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With the end of the tax year fast approaching, now is the time to ensure your financial affairs are in order. Whether it’s making the most of your ISA allowance, pension contributions, or other tax reliefs, acting now can make a real difference. It’s easy to put off these decisions, but this summary will help you focus on the key areas to address.

1. Personal Allowances and Tax Bands

For the 2024/25 tax year, the personal allowance remains at £12,570. Above this, different tax bands apply depending on your income level.

If you run a family business, consider how you distribute income. Dividends, salaries, and bonuses paid to family members (as long as they reflect actual work done) can help ensure personal allowances are fully used. Trustees may also be able to distribute income to beneficiaries in a tax-efficient way.

If your income falls between £100,000 and £125,140, your personal allowance is gradually withdrawn, creating an effective 60% tax rate. Pension contributions or charitable donations (see below) can help reduce this impact.

2. Pension Contributions

For most people, the annual pension contribution limit is £60,000, provided earnings are no more than £260,000. This allowance is tapered down to £10,000 for higher earners. If you haven’t used your full allowance in the previous three tax years, you may be able to carry it forward.

Although the maximum tax-free lump sum on retirement is capped at £268,275, there’s no longer a limit on the total size of your pension fund. Changes to inheritance tax (IHT) on pension savings from April 2027 could also affect your estate planning, so it’s worth seeking professional advice before taking action.

3. Charitable Giving

Donations to charity qualify for tax relief, but the rules can be confusing. If you’re a 40% taxpayer and donate £100 under Gift Aid, the charity receives £125, and you can claim back £25 in tax relief.

However, watch out for common pitfalls. If you make a Gift Aid donation but haven’t paid enough tax to cover the relief, HMRC will ask you to make up the difference. Also, not all donations qualify—giving directly to a US charity, for example, won’t get you UK tax relief, but donating to a UK charity that supports that cause will.

4. Tax-Efficient Gifting

If you’re thinking about passing on wealth, there are ways to do so without triggering an IHT charge. You can gift up to £3,000 each tax year (which can be carried forward for one year) without affecting your estate’s IHT liability. That means you could give £6,000 every other year tax-free.

If you have surplus income, you can make regular gifts that won’t be subject to IHT, regardless of how long you live. These must come from income, not capital, and should be properly documented to qualify. Professional advice is strongly recommended before relying on this exemption.

5. EIS and SEIS Allowances

Investing in qualifying companies under the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) can provide significant tax benefits. EIS offers 30% income tax relief, while SEIS provides 50% relief. Gains from these investments can be exempt from capital gains tax, and other gains can sometimes be deferred (EIS) or partially exempt (SEIS) when reinvested.

But be careful—capital gains tax exemption only applies if you’ve claimed income tax relief on the original investment. If you invest in EIS but have no income tax to offset, any profit on disposal will be taxable.

Act Now

The tax year-end is your last opportunity to take advantage of allowances and reliefs before they reset. Reviewing your position now could save you significant tax and improve your financial outlook. If you’re unsure about the best steps to take, now is the time to get professional advice.

Noel Guilford