End of year tax planning guide

With the end of the tax year fast approaching, there is no time like the present to ensure you have reviewed your finances and made the most of the reliefs and allowances available to you. We also have an end of year tax planning guide that can be found here:

Income tax

Income tax thresholds and personal allowances have been frozen again for the 24/24 tax year, so an increase in taxable income may push you into a higher tax bracket. As a taxpayer reaches income of over £100,000, their personal allowances is tapered by £1 for every £2 up to £125,140 meaning that a portion of your income above £100,000 is effectively taxed at 60%.

As a reminder, the tax rates for 2024/25 and 2025/26 are:

If your income breaches one of these thresholds, there are a number of simple ways which you can use to reduce your taxable income:

• You can obtain tax relief on any qualifying Gift Aid donation to a UK charity made by 5 April 2025 or any donation made by 31 January 2026 if filing a UK tax return.
• Make the most of your £60,000 annual pension allowance.  This is capped at 100% of your earnings if you earn below £60,000 and is tapered beyond earnings of £260,000.
• You may also be able to carry forward the previous three years’ allowances to the extent they are unused, to fund a large contribution.  Pension contributions will reduce your overall taxable income which may well preserve your personal allowance, place you in lower tax bracket or help you retain certain benefits such as child benefit.
• The ISA allowance of £20,000 has remained in place, so ensuring you have utilised this will see you benefit from tax free interest and growth within your ISA.

Capital gains tax

Following Rachel Reeves’ announcement in October last year, capital gains tax is now charged at increased rates of 18% at the basic rate and 24% at the higher rate. There is also a 4% surcharge on residential property disposals.

Married couples benefit from a nil gain/nil loss transfer of assets between both parties, meaning that you could utilise both of your £3,000 annual exemptions against the sale of a jointly owned asset reducing the overall tax burden.

Reducing capital gains tax when selling your business

Business asset disposal relief (BADR), formerly known as entrepreneurs’ relief, allows qualifying business owners to reduce the rate of capital gains tax (CGT) on the disposal of their business or business assets.  Instead of the standard CGT rates, gains that qualify for this relief are taxed at a reduced rate of 10%, up to a lifetime limit of £1 million. From 6 April 2025, the tax rate on gains qualifying for BADR will increase from 10% to 14%.

Tax efficient investments

The Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) offer generous income tax reliefs (30% for EIS and 50% for SEIS), while encouraging investment in early stage companies. They can be particularly effective in reducing personal tax liabilities and are worth considering as part of a broader tax strategy.

Inheritance tax (IHT)

The nil rate band for IHT remains at £325,000, with a further £175,000 Residential Nil Rate Band (RNRB) available when you pass your home to a direct descendent.  Reducing the taxable value of your estate will serve to reduce the bill your executors may be handed after you are gone.

There are various ways to do that:

• Make use of exemptions - the annual gift exemption allows you to give up to £3,000 tax free each year.  You can also make small gifts of up to £250 per person, wedding gifts, or regular gifts from surplus income without triggering an IHT liability.
• Plan lifetime giving - consider using the seven year rule for larger gifts to reduce the value of your estate over time.
• Trusts and estate planning - putting assets into a trust can help reduce the value of your estate subject to IHT, but it’s important to get professional advice to ensure compliance.

Consider gifting carefully as some gifts may trigger a taxable event for capital gains tax purposes.

If you have any questions regarding the year end and how to make the most of any options available to you, please get in touch with your Swindells partner who will be able to advise you further or download our guide