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Optimising your finances: A roadmap to successful tax year-end savings

With a new Westminster regime comes a refreshed fiscal strategy.

And as Labour’s policies take effect, individuals must be more proactive than ever when planning for the future.

A key starting point is the rapidly approaching tax year-end.

The headline April 5 financial event, coming as it does ahead of tax allowance revisions and further anticipated reductions, represents a crucial opportunity to ensure compliance while maximising savings and efficiency.

And by acting now, you can make your money work harder and secure a more prosperous future. From retirement savings to pension contributions, ISAs and strategies around capital gains and inheritance tax, there are a number of measures you can leverage to enhance tax efficiency ahead of the year-end.

Here, Ajay Naik, independent financial adviser at Fairstone, a leading wealth management firm in the UK and Ireland, examines the steps you can take to optimise your finances.

Bolster retirement savings

Higher-rate taxpayers can receive up to 40 per cent relief on contributions, while additional rate taxpayers can claim up to 45 per cent.

Maximise your £60,000 annual allowance, and consider making contributions to pensions for non-earning family members.

Effective withdrawal planning is equally crucial – take up to 25 per cent of your pension tax-free, and time withdrawals alongside other income to minimise overall liabilities.

Maximise pension contributions

If you earn more than £100,000, pension contributions represent a significant avenue towards lowering taxable income. 

Helping retain your full £12,570 personal allowance, the strategy also delivers up to 45 per cent tax relief.

Accentuate the impact further by carrying forward unused allowances from the past three years.

Don’t forget ISAs 

The £20,000 ISA allowance shelters your savings and investments from tax. 

Furthermore, cash ISAs offer easy access to funds, while stocks and shares ISAs are ideal for long-term growth. 

Junior ISAs allow for annual contributions of up to £9,000 for children.

If you’re under 40, consider opening a Lifetime ISA, where you can save up to £4,000 per year and receive a 25 per cent bonus.

Plan for dividends

With the dividend allowance now just £500, you must rethink your dividend income strategy. 

For basic ratepayers, the threshold is 8.75 per cent.

For higher rate taxpayers, it is 33.75 per cent, and 39.35 per cent for additional rate taxpayers.

Consider spreading dividend income across family members, or paying dividends before the tax year-end, to take advantage of current rates. 

Manage Capital Gains

The reduced Capital Gains Tax exemption means gains above £3,000 are taxed at 20 per cent for higher and additional rate taxpayers.

Gains realised from October 30, 2024, are charged at 24 per cent.

Strategies including a ‘Bed and ISA’ (selling assets and repurchasing within an ISA) and transferring assets to a spouse, to use their allowance, will help minimise tax and boost efficiency.

Protect your estate from Inheritance Tax

Use the £325,000 Nil-Rate Band and £175,000 Residence Nil-Rate Band to minimise Inheritance Tax exposure. 

Lifetime gifts, such as the £3,000 annual exemption and £250 small gifts, can also reduce your estate while benefiting loved ones.

Explore tax-efficient investments

Options including Enterprise Investment Schemes, Seed Enterprise Investment Schemes and Venture Capital Trusts offer tax relief and can complement your broader investment strategy.  

However, these investments are highly complex, so seek professional financial advice before proceeding.

Consider charitable donations

Higher or additional rate taxpayers can claim further relief through Gift Aid.

Utilise the Marriage Allowance

If you or your spouse earn below the personal allowance threshold, you can transfer up to ten per cent (£1260) of your allowance to the higher-earning partner, potentially saving up to £252 in tax.

Your next steps

For more information on the measures you could take to optimise your tax year-end planning, contact Fairstone or call 0800 884 0840.

Read more from Ajay here on the steps you can take to boost your tax efficiency.

THIS ARTICLE DOES NOT CONSTITUTE TAX OR LEGAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH. TAX TREATMENT DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF EACH CLIENT AND MAY BE SUBJECT TO CHANGE IN THE FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.

A PENSION IS A LONG-TERM INVESTMENT NOT NORMALLY ACCESSIBLE UNTIL AGE 55 (57 FROM APRIL 2028 UNLESS THE PLAN HAS A PROTECTED PENSION AGE).

THE VALUE OF YOUR INVESTMENTS (AND ANY INCOME FROM THEM) CAN GO DOWN AS WELL AS UP, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE. YOUR PENSION INCOME COULD ALSO BE AFFECTED BY THE INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS.

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