2024/25 Year-End Tax Planning Guide

As the 2024/25 UK financial year draws to a close on 5 April 2025, now is the time to take proactive steps toward tax efficiency. With recent changes in tax regulations and allowances, planning ahead is crucial for both individuals and businesses to maximise savings, stay compliant, and make informed financial decisions.

At Nichols & Co, we understand the complexities of tax planning and are here to guide you through every step. This comprehensive checklist is designed to help you navigate key changes, capitalise on opportunities, and avoid common pitfalls.

Why Is Year-End Tax Planning Important?

The end of the tax year is not just about compliance—it’s an opportunity to optimise your finances by:

• Utilising all available allowances before they reset.
• Minimising tax liabilities through strategic investments and contributions.
• Avoiding penalties by ensuring accurate submissions and documentation.

What’s New for 2024/25?

This year’s checklist includes:

• Updated insights on personal and corporate taxes, including the reduction of Dividend Allowance and revised employer NICs rates.
• Planning strategies for upcoming changes to inheritance tax and capital gains tax.
• Practical examples to help you act before the 5 April deadline.

Start your tax year-end preparations today with Nichols & Co. Whether you’re looking to safeguard your personal wealth or optimise your business’s tax position, our tailored advice ensures you’re well-prepared for the year ahead.

Here are the key announcements from the Labour Budget 2024 and how they may impact your tax strategy.

Click below to jump ahead

1. Personal Tax Planning
2. Dividend and Investment Planning
3. Corporation Tax Planning
4. Pensions and Retirement Planning
5. Inheritance Tax (IHT) and Estate Planning
6. Key Dates and Deadlines
7. Tax Compliance and Record-Keeping
8. Future Planning for 2025/26 and Beyond
9. How Nichols & Co Can Help
10. FAQ’s

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Personal Tax Planning

Maximising your allowances and minimising liabilities for the 2024/25 tax year.

Personal Allowance and Income Planning

TThe Personal Allowance for the 2024/25 tax year remains at £12,570, but tapering applies for those with income exceeding £100,000, reducing the allowance by £1 for every £2 earned above this threshold. For incomes over £125,140, the allowance is fully withdrawn.

Strategies to Consider:

• Pension Contributions: Reduce your taxable income to retain your Personal Allowance. For example, a pension contribution of £10,000 could bring your income under the taper threshold.
• Income Timing: Defer income, such as bonuses or dividends, to the next tax year to avoid losing the allowance.
• Gift Aid Donations: Make charitable contributions to reduce your adjusted net income, benefiting both you and your chosen cause.

Marriage Allowance Transfer

If you or your spouse earns less than the Personal Allowance, you may transfer £1,260 of unused allowance, saving up to £252 in tax.

Action: Check eligibility and ensure the transfer is completed before the year-end.

Tax on Savings and Investments

• Savings Allowance: Basic-rate taxpayers can earn up to £1,000 in savings interest tax-free, while higher-rate taxpayers are limited to £500.
• ISA Contributions: Ensure you use the full £20,000 ISA allowance to shield your savings from tax.

Tip: If you have significant savings interest, consider moving funds into ISAs or other tax-efficient accounts.

Dividend Allowance Changes

The Dividend Allowance has been reduced to £500 for the 2024/25 tax year. Any dividends above this threshold are taxed at:

• 8.75% (Basic Rate)
• 33.75% (Higher Rate)
• 39.35% (Additional Rate)

Strategies to Mitigate Impact:

• Family Shareholding: Spread dividend income across family members to maximise allowances.
• Review Timing: Distribute dividends before the end of the tax year to optimise the effective rate.

Tax-Efficient Spending Options

• Charitable Donations: Use Gift Aid to enhance the value of donations and reduce your taxable income.
• Pension Contributions: Contributions not only help retirement savings but also provide valuable tax relief.
• Enterprise Investment Scheme (EIS): Invest in qualifying businesses to claim 30% income tax relief, with potential capital gains tax benefits.

Checklist for Personal Tax Planning

1. Have you utilised your full Personal Allowance and Marriage Allowance?
2. Are you optimising your pension contributions to retain the allowance?
3. Have you maximised your ISA contributions for tax-free savings?
4. Are your dividend and savings strategies tax-efficient?
5. Have you reviewed Gift Aid or other tax-deductible donations?

