From new year to year end – Are you keeping a tax planning resolution?
The start of the year is the ideal time to focus on year-end tax planning. This is usually driven by the approaching tax year-end (Saturday 5 April 2025) and the Spring Budget. However, this year, following October’s significant Autumn Budget, there will be no Spring Budget. Instead, Rachel Reeves will deliver a Spring Forecast in late March.
Tax Planning Considerations
Following the Autumn Budget, there are several key areas to consider for your tax planning:
- Pension Contributions: The recent Budget announcement that pensions will be included in inheritance tax (IHT) calculations from 2027/28 necessitates a fresh look at pension contributions. While pensions remain a highly tax-efficient savings vehicle for most, those with substantial wealth who are less concerned about retirement income may need to reconsider their estate planning strategies.
- Capital Gains Tax (CGT): With the Budget’s increase in CGT rates to 24% for higher and additional rate taxpayers and 18% for others, it’s crucial to utilise your annual exemption (£3,000). After a generally positive year for stock markets, consider realising gains to make the most of this allowance.
- Inheritance Tax (IHT): Maximise your IHT planning by utilising your annual exempt amount of £3,000 for 2024/25. If you haven’t used your full allowance from 2023/24, you can also carry forward the unused portion.
- Marriage Allowance: If you or your spouse/civil partner earned below the personal allowance in 2020/21 (£12,500), you can still claim the marriage allowance for that year (£1,250) before 5 April 2025, potentially saving up to £250 in tax. This applies if the higher-earning partner was a basic rate taxpayer. Similar claims can be made for 2021/22 onwards with an allowance of £1,260.
- Threshold Planning: Frozen income tax allowances and thresholds could push you into a higher tax band. You might also exceed the £60,000 threshold for the high-income child benefit charge or the £100,000 threshold for personal allowance tapering and loss of tax-free childcare. Consider strategies like bringing income forward into 2024/25 or transferring income-generating investments to a lower-earning spouse or civil partner before 5 April.
Need help with your tax planning?
Contact Chartwell today to speak with one of our expert financial advisors. We can help you navigate the complexities of tax legislation and develop a personalised strategy to minimise your tax liabilities.
