With the tax/financial year end approaching, now is a good time to check that you’re making the most of the available reliefs and allowances available to you. Please talk to us if you think any of the issues affect you.
Savings
If you have some spare cash, an obvious tax planning point might be to maximise your ISA allowances for the 2024/25 tax year (currently £20,000 per person). If you are 18 or over, but under 40, you can open a Lifetime ISA to save for your first home or retirement. You can put in up to £4,000 each year, until you’re 50, but you must make your first payment into your ISA before you’re 40. The government will add a 25% bonus to your savings, up to a maximum of £1,000 per year. The £4,000 Lifetime ISA limit counts towards the £20,000 ISA allowance.
Pension planning
You might also want to consider increasing your pension savings before 5 April 2025.
Under the current rules, the government adds to your pension contributions at the 20% basic rate. For instance, if you save £4,000 in a personal pension, the government tops this up to £5,000. If you are a higher rate taxpayer there is a further £1,000 tax relief when your tax liability is calculated, reducing the net cost to £3,000.
If you have income in excess of £100,000, your £12,570 personal allowance may be tapered. For every £2 of income in excess of £100,000, the personal allowance is reduced by £1, reducing to nil where net income is £125,140 or more. Additional pension contributions can be even more effective if your income is between £100,000 and £125,140; the gross pension contribution reduces net income for the purposes of calculating the reduction in the personal allowance. This is effectively a 60% tax saving.
To discuss your specific cirmustances, contact your usual A C Mole contact or any member of the tax team based in our Taunton office.
