Strategic Financial Planning: Maximising End-of-Tax-Year Allowances andPreparing for Success in the 2024/2025 Tax Year
As we approach the end of the current tax year and the dawn of a new one, now is the perfect time for individuals and businesses in the UK to assess their financial strategies and make proactive decisions to optimise their tax efficiency and wealth management.
By leveraging available allowances, exploring tax-efficient strategies, and planning ahead for the new tax year, you can work towards achieving your financial goals and securing a brighter financial future.
In this blog, we'll explore key considerations for maximising allowances before the end of the tax year 2023/2024 and planning ahead for the new tax year.
Maximising Allowances Before the End of the Tax Year
Utilise ISA Allowances
With the tax year ending on April 5th, individuals have a limited time to make the most of their ISA (Individual Savings Account) allowances. For the current tax year (2023-2024) you have a £20,000 ISA allowance to use before April 5th. Consider maximising contributions to your ISA accounts, whether it's a Cash ISA, Stocks and Shares ISA, or Innovative Finance ISA to benefit from tax-free growth on your savings and investments while reducing your tax liabilities.
Contribute to Pension Plans
Contributing to pension plans, such as SIPPs (Self-Invested Personal Pensions) or workplace pensions, before the end of the tax year can help individuals reduce their tax bills while building wealth for retirement. The annual pension allowance for the current tax year 2023/2024 and the next tax year 2024/2025 is up to £60,000. You can take advantage of these pension allowances and consider making additional contributions to maximise tax relief and accelerate your retirement savings.
According to Hargreaves Lansdown, ISAs and pensions saved an estimated £23bn in tax last year!
Explore Capital Gains Tax Planning
Investors are expected to pay £16.5 billion in capital gains tax for the current tax year, which is expected to catch many people out. The current allowance for this year is £6,000, which is lower than it was for the last tax year (£12,300). It will also be lower again for the new tax year at just £3,000.
Before the tax year ends, consider reviewing your investment portfolio and assessing any potential capital gains tax liabilities. Explore tax-efficient strategies such as tax-loss harvesting or utilising the annual capital gains tax allowance to offset gains and minimise tax liabilities.
Utilise Annual Allowances
Take stock of all available annual allowances and exemptions, including the annual dividend allowance (£1,000 for individuals in the 2023/2024 tax year) and the annual gift allowance (£3,000). By making use of these allowances before the end of the tax year, individuals can reduce their tax exposure and optimise their financial planning strategies.
Considerations for the 2024/2025 Tax Year
- Review Financial Goals and Objectives
With the start of a new tax year, it's essential to review your financial goals and objectives to ensure they remain relevant and achievable. Take this opportunity to reassess your savings targets, investment strategies, and retirement plans, and make any necessary adjustments to align with your evolving financial circumstances and aspirations.
- Maximise Tax-Efficient Investments and Utilise Allowances
Keep abreast of any changes to tax regulations, allowances, and thresholds that may impact your financial planning in the new tax year. It’s also wise to explore opportunities to maximise tax-efficient investments in the new tax year, such as contributing to ISAs, and pensions.
The allowances to be aware of in the new 2024/2025 tax year are:
- Annual ISA (Individual Savings Account) allowance for the 2024/2025 tax year: £20,000
- Annual allowance for pensions for the 2024/2025 tax year: £60,000
- Annual capital gains tax allowance 2024/2025 tax year: £3,000
- Annual dividends allowance: 2024/2025 tax year: £500
- Annual gift allowance for 2024/2025 tax year: £3,000
- Seek Professional Financial Advice
Given the complexities of taxation and wealth management, seeking professional financial advice from a qualified adviser is invaluable. A knowledgeable advisor can provide personalised recommendations tailored to your individual circumstances and objectives, helping you navigate the intricacies of tax planning and wealth management effectively. Ramsay & White Wealth Management provides independent financial advice across the UK, including pensions, investments and inheritance tax planning.
Remember, while these principles serve as valuable guidelines, seeking personalised advice from a wealth management adviser is essential. At Ramsay & White, our experienced advisors can provide tailored guidance to ensure your investment strategy aligns seamlessly with your unique financial goals.
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