With 6 April around the corner, here are 5 allowances and exemptions to make the most of before the end of the tax year

With 6 April fast approaching, the new tax year is just around the corner, and with it comes a reset of key personal and business allowances, exemptions, and reliefs.

The new tax year presents a fresh opportunity to optimise your finances for the year ahead. So, now is the perfect time to get organised and position yourself to make the most of next year’s allowances.

But while planning ahead is a good idea, it’s also important to take full advantage of this year’s tax-efficient saving and investing opportunities before they expire. As you only have a few weeks left before the new year begins, you may want to make any transfers or requests as soon as you can.

Read on to discover five key allowances and exemptions to maximise before the current tax year ends.

1. Pension Annual Allowance

When you contribute to your pension, you typically receive 20% tax relief automatically. If you're a higher- or additional-rate taxpayer, you may be able to claim a further 20% or 25% through self-assessment. Moreover, any interest or investment returns you earn on your pension savings are tax-free.

Every tax year, there is a limit on how much you can contribute to your pension without facing a tax charge, known as the “Annual Allowance”.

In 2024/25, the Annual Allowance is £60,000 or 100% of your earnings, whichever is the lower of the two figures. However, if your adjusted income exceeds £260,000 or you have accessed your pension flexibly, your Annual Allowance may be reduced to as little as £10,000. 

If you haven’t used your full Annual Allowance in previous years, you can carry forward unused amounts for up to three tax years. This means you have until 5 April 2025 to take advantage of any remaining allowance from 2021/22 onwards. 

If you’ve used your full Annual Allowance for 2024/25 and didn’t make any contributions in the previous three tax years, you may be able to contribute an additional £140,000 (£200,000 in total) to your pension in a single year by taking advantage of the carry forward rule. This is because the Annual Allowance was £40,000 in 2021/22 and 2022/23, before rising to £60,000 in 2023/24.

So, it’s a good idea to maximise your pension contributions before the new tax year, so you can make full use of the benefits and boost your retirement savings.

2. ISA allowance

ISAs are an efficient way to save and invest, offering tax-free interest and returns on your savings. 

In the 2024/25 tax year, you can contribute up to £20,000 across all of your ISAs. If you’re married or in a civil partnership, you can also combine your ISA allowances, allowing you to save up to £40,000 tax-free.

There are several different types of ISAs, and which you choose to save or invest in will depend on your financial goals and their timeframes.

For instance, for your shorter-term goals, a Cash ISA may be a safer option. On the other hand, if you're investing for a goal five years or more in the future, a Stocks and Shares ISA could offer greater growth potential, though it comes with higher risk. 

In addition to your own ISA allowance, you can save up to £9,000 in a Junior ISA (JISA) on behalf of a child. This can be an efficient way to build a pot for their financial future, as any interest, dividends, or capital gains within a JISA are entirely tax-free.

3. Gifting exemption

If your estate is likely to be subject to Inheritance Tax (IHT) when you pass away, gifting wealth during your lifetime can be an effective way to reduce your future tax liability.

However, not all gifts are immediately exempt from IHT. Some may still be considered part of your estate for up to seven years after you give them before falling outside the IHT threshold. These are known as “potentially exempt transfers”.

But crucially, every tax year, you can also take advantage of the annual gifting exemption, which allows you to give away a certain amount that will fall outside your estate for IHT purposes. For 2024/25, this exemption is capped at £3,000. If you didn’t use your full exemption in the previous tax year, you can carry it forward.

By making tax-efficient gifts during your lifetime, you can help minimise the IHT burden on your estate and ensure more of your wealth is passed on to your loved ones.

4. Capital Gains Tax Annual Exempt Amount

Capital Gains Tax (CGT) is a tax on the profit you make from selling certain assets.

The Annual Exempt Amount allows you to make gains of up to £3,000 in the 2024/25 tax year before CGT applies.

You can’t backdate the Annual Exempt Amount, but you can give assets to your spouse without paying CGT. This means that if one of you hasn’t used your full exemption, it may be more efficient for that partner to make the sale rather than the one who has.

So, carefully planning asset sales to make full use of this exemption can be an effective way to reduce your tax liability.

5. Dividend Allowance

If you’re a business owner or hold shares in a company, you may receive dividend payments as part of your income.

Dividends within your Personal Allowance are tax-free. Furthermore, you can also benefit from the Dividend Allowance, which lets you receive up to £500 in dividends before you pay Dividend Tax.

So, earning money from dividends can be a tax-efficient way to supplement your income while keeping your overall tax liability lower.

Get in touch

If you get your requests in as soon as possible, we can work with you to maximise your allowances and exemptions before the end of the tax year.

To find out how to make full use of these benefits, get in touch.

Email info@mlpwealth.co.uk or call us on 020 8296 1799.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.