End of Year Tax Planning Checklist

The UK tax year comes to an end on 5th April 2024. If you’re not already done with the end-of-year tax planning, February and March are the only months for you to plan. Let us help you with minimizing your tax bill below:

What Additional Rate Applies to the Taxpayers?

If you’re earning more than £100,000, your tax-free personal allowance falls by £1 for every £2. You won’t receive any tax-free personal allowance if you’re earning more than £125,000.

If you’re earning more than £150,000 it’s important to note that an additional tax rate of 45% will be deducted. Another way of reducing this liability is you use pension contributions and move investment to a low-rate tax-paying spouse.

Can You Use the Allowance Allotted to Your Spouse?

Of course, you can. Please note that if your spouse is a non-taxpayer or lower, they can use 20% of their allowance for their partner. This helps you save £250 in tax.

In case you have income-producing assets (this does not only include buy-to-let properties but also a savings account). Make sure that you’re putting these in lower or non-taxpaying spouse names.

This helps you lower your overall tax liability and helps you out with end-of-year tax planning. It’s important to note that assets can be passed between spouses, without worrying about any CGT liabilities.

Utilize your Individual Savings Account (ISA) Allowance

The tax allowance for ISA is £20,000 per person this year. A married couple can invest around £40,000 on April 5th before the end of the tax year. If you’re married, you need to make major decisions in your life accordingly.

Count yourself exempted from capital gains tax (CGT) and any other tax on UK income. You don’t have to declare this on your tax return. If you’re not making use of ISA allowance, you won’t be able to carry it forward.

Work on your Tax-Free Pension Allowance

If you look at your current tax year, a standard pension allowance is around 100% of your earned income or £40,000. It can be higher. If your income exceeds £240,000, this can be reduced accordingly. This can also be reduced if you’ve taken benefits from Flexi Access Drawdown previously.

However, if you’re paying tax at a higher rate, and you’ve got relevant earnings, it’s easier to claim your tax relief. It’s always a good idea to carry forward any unusual personal allowance from three previous tax years. So if you were a member of the pension scheme, it’s probably a good idea to carry forward your allowance from three previous tax years.

Save yourself Some Pension – Sort Out your End of Year Tax Planning

Never let go of the idea of letting go of your pension for your children and grandchildren. Save up to £3,600 of your pension for your spouse, children, or even civil partner.  Even if they’re not earning on their own, it’s a good idea to obtain tax relief on your contributions.

Know More About Capital Gains Tax Here

• Tax-Free CGT Allowance: You can make up to £6,000 in capital gains before any tax is due for the 2024/2025 tax year. For gains over this limit, 10% or 20% tax will be applied, depending on your income level.
• Residential Property CGT: Gains from the sale of residential property are taxed at 18% or 28% depending on your taxable income.
• CGT Planning: Married couples can transfer assets before sale to utilise both allowances, potentially reducing the tax liability.

What are CGT Changes at the Disposal of Residential Property

From 6th April onwards, some major changes were observed in the CGT regime.  This concerns the disposal of residential property and also includes any reductions in the relief process.

Private Residence Relief was restricted a long time ago, and the lettings were abolished in several cases at a given date. There is a new requirement to report capital gains and it is, therefore, necessary to pay the associated tax due within 30 days of completion.

If there are certain instances of non-compliance, many penalties shall be charged. One of the major changes was introduced on 6th April 2020. This was with exchanges of property between spouses or civil partners.

This may have a strong effect on the situation of the couple. As a result of this change, when you’re considering the transfer of property, you need to take the transferring history of your spouse into account.

We hope that we’ve given you a clear overview of end-of-year tax planning, allowance allotted to your spouse, any additional rates applied to the taxpayers, and individual savings allowance. Make sure you keep up with the news and know all the latest updates.