News

Review your finances and maximise your tax allowances before 5 April.

Make the most of your financial situation before the deadline but also take the opportunity to review your current financial situation.

The end of the tax year is fast approaching, ending on 5 April 2025. This is your opportunity to review your annual allowances and assess how best to make the most of them.  With some significant changes to tax allowances in the 2024/25 tax year, and further reductions expected in the future, planning ahead is key.

Using your allowances now could maximise your wealth by using tax efficient strategies and minimising liabilities.  Here are some practical steps to maximise your financial situation before the deadline.

Make use of your ISA allowance
Individual Savings Accounts (ISAs) remain one of the most efficient ways to save and invest tax efficiently. The annual ISA allowance for the 2024/25 tax year is £20,000.  Any gains you make within an ISA shield you from Capital Gains Tax (CGT), making it a valuable option, especially for higher or additional rate taxpayers.

Furthermore, you pay no tax on interest or dividends earned within an ISA.   If you are married or in a registered civil partnership, as a couple, you can contribute up to £40,000 between the two of you into your ISAs, thereby increasing your overall tax efficient savings potential.

You might also consider the ‘bed and ISA’ technique, where you sell non ISA investments to release a capital gain and reinvest the proceeds within an ISA.   This can be effective but may involve a temporary period out of the market, and obtaining professional advice is recommended.

Boost your pension contribution
Contributing to your pension is another effective way to maximise tax relief.  For most individuals, the maximum tax relievable contribution for the 2024/25 tax year is £60,000 (gross) or 100% of your earnings, whichever is lower.  However, high earners should be mindful of the tapered annual allowance, which reduces your limit by £1 for every £2 your income exceeds £260,000.

The minimum annual allowance for those affected by tapering is £10,000.  The money purchase annual allowance is also set at £10,000 (gross) per tax year.  This means if you have flexibly accessed your pension, the maximum amount you can contribute to your defined contribution pensions while still receiving tax relief is £10,000 (gross).

Even if you don’t have an income but are under 75, you can still contribute up to £2,880 into a pension, with tax relief boosting this to £3,600.  Pension contributions from both personal and workplace schemes count towards your annual limit. Breaching your allowance will result in tax charges, so understanding your limits is crucial to avoid unnecessary penalties.

Plan for financial gifting
Another allowance worth considering is your entitlement to make tax free financial gifts.  Each tax year, you can gift up to £3,000 without it being subject to Inheritance Tax (IHT).  You can carry forward one year’s unused allowance if not used the previous tax year, potentially gifting £6,000 without tax consequences.

Additionally, you can give multiple gifts of up to £250 each to different individuals in the same tax year, provided you don’t combine these with your £3,000 annual exemption to the same recipient.  Larger gifts, such as those intended for property deposits for children, may also be exempt from IHT if you live for at least seven years after making the gift.

Navigating tax regulations and allowances can be complex, and we can help you understand the intricacies of tax reliefs, exemptions and allowances while identifying the best opportunities for you.

Speak to our tax specialists today by calling 01228 711888.

Make the most of your CGT allowance

CGT regulations offer an annual exemption, allowing you to make tax free gains of up to £3,000 in the 2024/25 tax year.  This allowance doesn’t roll over to subsequent years, so it’s worth using before the deadline.

This can help you minimise your future CGT liability.  Spouses and registered civil partners can transfer assets between themselves to utilise their annual exemptions effectively.

Review your personal allowance
Your personal allowance allows you to earn up to £12,570 tax free annually.  Married couples or those in civil partnerships can optimise their tax allowances by transferring assets to the lower rate taxpayer.

If one partner’s income falls below the personal allowance, the marriage allowance could also allow up to £1,260 of the unused allowance to be transferred to the higher earner, resulting in a tax saving of up to £252.

This approach is particularly useful for couples with a significant disparity in income and should be part of any comprehensive financial review before the tax year ends.

Revisiting your financial goals
Has anything changed in your life that might impact your financial priorities?

A new tax year is an ideal time to assess your financial ambitions, whether short, medium or long term.  For instance, if your income has increased or your family circumstances have shifted, your
financial plan may benefit from some adjustments.  Revisiting goals may also involve reassessing your investment portfolio.

It is crucial to ensure that your investments align with your risk tolerance and long term objectives.  Professional financial planners can help you monitor your progress and recommend strategies to keep you on track, preserving and growing your wealth effectively.

Review your protection polices
Life can be unpredictable, which is why financial protection is vital.  Ensuring you have adequate insurance coverage – be it life insurance, critical illness cover or income protection – safeguards your loved ones against financial strain in the event of the unexpected.  Even if you already hold policies, reviewing them annually is wise to ensure they remain relevant to your circumstances.

Over time, gaps in protection may emerge as your financial commitments evolve, such as having children or taking on a larger mortgage.  Updating your policies ensures that your family’s
financial future is secure.

If you are looking to take control of your financial future, our team of Independent Financial Planners are here to help.  Whether building your retirement fund, supporting your family or investing tax efficiently, for tailored professional advice and a personalised financial review, contact us today.

Together, we can build a financial future that’s secure and aligned with your aspirations.

Making or updating your Will
A Will is fundamental in guaranteeing that your wishes are carried out after your death.  Yet, many overlook the importance of having one in place. If you’ve already made a Will, consider
whether it needs updating, especially if life events such as marriage, divorce or the birth of a child have occurred since it was written.

Ensuring your Will is up to date can also help to minimise disagreements and ensure assets are distributed according to your preferences.  It’s a small step but one with long-lasting implications for those you care about.

Why professional advice matters
Many individuals find the intricacies of rebalancing investments, planning tax efficient strategies and developing a resilient retirement fund overwhelming.

That’s where professional financial advisers come into play.  We can tailor an individual plan around your unique circumstances, reviewing it regularly to ensure it remains aligned with your personal goals, changes in legislation and the economic climate.

Our professional guidance can make the difference between simply managing your finances and genuinely mastering them. 

With our advice, you will gain clarity on your financial options and the confidence to make informed decisions.  Give us a call today on 01228 711888.

_{David Allen Financial Services (Dalston) Ltd (Registered in England & Wales, Company Number 06966976) has its registered office at Dalmar House, Barras Lane, Dalston, Carlisle CA5 7NY. The company is authorised and regulated by the Financial Conduct Authority. Firm Reference 506138.}