Do you need to review your personal finances before 5 April 2025?

Ahead of the new tax year, it may be prudent to review some key areas in your personal finances. This article outlines some suggestions, however it is worth contacting your financial planner to ensure you are following the best course of action based on your personal circumstances.

ISA allowance

The maximum amount which can be added to an ISA in the tax year 2024/25 remains at  £20,000 per person. Any an unused ISA allowance cannot be carried forward though. So, if you do not use your ISA allowance by 5 April 2025 you will lose the opportunity to do so.

Capital gains tax (CGT)

It is important to note that the sale of investments can be chargeable to CGT. Each individual has a CGT allowance of £3,000 (2024/25 tax year). Any gains in your investment portfolio will be added to the gains realised on other assets, and the cumulative result could give rise to a charge. If you make a capital loss, this must be first set against gains in the same tax year, but any excess loss may be carried forward indefinitely and offset against future gains.  Please note the highest rate of CGT is now 24% on most assets.

Inheritance tax (IHT)

With more types of assets being brought into the UK IHT net maximising on the use of IHT exemptions becomes more important.  Certain gifts can be made each tax year which will reduce the value of an estate for the purposes of IHT. The annual exemption is £3,000, and if this is not fully used in one year then the balance can be carried forward to the next (total up to £6,000). In addition, gifts up to £5,000 can be made by parents on the marriage of children and £2,500 by grandparents. Any number of gifts of £250 can be made without attracting tax.

Potentially Exempt Transfers (PETs) apply to outright gifts of an unlimited value. These are exempt from inheritance tax after a seven-year period has passed, and the donor is still living.  Seeking professional advice ahead of making larger gifts is recommended.

Pension contributions

Generally, the maximum pension contribution, on which tax relief can be claimed in a tax year, is £60,000 gross – this includes personal, employer and third-party contributions. This limit can reduce if your income, from all sources, is more than £200,000 in the same tax year.  A further restriction may be imposed where you have received pension income from a flexi-access drawdown arrangement or your earned income is low. 

• Provided that the current year’s annual allowance for pension contributions has been fully used, you are able to make use of any unused allowance from up to the three previous years. The oldest unused relief must be used first. To qualify you must have held a pension plan in the years from which you are looking to carry forward unused relief.
• Where you or your partner are receiving child benefit and there is a risk one of your taxable income’s exceeds £50,000 then making pension contributions could reduce the need to be caught by the Higher Income Benefit Charge.
• Where your income is over £100,000 then your personal allowance starts to taper, completely being removed where taxable income exceeds £125,140.  Making pension contributions can rebalance the tax free allowance.

Banking interest rates

Given the rises in interest rates, we are seeing more of our clients paying tax on their savings interest.  Bank interest is paid gross, and the liability falls on the individual to declare any taxes due to HMRC.  It is important to review your income for 2024/25, and the bank interest received; this could mean that you pay more tax in the current tax year or move your income tax bracket from basic rate to higher rate taxes.

To review your personal finances please contact our Financial Planning team on +44 (0) 330 124 1399 or provide your details via our online enquiry form 

The content of this article is for information only and does not constitute formal financial advice. This material is for general information only and does not constitute investment, tax, legal or other forms of advice. 

You should not rely on this information to make, or refrain from making any decisions.