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Dividend and Investment Planning

Optimising your income and investment strategies to minimise tax liabilities and maximise growth.

Dividend Allowance Changes

The Dividend Allowance for 2024/25 has been reduced to £500, down from £1,000. Dividends above this amount will be taxed at the following rates:

• Basic Rate: 8.75%
• Higher Rate: 33.75%
• Additional Rate: 39.35%

Strategies to Mitigate Tax:

• Family Shareholding: Consider allocating shares to family members, such as spouses or children, to utilise their dividend allowances and lower tax bands.
• Salary vs. Dividends: Reassess your remuneration strategy to balance dividends and salary, especially in light of rising corporation tax rates.
• Timing: Pay dividends before the end of the tax year to utilise the current allowance.

Maximising ISA Contributions

ISAs remain a cornerstone of tax-efficient investing. For 2024/25, you can contribute up to £20,000, shielding your investments from income tax and capital gains tax.

Key Considerations:

• Use a mix of cash ISAs for savings and stocks & shares ISAs for long-term growth. Speak to a financial adviser.
• Contributions must be made by 5 April 2025 to avoid losing this year’s allowance.
• Junior ISAs offer a tax-efficient option for children, with a contribution limit of £9,000.

Capital Gains Tax (CGT) Planning

For 2024/25, the annual CGT exemption is £3,000 (reduced from £6,000). Gains above this threshold are taxed at:

• 10% (Basic Rate)
• 18% (Basic Rate from 30 October 2024)
• 20% (Higher or Additional Rate)
• 24% (Higher or Additional Rate from 30 October 2024)

For non-UK residents, understanding CGT obligations is crucial for effective planning.

Tax-Efficient Strategies:

• Bed and ISA: Sell assets to realise gains within the exemption, then repurchase them in an ISA.
• Gift to Spouse: Transfer assets to your spouse to utilise their CGT exemption.
• Use of Losses: Offset gains with any unused capital losses from current or previous years.

Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs)

Investments in EIS and VCTs offer significant tax relief while supporting UK businesses.

• EIS: You can claim 30% income tax relief on investments up to £1 million annually, or up to £2 million if at least £1 million is invested in knowledge-intensive companies. Gains are exempt from CGT if the investment is held for at least three years and the company remains eligible under EIS rules. Any capital losses on EIS investments can be offset against your income tax or CGT liability.
  
• VCTs: Investors can claim 30% income tax relief on investments up to £200,000 per tax year, provided the shares are held for at least five years. Dividends received from VCTs are tax-free. Gains from the sale of VCT shares are also exempt from CGT.

Checklist for Dividend and Investment Planning

1. Have you optimised dividend distribution across family members?
2. Are you fully utilising your ISA and Junior ISA allowances?
3. Have you planned asset sales to stay within the CGT exemption?
4. Are you exploring tax-efficient schemes like EIS and VCTs?
5. Have you reviewed your investment portfolio for tax efficiency?

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Corporation Tax Planning

Effective corporation tax planning is essential for minimising liabilities and maximising available reliefs, especially in light of tiered tax rates.

Learn how tax strategies can help improve your business cash flow.

Corporation Tax Rates

The Corporation Tax rate for 2024/25 remains tiered based on profits:

• 19% for companies with profits up to £50,000 (small profits rate).
• 25% for companies with profits over £250,000 (main rate).
• Marginal relief applies for profits between £50,001 and £250,000.

Businesses must carefully calculate their effective tax rate, especially when grouped companies or associated companies share profit thresholds.

Profit Extraction Strategies

Efficient profit extraction is key to minimising tax liabilities. Common methods include:

• Dividends: Still tax-efficient but require planning due to the reduced Dividend Allowance.
• Salaries and Bonuses: These remain deductible expenses for the company and may lower overall tax liability.
• Pension Contributions: Employer contributions are deductible and do not attract National Insurance.

Timing of Expenditure

Bringing forward or delaying certain expenditures can influence your Corporation Tax liability.

