As someone famously once said, death and taxes are the only certainties in life. Given this, getting your tax planning right is undoubtedly an important task to prioritise.
With the tax year ending on April 5th, we want to make sure you are well-prepared for financial success in the months leading up to the deadline. As part of the campaign, we will be reaching out to our clients. In the meantime, we've outlined key areas for you to review, ensuring you’re maximising your tax reliefs and allowances.
Make the most of your pension allowance
The first step on your tax planning journey is to ensure you're maximising your pension contributions. HMRC offers generous reliefs that can significantly boost the growth of your pension pot.
Basic rate taxpayers receive 20% pension tax relief, meaning if you contribute £20,000 to your pension, you’ll get an additional £5,000 from the taxman in the form of income tax relief. Higher rate taxpayers enjoy a 40% relief.
The amount you can contribute to your pension ranges from £3,600 to £160,000, depending on various factors. If you qualify, unused allowances from the previous three years can be carried forward. Additionally, make sure to take full advantage of your employer’s contributions, whether through matched contributions or salary sacrifice.
If you don’t use them, you’ll lose them – speak to Reeves Independent before the tax year is out to ensure you are making the most of your allowances.
Maximise your ISAs
ISAs can be a valuable complement to your pension for building cash savings, making them a fundamental part of your tax planning approach.
Everyone has an ISA allowance of £20,000 per year, and you can also save up to £9,000 for your children. Unlike pensions, ISA allowances cannot be carried forward, so it’s important to make the most of your allowance each year.
For a Lifetime ISA, the annual allowance is £4,000. You can open a Lifetime ISA between the ages of 18 and 39 and contribute up to £4,000 each year until you turn 50. The government will add a 25% bonus, up to £1,000 annually. You can withdraw funds from your Lifetime ISA either when purchasing your first home or at age 60.
Reeves Independent offer a free no obligation review, so speak to us today to ensure you are maximising your ISAs for a success tax planning strategy.
The Personal Income Tax Allowance
A key factor in your tax planning is the Personal Income Tax Allowance, which sits at £12,570. This can be applied to income from employment, pensions, or a limited company. If you have no other income, you may be able to withdraw up to £12,570 from your pension tax-free.
Capital Gains Allowance
Another vital consideration in your tax planning strategy. This tax typically applies to individuals making a profit from selling assets, such as shares, second properties, or valuable antiques. The allowance for capital gains for 2024-2025 is £3,000. If your profits (or gains) from sales exceed this amount, you may be required to pay tax.
In conclusion, it’s crucial to ensure you’re addressing all the key points in your tax planning checklist to make the most of your allowances and reliefs. However, don’t stop at just the basics. At Reeves Independent, we offer a wealth of expertise and resources to help you navigate more complex areas of income tax planning. Our team can provide tailored strategies that not only maximise your current tax position but also look ahead to help safeguard your future wealth. With our guidance, you can make informed decisions that could significantly improve your financial outlook in both the short and long term.
