As the end of the 2024/25 fiscal year approaches, you may be wondering how you could maximise the allowances and reliefs that are available to reduce your tax liability. With the deadline of Saturday 5 April getting closer, it’s important to remember that if you don’t use many of the reliefs and allowances provided, you’ll lose them when the new tax year starts.
That said, there are also several tax reliefs that can be carried over to the next tax year if you don’t take full advantage of them. With this in mind, read on to discover two important tax reliefs and allowances that you can carry forward into the 2025/26 tax year, and two that you can’t.
Let’s look at the allowances you can’t carry forward first.
Individual Savings Account allowances
As Individual Savings Accounts (ISA’s) are not exposed to Income Tax, Dividend Tax or Capital Gains Tax (CGT), they provide an extremely tax-efficient way to save or invest your money. In 2024/25 you can place up to £20,000 into an ISA, however if you don’t use it, you lose it when the next tax year begins on 6 April.
While you can put money into a cash ISA, a Stocks and Shares ISA or both, you must not exceed the allowance in a single tax year. It’s also important to remember to use your Junior ISA (JISA) allowance if you have children or grandchildren, as this too is lost if you don’t use it.
The maximum you can contribute to a JISA in 2024/25 is £9,000, and can use these tax-efficient accounts to place the money into cash savings, stocks and shares or both.
Capital Gains Tax allowance
This is charged on the profit you make when you sell most assets, which includes a property that’s not your main residence, shares or art. In 2024/25 you’re allowed to make profits of up to £3,000 before Capital Gains Tax (CGT) is charged at 18% if you’re a basic rate taxpayer, or 24% if you’re a higher rate taxpayer.
As you’re not permitted to carry any unused amounts of the allowance over into the next tax year, it’s important to maximise it if you’re selling assets. One way you might be able to do this is to consider selling some assets just before the tax year end, and the remainder just after.
This could allow you to use two different tax year’s CGT Allowance in quick succession, which may allow you to make up to £6,000 in profit without any exposure to the tax.
Now that we have looked at two important taxes that you can’t carry over into the next tax year, let’s look at two that you may be able to.
Annual Allowance
To encourage us to save for our retirement, the Government provides tax relief on pension contributions. This means that every £100 you place into your pension scheme could cost just:
- £80 if you’re a basic-rate taxpayer
- £60 if you’re a higher-rate taxpayer
- £55 if you’re an additional-rate taxpayer.
While you can contribute as much as you like into your pension during a tax year, the amount that enjoys tax relief is limited to your Annual Allowance. In 2024/25, this is £60,000 or the amount you earn, whichever is lower.
Higher earners may have an Annual Allowance of £10,000 under the ‘tapering’ rules.
If you do not use all of your allowance in 2024/25, you may be able to utilise the outstanding amounts in 2025/26 under the ‘carry forward’ rules. This allows you to potentially use the amount of Annual Allowance that you didn’t utilise in the previous three years.
As a result, you may be able to contribute up to £220,000 in 2025/26 and still receive tax relief. That said, strict regulations apply to carry forward, so it’s important to speak to a financial adviser to ensure it’s right for you and that you don’t inadvertently fall foul of the rules.
If you do breach the carry forward rules you may face an unexpected, and significant, tax charge.
Inheritance Tax gifts
When you die, the value of any assets that you own that exceeds your nil-rate band is typically liable to Inheritance Tax (IHT). This is the amount you’re allowed to have in your estate upon death before the tax is charged, usually at 40%.
To help you reduce the value of your estate, and with it, your estate’s exposure to the tax, HM Revenue & Customs allows you to make certain gifts during the tax year. This includes a £3,000 gift that can be given to one person or divided between many.
If you do not use the full gift allowance, the unused amount can be carried over to the following tax year and added to that tax year’s gift. As such, you may be able to give away up to £6,000 in 2025/26.
Furthermore, as it’s £3,000 per person, if you’re married or in a civil partnership you could gift up to £12,000 between you. Please note that this is not a complete list of the gifts you could make to reduce your IHT liability.
The tax year end is an important time
While we hope this blog provides useful information, please remember that the tax year end is an important time when it comes to financial planning. It provides an excellent opportunity to ensure your money and wider wealth is as tax-efficient as possible, as well as a time to reassess your priorities and money’s performance.
To help you better understand the opportunities presented by the tax year end, we will be looking at ways to maximise them in our next wealth webinar. The online seminar, which takes place on Tuesday 25 February, is part the series that AFH Wealth Management is hosting to help everyone get more from their finances.
Former BBC presenter Mark Foster will join Chief Advice Officer, Austin Broad, and Financial Adviser Jade Soutter-Davies for the webinar, entitled: making the most of tax year end to optimise your wealth.
Join us for what promises to be an engaging and informative event, so that you can learn how the tax year end could help you to reduce your tax liability and get more from your money. We Follow the link to register for the webinar.
Get in touch
If you would like to discuss ways to improve your tax efficiency or arrange a no obligation meeting with one of our advisers, call us on 0333 010 0008.
Monday 24 February 2025