Four tax reliefs to make the most of before 5 April
Savers and investors have just a few weeks left to take advantage of their tax reliefs before the financial year ends on 5 April.
Using these tax reliefs helps make the most of an uncertain political environment around wealth, with some tax allowances slashed in the 2024/25 year.
These are four of the top tax allowances to be aware of before the end of the current tax year.
Morning Wire has teamed up with TaxScouts to help readers understand the world of tax.*
A consultation with a TaxScouts accountant can help you review your tax-free allowances to avoid missing out on potential savings.
Failing to act before 5 April means losing these allowances forever, potentially increasing your tax bill unnecessarily.
For those who need to file a tax return, TaxScouts ensures your income is reported correctly and that you claim all available tax reliefs to reduce your liability.
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1. Boost your ISA
Savers can put up to £20,000 per tax year into individual savings accounts, or ISAs. Any interest gained on ISA holdings is not eligible for capital gains tax (CGT) or income tax.
There are five different types of ISA.
A Cash ISA works like a standard savings account, but interest earned is tax free.
A Stocks and Shares ISA lets you invest in assets like bonds, company shares and investment funds.
An Innovative Finance ISA (IFISA) allows tax-free investment in peer-to-peer lending and crowdfunding debentures.
A Lifetime ISA, or LISA, is designed for first-time homebuyers and for retirement savings. You can put in up to £4,000 annually, with a 25 per cent yearly government bonus.
A Junior ISA, or JISA, is a tax-free savings or investment account for children under 18. Parents or guardians can open one, and anyone can pay in up to £9,000 annually.
2. Top up your pension
Pension savers can put up to £60,000 into their retirement pots per tax year, or up to 100 per cent of their earnings, whichever is lowest.
High earners get a lower pension annual allowance, as for every £2 they earn in adjusted income over £260,000 a year, and for those with threshold income of more than £200,000 a year, the pension savings cap falls by £1.
The pension annual allowance can fall to a minimum of £10,000 in the 2023/24 tax year.
Aberdeen’s interactive investor* has topped a ranking of Self-Invested Personal Pension (SIPP) providers in the UK.
3. Use your CGT allowance
Those selling assets are allowed to earn £3,000 in the 2023/24 tax year without paying CGT.
The CGT allowance cannot be carried over into the next tax year.
Any money made from ISA or pension investments is exempt from CGT, as are profits made from selling your main home.
Gains made outside these allowances and exemptions before 30 October 2024 are taxed at 10 per cent for basic-rate taxpayers. This rises to 18 per cent for selling a residential home.
Higher-rate taxpayers pay 20 per cent CGT and additional-rate taxpayers 24 per cent.
Gains after 30 October 2024 are taxed at 18 per cent for basic-rate taxpayers and 24 per cent for those in higher and additional-rate tax bands.
4. Gift money
You can give away up to £3,000 per tax year without it being added to the value of your estate when paying inheritance tax (IHT).
You can also give unlimited gifts of up to £250 per person in each tax year, so long as you have not already paid one of the recipients using the £3,000 exemption.
You can give as much as you like to children and family members without them paying IHT, provided you live for more than seven years after making the gift.