Personal tax planning strategies for the new tax year

The 2024/25 fiscal year has just begun, which means your previous allowances and exemptions have reset (as of 6 April).

As a result, we’ve spent the last few weeks advising our clients on how to reapply for these and strategise their tax planning for the coming 12 months.

We’ve also been preparing many of them for this year’s updated regulatory and legislative changes – many of which came in during the Spring Budget a couple of months ago.

We have covered a lot of relevant information in the below article, but it is in no way an exhaustive guide and you should seek further advice from your tax adviser where possible.

As Sharla Dandy says: “This article should give you a basic understanding of your tax planning strategies – a base to work from – but it’s always best to discuss the details with your accountant.

“The regulatory landscape may have changed considerably since your last strategy was developed so it’s vital to have a rethink at the start of every new tax year.”

For those of you also looking for tailored advice, our team have the experience and knowledge to give you bespoke guidance on your liabilities and reducing your tax bill, but here’s a broad overview of the personal tax planning strategies you could use this year.

Individual Savings Accounts (ISAs)

The ISA allowance remains at £20,000 this year, offering tax-free interest or gains up to this threshold.

However, a proposed “British ISA”, introduced by the Chancellor in the Spring Budget, may increase the allowance to £25,000, focusing on UK-listed companies through an additional £5,000 ISA.

However, it’s currently not confirmed whether this will be in addition or within the current threshold.

Sharla says: “Utilising the full ISA allowance protects your investments from Capital Gains Tax and Income Tax – under the right circumstances – so this can be a prudent way of shielding your wealth from tax bills.

“We often recommend that clients make the most of this allowance to the fullest to protect their hard-earned cash.”

Pension contributions

“Pension contributions are also an absolutely vital aspect of personal tax planning,” says Sharla.

“Tax relief on pension contributions is currently available at the marginal rate, with a £60,000 annual allowance, but excess contributions may incur tax charges, making good planning crucial.”

Unused allowances from the previous three years can also be carried forward.

In April, the lifetime allowance of £1,073,100 was abolished.

Charitable giving

Donations under Gift Aid allow charities to claim an additional 25p per £1 donated.

Higher and additional rate taxpayers can reclaim the tax difference on this, reducing their overall taxable income.

“This strategy is generally most beneficial for incomes just above the £100,000 threshold, says Sharla,  “but you should always discuss this with your accountant in more depth”.

Sharing income

Transferring assets to a lower-earning spouse can optimise your tax bands and allowances.

This strategy reduces your overall tax payable by utilising the lower earner’s tax rate and their personal allowance of £12,570.

In essence, this reduces the household’s tax liability through income distribution rather than focusing on individual incomes.

National Insurance Contributions (NICs)

“This year’s Spring Budget introduced a two per cent NIC rate cut from 6 April for employees and the self-employed,” says Sharla.

The rates now look like this:

  • For the self-employed – 6 per cent (reduced from 8 per cent)
  • For employees – 8 per cent (reduced from 10 per cent)

“It’s going to be important to review your NICs to ensure your eligibility for the full State Pension benefits,” Sharla says. “Too few contributions might increase your retirement age or exclude you.

“You may wish to top up your contributions through voluntary contributions if this is the case and, again, your accountant can help with this kind of pension planning.”

Gifts and Inheritance Tax planning

As always, utilising the £3,000 annual exemption amount for gifting can reduce your Inheritance Tax liability, if done within seven years of your demise.

Lifetime gifts and small gift exemptions (£250) are also strategic ways of passing on your wealth without incurring Inheritance Tax.

“In essence, tactical planning helps ensure more of your estate goes to your beneficiaries and less to the taxman,” says Sharla.

Capital Gains Tax (CGT)

The Chancellor lowered the higher CGT rate on residential property in the Spring Budget.

Residential property sales, for those in the higher band, now incur a 24 per cent CGT, down from 28 per cent last tax year.

Sharla says that, as a result, “strategic asset disposals and transfers this year could optimise your tax efficiency this tax year.

“Equally, utilising your annual exemptions (£3,000 this tax year, down from £6,000 in 2023/24) and spousal transfers can minimise your CGT liabilities.

“Again, it’s best to discuss this strategy with a qualified and experienced tax adviser.”

Investment schemes

The Enterprise Investment Scheme (EIS) and the Seed Enterprise Investment Scheme (SEIS) can provide substantial tax relief to individuals investing in startups and small-scale enterprises.

The Venture Capital Trusts (VCTs) also offer a 30 per cent relief on Income Tax and allow for dividends to be received tax-free by investors.

“Together, these programs aim to incentivise investment in businesses with significant growth prospects, offering you the opportunity to support nascent companies while gaining considerable tax benefits,” says Sharla.

Child Benefit payments

In the Spring Budget, the High-Income Child Benefit charge threshold increased to £60,000, from £50,000.

A new taper was also introduced that extends up to £80,000, broadening eligibility and providing further tax incentives for higher earners.

These changes are likely to provide additional support and simplify the system for middle-income families.

Stamp Duty Land Tax (SDLT) changes

“The abolition of Multiple Dwellings Relief in the Spring Budget is likely to affect your property investment strategy – if you have one,” says Sharla.

“Whilst the adjustments benefit first-time buyers and specific sectors, re-evaluating your property transactions in light of these changes is advised as you could incur a much larger tax bill than in previous years.”

Time to speak to your accountant?

Sharla says: “With the tax year just beginning, many people think that they have ample time to apply their allowances later.

“However, we do not generally recommend this strategy.

“Getting your allowances and reliefs in order sooner, rather than later, is always more efficient and gives you scope as to how much your tax bill is likely to be.”

Speaking to your accountant or tax adviser is the best way to mitigate your tax liabilities and reduce your personal expenses.

We can advise you on which strategies apply to your specific situation and even get the process moving for you by discussing these issues with the relevant tax authorities.

If you’d like bespoke guidance, please reach out to one of our team.