Proactive Tax Year Preparation
Planning for the beginning of the new tax year is as important as the planning done for the end of the old one.
While the 5th of April, the tax year’s conclusion, is a major focal point, the following day, while appearing to need less immediacy, should be considered of equal importance.
1. Personal Allowances
The personal allowance for 2025/26, the new tax year, remains at £12,570, the same as it has been since 2021/22. Above that level, income tax will normally enter the equation. If you (or your spouse/civil partner) do not have enough income to cover the personal allowance, then you could consider transferring investments between yourselves so that the income generated escapes tax. You should also consider whether or not to claim the marriage allowance if your partner pays no tax and you pay no more than the basic rate (or vice versa).
2. Other Tax Allowances & Bands
Similar principles apply to other allowances, such as the personal savings allowance (up to £1,000), the dividend allowance (£500) and the thresholds of tax bands. It is much easier to shuffle around future income at the start of the tax year than attempt to do so as 5 April looms near.
3. HICBC – High Income Child Benefit Charge
If you or your partner (marriage is irrelevant) have income (after certain allowances) of over £60,000 and both claim and receive payments of child benefit, then whichever of you has the higher income is taxed on that benefit. The tax charge is 1% of the child benefit for each £200 of income over the £60,000 threshold, meaning the tax matches the benefit at £80,000. If you have two children, this is equivalent to an extra 11.26% added to your marginal tax rate. Shifting your investment income could therefore save tax, even if you both pay the same marginal rate of tax.
The Financial Conduct Authority does not regulate tax advice.
Tax Year Planning: Expert Guidance
Need help planning your new tax year, particularly in relation to your personal allowance and understanding how tax bands will impact your financial strategy? Chartwell’s experts offer tailored advice on investment planning, ensuring you optimise your tax position. Get in touch today for a consultation and take control of your financial future.
