Make sure you make the most of your Tax-Free allowances before the New Tax Year
As the end of the tax year approaches us on 5th April (only 5 weeks away at point of posting), now is the perfect time to review your finances and make sure you’re taking full advantage of your tax-free allowances.
Every year, in the UK we all have access to a range of allowances that can help reduce tax bills and keep more of our hard-earned money. If you don’t use them, you lose them!
So, here’s how to make the most of them before that all important deadline.
1. Use Your ISA Allowance (£20,000)
Individual Savings Accounts (ISAs) allow you to save and invest without paying tax on interest, dividends, or capital gains. The ISA allowance for 2023/24 is £20,000, and if you don’t use it by 5th April, it’s gone for good. You can split this between a Cash ISA, Stocks & Shares ISA, Lifetime ISA, or Innovative Finance ISA depending on your financial goals.
Tip: If you haven’t used your allowance yet, consider moving some savings into an ISA to shelter your money from tax.
2. Make the Most of Your Pension Contributions (£60,000 or More)
Pension contributions come with valuable tax relief, making them one of the most tax-efficient ways to save for the future. For most people, the annual pension allowance is £60,000, but this could be lower if you’re a high earner or have already accessed pension benefits.
Tip: Contributions within your allowance benefit from 20% tax relief at source, and higher and additional-rate taxpayers can claim even more. If you haven’t maxed out your pension contributions for the past three years, you may be able to carry forward unused allowances.
3. Use Your Capital Gains Tax Allowance (£3,000)
If you’ve made profits from selling assets like stocks, property (excluding your main home), or other investments, you can take advantage of the £3,000 capital gains tax (CGT) allowance before the new tax year.
Tip: If you’re considering selling investments, doing so before the end of the tax year could help you reduce your Capital Gains Tax bill if you’ve not already used your allowance this year.
4. Take Advantage of the Dividend Allowance (£500)
For those with investments outside an ISA or business owners receiving dividends, the £500 tax-free dividend allowance is another valuable benefit.
Tip: If you own a business and take dividend income, make sure you are utilising this allowance.
5. Use Your Personal Savings Allowance (£1,000/£500)
The Personal Savings Allowance (PSA) allows basic-rate taxpayers to earn up to £1,000 of interest tax-free, while higher-rate taxpayers get £500. Additional-rate taxpayers do not receive a PSA.
Tip: If your interest earnings are approaching your allowance, consider using an ISA to shelter future savings from tax.
6. Plan Gifting for Inheritance Tax (£3,000 Annual Exemption)
If you’re thinking about estate planning, remember that you can gift up to £3,000 per tax year without it being counted towards inheritance tax (IHT). If you didn’t use this allowance last year, you may be able to carry it forward for a total of £6,000 this year.
Tip: Consider making tax-free gifts to loved ones before the tax year ends to reduce potential IHT liability.
Final Thoughts
The end of the tax year is a crucial time to ensure you're making the most of all available tax-free allowances.
If you need help optimising your finances, our team at F&O Wealth Management is here to provide expert advice. Get in touch today to discuss how we can help you make the most of your tax allowances before the deadline.
This blog is for information purposes and does not constitute financial advice, which should be based on your individual circumstances.
The taxation of the investment is dependent on the individual circumstance of each investor, and may be subject to change in the future.
The favourable tax treatment of ISAs may be subject to changes in legislation in the future
An investment in a Stocks & Shares ISA will not provide the same security of capital associated with a Cash ISA.