As 2025 is now well underway, it’s once again that time of year when you need to consider your year-end tax plans. While there will be no Spring Budget this year, taxpayers must still get their tax affairs in order before the end of the tax year on 5th April.
Only a Spring Forecast is due in March rather than more tax reform announcements, but the changes announced in the Autumn Budget in October 2024 are enough to be getting on with.
Here is what you should be taking into consideration for your tax year-end planning:
Pension Contributions Planning
It was announced in the Autumn Budget that pension savings will be included in estates for Inheritance Tax (IHT) purposes from April 2027, rather than being paid to beneficiaries tax-free.
This means that while pension schemes still offer a tax-efficient way of saving for retirement, they are no longer as tax-efficient for estate planning, so this must be taken into account when reviewing your pension contributions this year.
Capital Gains Tax (CGT) Planning
The Autumn Budget also increased the rates of Capital Gains Tax (CGT) with immediate effect from October 2024. Annual gains exceeding the exempt amount of £3,000 are now subject to:
- 18% CGT for non-taxpayers or basic rate (20%) taxpayers
- 24% CGT for higher rate (40%) and additional rate (45%) taxpayers
If you haven’t used your annual exemption yet, you should think about doing so before the end of the tax year – otherwise you’ll lose it, as you can’t carry it forward to use in the next tax year.
Inheritance Tax (IHT) Planning
Though there had been speculation about the abolition of Inheritance Tax (IHT), the Labour government will be maintaining this tax on inherited personal estates with the same thresholds.
You’re still allowed to give away tax-free gifts of up to £3,000 a year, though these may be taxed if you pass away within 7 years. You can only carry this allowance forward for 1 year, so you should look into using your full exemption for the last 2 tax years if you haven’t already.
Marriage Allowance Planning
Married couples or civil partners can share some of their Personal Allowance if one of them earns less than the annual tax-free amount of £12,570 and the other is a basic rate taxpayer.
The lower-earning partner can claim Marriage Allowance to transfer up to £1,260 of their tax-free allowance to the higher-earning partner, reducing their tax bill by up to £252. You can backdate claims for up to 4 years, so claims for 2020–2021 are due to expire in April.
Income Tax Planning
It has been increasingly documented that the long-term personalincome tax threshold and allowance freezes are pushing more taxpayers into higher tax bands due to fiscal drag.
If you find yourself pushed into a higher tax bracket, this will affect your tax reliefs, possibly losing your Child Benefit or tax-free allowance. You can try to avoid this by spreading income and allowances across multiple years or transferring them between married partners.
Get tax planning advice from gbac
Tax planning is vital year-round if you want to make the most of all the allowances and reliefs that you’re eligible for, but it’s even more essential if you haven’t used them up before the end of the relevant tax year or eligibility period.
You shouldn’t rush into important tax decisions due to the pressure of the looming year-end deadline, though. Tax errors can be costly and hard to fix, which is why it’s best to seek professional advice before taking action.
Here at gbac, our team of accountants in Barnsley includes tax consultants and financial advisers, so be sure to reach out if you need guidance on efficient tax management.
You can call us on 01226 298 298 or send an email to info@gbac.co.uk to find out more.