Help?

Tax planning can be complex, and everyone’s situation is unique. If you’re unsure about which reliefs apply to you or how to claim them, let’s grab a coffee.