Preparing for tax year end: Top tips for managing your finances

4 minute read

As the end of the tax year approaches, it's essential to take stock of your financial situation and make the most of any available allowances. Here are our top tips to help you get your finances in order before the deadline.

1. Check your tax code

Most people can earn up to £12,570 from income sources, like salary or rent, before paying income tax. This is called the personal allowance, and it is currently frozen at this amount until the 2028/29 tax year. Ensure you are on the correct tax code, which you can find on your last payslip. If you think it's wrong, contact HMRC as soon as possible. Business owners should also check their balance of salary and dividends to maximise their personal allowance and benefit from lower tax rates on dividends.

2. Maximise your savings allowances

Each tax year, you can save up to £20,000 into an ISA (Individual Savings Account), which grows free of income tax and capital gains tax (CGT) liabilities. This allowance does not carry over between tax years, so it's a use-it-or-lose-it situation. If you've been meaning to save into an ISA, do so as soon as possible. You can also contribute up to £9,000 into a child's Junior ISA, provided you don't exceed the allowances.

If you have a Flexible ISA, remember to replenish any funds withdrawn within the same tax year, otherwise, you'll lose this ability, and your ISA subscription allowance will reset to the standard £20,000.

3. Use 'Bed & ISA'

If you haven't made full use of your ISA allowance this year, consider a 'bed and ISA' transfer. This allows you to move investments from a taxable environment into an ISA, where it no longer attracts CGT, while utilising your annual ISA allowance of £20,000. With a bed and ISA transfer, your non-ISA investments can be sold, any CGT arising at that point should be paid, and the cash proceeds are used to fund an ISA subscription, allowing the investments to grow free of CGT.

Before making use of a bed and ISA transfer, it's a good idea to speak with a financial adviser, as there may be a potential CGT liability on the disposal of non-ISA assets.

4. Minimise your Capital Gains Tax (CGT) Liabilities

With recent increases in CGT rates effective from 30 October 2024, it's crucial to consider how to minimise your CGT liabilities. Basic-rate taxpayers now pay 18% CGT on gains, up from 10%, while higher and additional-rate taxpayers pay 24% CGT, up from 20%. The tax rate for selling second homes or rental properties remains at 18% for basic-rate taxpayers and 24% for higher-rate taxpayers.

To reduce your tax liability, each person can make £3,000 in gains tax-free each year using their CGT annual exemption. By selling part of an investment before 5 April and the rest after, you can spread your gains across two tax years. Transferring assets to a spouse or civil partner can also help, as there's no tax to pay when transferring between partners, allowing you to utilise both tax-free allowances.

If you’ve experienced losses on investments in the last four years, you may be able to reduce your overall tax bill by offsetting these losses against your gains. You should also consider the timing of your sales. Selling over multiple tax years rather than all at once can help manage and potentially lower your CGT bills.

5. Top up your pension pot

Saving into your pension pot is a great way to save for retirement, particularly as you receive income tax relief on the money you put in. Most people can save up to £60,000 this tax year, or 100% of your salary, whichever is lower. If you don't use all your personal allowance this year, you may be able to 'carry it forward' for up to three years.

6. Gift to your loved ones

If you have the funds to do so, gifting money to loved ones can help them and also mitigate inheritance tax (IHT) for you. Each tax year, you can gift up to £3,000 IHT-free, and a couple can combine their allowances to gift £6,000. Any unused allowance can be carried over for one year. Remember that any gifts over this amount may be liable for IHT if you die within 7 years of the gift.

7. Regain your child benefit

If either you or your partner's income is over £60,000, you would have lost some or all of your child benefit. By keeping your taxable income below that threshold, you may be able to regain some of your allowance. This can be done by making personal contributions into your pension.

By taking these steps and planning ahead, you can make the most of your allowances and ensure your financial affairs are in good shape for the new tax year.

Speak to your financial adviser today. If you don't have one, find out about our advice services.

Remember, the value of your investments can go down as well as up.

Tax treatment varies according to individual circumstances and is subject to change.

Tax Planning is not regulated by the Financial Conduct Authority.

Approver Quilter Wealth limited, Quilter Financial Services Limited, Quilter Mortgage Planning Limited, Quilter Financial Limited, Quilter Financial Planning Solutions Limited March 2025.

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