Tax-Saving Tips for Tax Year End
The end of the tax year is approaching fast! There are several ways to ensure you minimise your tax liability. ‘It’s important to avoid paying more tax than you need to,’ says Trina Haggerty of Chartered Certified Accountants Hargreaves Owen near Hitchin. ‘The tax year ends on 5 April, so there’s still time to act.’
Here are our top tips to reduce tax:
- Personal allowances
We each have an annual personal allowance of £12,570. This amount includes all sources of income, such as salary, self-employed profit, dividends, rental fees and pension payments. The exception is ISA interest (see below). It’s important to note that you lose your personal allowance if you earn over £100,000. Pension contributions and charitable donations can protect your allowance. Ask us for details.
- ISA allowance
The annual ISA (Individual Savings Account) allowance) is £20,000. Contributions and interest earned are tax-free. Various options exist including cash, stocks & shares and lifetime ISAs. Dividends from ISA investments can be reinvested or withdrawn tax-free.
- Dividend allowance
Tax-free earnings from dividend payments have significantly reduced in recent years. The current allowance is £1,000, falling to £500 for the tax year 2024/25. If you own and manage a limited company it may impact how you withdraw money from the business. We’re here to help – please contact us.
- Use of home
If you work from home, you are entitled to claim certain expenses against your business’s profit. Are you a business owner? Have you made the most of this opportunity?
- Minimise capital gains tax
If you hold investments outside an ISA, any profits are subject to capital gains tax. The current tax-free level for investment returns/gains is £6,000pa. If you think you will surpass this amount, selling loss-making investments could offset your overall gain. Like your personal allowance, unused allowances are not transferrable to the next tax year.
- Children
If you are responsible for your child, you need to know how your earnings impact your child benefit payments. For every £100 you receive above £50,000 for the tax year, you need to pay back 1% of the maximum amount of child benefit you’re entitled to. The benefit is lost completely when you earn over £60,000pa. As with your personal allowance, pension contributions and charitable donations can help this situation. In addition, you can reduce your tax liability by saving up to £9,000 for your children in a junior ISA.
Note: From 6 April 2024 new child benefit thresholds apply (read more).
Would you like to minimise your tax payments?
Talk to the friendly tax experts at Hargreaves Owen. We’ll apply our tax-saving knowledge to keep your tax affairs compliant and your tax bill minimal. Let’s save you some money!