27th February 2025
Make the most of your financial planning arrangements with our end of tax year checklist!
Your checklist
As we approach the end of another tax year, it serves as a timely opportunity to consider what you would like to achieve with your finances in 2025.
Whether you have short, medium or long term financial objectives, use our handy guide to help you make some informed decisions to help boost your finances ahead of the upcoming tax year end.
The tax year ends on April 5th. Make sure you take advantage of the tax reliefs and allowances available to you before they reset.
Let us guide you with clarity and confidence through these important financial steps by enjoying our short three-minute read, easy-to-action checklist to help you maximise your tax efficiency.
Your checklist:
- ISA contributions
- Pension contributions
- Personal allowance
- Captial Gains Tax allowance
- Annual gift exemptions
- National Insurance contributions
- Reach out to Principal and Prosper for professional advice
Maximise your ISA contributions
An ISA (Individual Savings Account) allows you to grow your savings or investments tax-free, with an annual allowance of £20,000 each tax year. Ensure you’re making use of your allowance by contributing the maximum amount before the deadline of 5th April.
Why it matters
This tax-efficient strategy protects your savings from income tax and capital gains tax, reducing your tax liability and helping your finances grow quicker. Don’t underestimate the compounding effect of this over time!
What you need to do
Check your current ISA contributions and top up if needed to reach the annual limit.
Boost your pension contributions
Despite the gloom surrounding pensions in the lead up to and following the recent budget, pensions remain the most tax-efficient vehicle to save funds for your retirement. Don’t be fooled by some headlines making you believe otherwise.
With full tax-relief available at your marginal rate (this is the highest percentage of tax you pay on your income), you should consider whether you have scope to make further pension contributions before the end of the tax year on 5th April.
Considerations
Pension contributions are restricted by earnings and your annual allowance however, you can carry forward any unused allowance from the previous three tax years. It's a great way to reduce your income tax payable in the current tax year while also saving for your retirement.
What you need to do
Review your pension statements and consult with an expert at Principal & Prosper to determine your best strategy.
Use your personal allowance
If you don’t have any taxable income, you may wish to consider withdrawing an income as your personal allowance is "use it or lose it” each tax year. It’s the amount of income you can earn each year without paying tax which, for most people in the UK, is £12,570.
If you’re of pensionable age, consider withdrawing pension funds tax-free or if you’re a business owner, consider drawing down salary from your business to use this allowance effectively.
What you need to do
Evaluate your current income and adjust withdrawals or salary to maximise your allowance.
Review your Capital Gains Tax (CGT) allowance
The Capital Gains Tax (CGT) allowance of £3,000 refers to the tax-free amount you can earn from the profit made when selling an investment or asset. It will commonly apply to most investments not held within an ISA.
Staying within this limit means you can make the most of growth on some assets without suffering capital gains tax. For example, consider selling some of your investments to take advantage of your tax-free allowance and transfer the proceeds into an ISA where any future growth is sheltered from any tax.
What you need to do
Review your investment portfolio and plan any asset sales accordingly.
Make use of annual gift exemptions
With inheritance tax receiving a lot of coverage in the news of late, it’s worth highlighting that everyone has an annual gift allowance of £3,000. If you haven’t used this in the previous tax year, you can also carry it forward.
This allows couples to potentially gift up to £12,000 tax-free, without any repercussions from an inheritance tax perspective. Small gifts up to £250 can be given to unlimited individuals, helping manage inheritance tax.
What you need to do
Review your investment portfolio and plan any asset sales accordingly.
Review National Insurance contributions
Your state pension entitlement is based on your National Insurance Contribution (NIC) history. Filling any gaps can help ensure you receive a higher state pension, making you get the maximum amount of income available to you in retirement.
Deadline
You can make voluntary contributions for years from 2006 onwards until the 5th April 2025. After this deadline, you will only be able to pay voluntary contributions for the previous six tax years.
What you need to do
Run a state pension forecast (link here) to establish how much state pension you can expect to receive in future and identify any gaps in your national insurance record.
Feeling overwhelmed?
If at any point you feel lost or overwhelmed, we have a team of expert financial planners at Principal & Prosper waiting to help you. We provide tailored advice and support, ensuring you’re well-prepared and on track for the future you envisage.
Effective tax planning is crucial to making the most of your annual tax-free allowances and achieving your long-term financial goals.
Get personalised guidance and support tailored to your unique financial situation.
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