End of Year Personal Tax Planning Tips
Each March, Pillow May carries out a 360° purposeful financial review designed to deliver value far beyond your annual tax return. This holistic review ensures remuneration has been taken efficiently and considers your wider financial position and goals.
Considering the below factors alongside your personal situation, we recommend the most effective and appropriate way to structure your finances and set a clear, personalised remuneration and tax planning strategy for the current tax year and new tax year giving you clarity and confidence that your finances are working to support the life you want.
- Make the Most of Your Tax-Free Allowances
• Personal Allowance: Up to £12,570 tax-free income (lost once income exceeds £100k).
• Dividend Allowance: Up to £500 tax-free dividends.
• Personal Savings Allowance:
• £1,000 for basic rate taxpayers
• £500 for higher rate taxpayers
• Not available for additional rate taxpayers.
• Starting Rate for Savings: Up to £5,000 tax-free interest if other income is below £16,850.
- Use Special Allowances for Extra Income
• Rent a Room Scheme: Up to £7,500 tax-free from letting furnished accommodation.
• Property Allowance: Up to £1,000 tax-free on rental income (not if you use Rent a Room).
• Trading Allowance: Up to £1,000 tax-free from casual or self-employed income.
• Marriage Allowance: Transfer 10% of your Personal Allowance to a basic rate spouse.
- Maximise Pension Contributions
• Up to £2,880 tax-relieved contributions regardless of earnings.
• Otherwise, up to 80% of earnings, capped at £48,000.
• Carry forward unused allowances from previous years.
• Higher earners can save up to £27,000 in tax.
• Pension now included in your estate on death from April 2027
- Use Your ISA Allowance
• Save up to £20,000 tax-free in an ISA.
• Choose between Cash ISAs or Stocks & Shares ISAs.
• Platforms like https://www.nutmeg.com/ make investing accessible.
• Any investments made under enterprise schemes that give additional tax relief
- Plan Capital Gains Carefully
• Up to £3,000 tax-free gains each year.
• Spread asset sales across tax years.
• Could any of the gains be eligible for relief?
• Record losses to offset future gains.
• CGT applies to gifts, including passing assets to family.
• Capital gains tax liability at 14%, 20% or 24% depending on the type of asset and whether a basic or higher rate taxpayer.
- Avoid the High Income Child Benefit Charge
• Income over £60,000 triggers clawback.
• Full clawback at £80,000.
• Reduce adjusted net income with Gift Aid or pension contributions.
- Keep Track of Gift Aid Donations
• Donations are tax-free (and therefore can reduce tax payable) if:
• Made via Gift Aid
• Through Payroll Giving
• As land, property or shares
• In your will
• Ensure you’ve paid enough tax to cover Gift Aid claimed.
- Gifts to reduce your estate
• Annual exemption of £3,000
• Start 7 year clock running