Now is the Time to Plan for the Financial Year End

Monday 17 March, 2025

As the end of the financial year approaches on 5 April 2025, it's an opportune time to assess your personal financial situation and consider strategies to optimise your tax efficiency, savings, and investments.

Tailoring your approach to your unique circumstances can help you make the most of available allowances and reliefs. Here are key areas to consider:

Utilise Your Personal Allowance

For the 2024/2025 tax year, every individual is entitled to a personal allowance of £12,570, meaning you can earn this amount before paying Income Tax. If your income exceeds £100,000, your personal allowance decreases by £1 for every £2 earned over this threshold, effectively reducing to zero once income surpasses £125,140.

Maximise ISA Contributions

Individual Savings Accounts (ISAs) offer tax-free interest on savings and investments. The annual ISA allowance for the 2024/2025 tax year is £20,000. Contributing the maximum amount allows your savings or investments to grow free from Income Tax and Capital Gains Tax. Consider the various ISA options available, such as Cash ISAs, Stocks and Shares ISAs, and Lifetime ISAs, to determine which aligns best with your financial goals.

Review Pension Contributions

Pension contributions are a tax-efficient way to save for retirement. The Annual Allowance for pension contributions in the 2024/2025 tax year is £60,000. Personal contributions would receive tax relief up to the lower of relevant UK earnings and the AA, or £3600 if there are no relevant earnings. Be mindful of the Money Purchase Annual Allowance (MPAA), which is £10,000; this applies if you've accessed your pension flexibly. The Annual Allowance may be reduced if you are subject to tapering

Capital Gains Tax Planning

If you've realised gains from the sale of assets, it's important to consider Capital Gains Tax (CGT). The annual CGT exemption allows you to realise a certain amount of gains tax-free each year. Utilising this exemption before the tax year ends can help minimise your tax liability. Additionally, investing within tax-free allowances, such as ISAs and pensions, can prevent significant CGT and dividend tax costs on investments.

Consider Charitable Donations

Donations to registered charities can provide tax relief. Under the Gift Aid scheme, charities can claim an extra 25p for every £1 donated by a tax payer, and higher-rate taxpayers can claim the difference between the basic rate and their tax rate on the donation. Making charitable contributions before the end of the tax year can enhance your tax efficiency while supporting causes you care about.

Evaluate Your Investment Portfolio

Review your investment portfolio to ensure it aligns with your financial objectives and risk tolerance. Consider the tax implications of your investments and explore tax-efficient vehicles, such as ISAs and pensions, to shelter investment growth from taxes. Diversifying your investments can also help manage risk and optimise returns.

Neil Homer, Independent Financial Adviser (IFA) in Stafford provides Final Considerations:

“As the financial year-end approaches, reviewing all available investment and savings opportunities ensures you optimise your financial position. Taking proactive steps now can lead to long-term tax efficiency and financial growth.”

Seek Professional Financial Advice

Financial planning can be complex, and individual circumstances vary. To navigate the intricacies of tax laws and investment options effectively, it's advisable to seek professional financial advice. The team at Lonsdale can provide personalised guidance tailored to your situation, helping you make informed decisions as the financial year-end approaches.

Please note:

The value of an investment and the income from it could go down as well as up. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested.

The information contained within this article is for guidance only and does not constitute advice which should be sought before taking any action or inaction.

The information is based on our understanding of legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases and reliefs from taxation may be subject to change. The Financial Conduct Authority does not regulate tax planning.

Sources: PwC Tax Summaries, Aviva, Financial Times

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