As the 2024–2025 tax year comes to a close, you should be completing your year-end tax planning to ensure all loose ends are tied up before moving on to new tax year planning.
While the end of the current tax year on 5th April is currently the main focus for many tax planners, the start of the new tax year on 6th April should be given just as much attention.
Here are some of the factors you should be accounting for in your new tax year plans:
Personal Allowance
The annual tax-free Personal Allowance remains the same as it has since 2021, as it has been frozen at £12,570 until 2028. This freeze is expected to result in 2 in 9 taxpayers moving into the higher rate or additional rate brackets of Personal Income Tax by 2028.
The tapering of the tax-free allowance will also contribute to this increase, as higher earners will lose £1 of their annual allowance for every £2 they earn over £100,000.
Depending on their individual earnings, couples should look into claiming the Marriage Allowance or transferring investments between partners to reduce their taxable income.
Other tax allowances
Tax is also charged on personal income from savings interest and dividends from company shares if it isn’t covered by the standard Personal Allowance or other allowances.
The Personal Savings Allowance is £1,000 for nil or basic rate taxpayers and £500 for higher rate taxpayers, while additional rate taxpayers are not eligible. Meanwhile, the Dividend Allowance is only £500, with the tax rate dependent on the individual’s income tax band.
If rising interest rates could increase your tax liability, you might want to look into other investment options, such as an Individual Savings Account. You won’t be taxed on interest and dividends from an ISA if they fall within the £20,000 annual tax-free allowance for ISAs.
It’s much easier to move income around to make the most of allowances at the start of the tax year, so you should take stock now rather than waiting until next March.
High Income Child Benefit Charge
Whether you’re married or not, if you or your partner earn over £60,000 a year after certain allowances and claim Child Benefit, then the highest earner will be taxed on this benefit.
The High Income Child Benefit Charge (HICBC) taxes 1% of the benefit for every £200 earned over the threshold, so you’ll have to pay all of it back if you earn £80,000 a year or more.
For parents with two children, this would be the same as adding another 11.26% to the responsible taxpayer’s marginal tax rate – so it may be worth opting out instead.
Otherwise, shifting investment income could also help to keep both parents under the HICBC threshold, even if both earners are within the higher rate tax band.
Plan for 2025–2026 taxes with gbac
If you have any concerns about the taxes and allowances mentioned above, or you’re looking for professional help to legally reduce your tax liability, you can come to gbac.
We have an experienced team of accountants in Barnsley who can provide tax consultancy services to individuals and organisations across the country.
The sooner you get started planning for the new tax year, the better – so get in touch by calling 01226 298 298 or emailing info@gbac.co.uk to set up a consultation.