• Consider making capital investments before year-end to qualify for Annual Investment Allowance (AIA), which allows 100% deduction on qualifying purchases.
• Align bonuses or other expenses with the financial year to maximise deductions.

Family Tax Efficiency

Using family members in the business can help optimise tax efficiency:

• Pay family members a salary that is commercially justifiable and tax efficient.
• Allocate shares to family members to utilise lower tax bands and allowances for dividend income.

Checklist for Corporation Tax Planning

1. Have you reviewed your profit forecasts to assess the applicable tax rate?
2. Are you optimising profit extraction through dividends, salaries, or pensions?
3. Have you considered bringing forward capital expenditures to benefit from AIA?
4. Are you claiming all available R&D tax credits for qualifying activities?
5. Have you explored opportunities for family tax efficiency within your business?

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Pensions and Retirement Planning

Maximising pension contributions and planning for retirement can provide valuable tax relief while securing your financial future.

Annual Allowance

The Annual Allowance for pension contributions is £60,000 for the 2024/25 tax year. Contributions within this limit attract tax relief at your marginal rate.

Unused allowances from the previous three years can be carried forward if you meet the eligibility criteria, allowing higher contributions to be made this year.

Tax Relief on Contributions

Contributions to pensions can reduce taxable income, helping high earners retain their Personal Allowance or minimise exposure to higher tax bands.

• Basic-rate taxpayers receive 20% tax relief, higher-rate taxpayers receive 40%, and additional-rate taxpayers receive 45%.
• Employer contributions are not subject to National Insurance, providing additional tax efficiency for businesses.

Pension Lifetime Allowance (LTA)

Although the Pension Lifetime Allowance charge has been abolished, monitoring the size of your pension fund remains critical to avoid future policy changes or potential overfunding.

Family Pension Contributions

Contributing to pensions for family members, including children, can be a tax-efficient way to support their financial future. You can contribute up to £3,600 gross (£2,880 net of tax relief) annually for non-earning individuals.

Planning for Tax-Free Withdrawals

From the age of 55 (rising to 57 in 2028), you can access up to 25% of your pension pot tax-free. Planning withdrawals in line with other income sources can help minimise overall tax liabilities during retirement.

Checklist for Pensions and Retirement Planning

1. Have you maximised your Annual Allowance and considered carry-forward options?
2. Are you using pension contributions to reduce taxable income and retain your Personal Allowance?
3. Have you explored contributing to pensions for non-earning family members?
4. Are you aware of the tax-free withdrawal rules and planning your retirement income efficiently?
5. Is your pension fund appropriately monitored to align with your retirement goals?

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Inheritance Tax (IHT) and Estate Planning

Proactive estate planning can help minimise Inheritance Tax liabilities while ensuring your assets are passed on to your loved ones efficiently.

For a detailed approach to safeguarding your assets, visit our guide on how to plan for inheritance tax.

IHT Thresholds and Rates

Inheritance Tax is charged at 40% on estates exceeding the following thresholds:

• £325,000 (Nil-Rate Band).
• £500,000 if the residence is passed to direct descendants (Residence Nil-Rate Band).

Unused allowances can be transferred to a spouse or civil partner, effectively doubling the thresholds for married couples and civil partners.

Lifetime Gifting

Making lifetime gifts can reduce your estate’s taxable value while benefiting your loved ones sooner. Gifts made more than seven years before death are exempt from IHT.

• Annual Exemption: You can give away up to £3,000 per year tax-free.
• Small Gifts Exemption: Gifts of up to £250 per recipient are exempt.
• Gifts from Surplus Income: Regular gifts from excess income can be exempt if they do not reduce your standard of living.

Pensions and IHT

From April 2027, unused pension funds and death benefits may become subject to IHT. Planning now to withdraw or reinvest funds can help mitigate future liabilities.

Agricultural and Business Property Reliefs

Agricultural Property Relief (APR) and Business Property Relief (BPR) allow for significant reductions in IHT. However, new rules cap the relief at 100% for the first £1 million and 50% for amounts above this cap.

Trusts for Estate Planning

Trusts can be an effective way to protect assets and manage IHT liabilities. Assets placed in trusts may be removed from the estate after seven years, though careful structuring is essential to avoid unexpected tax consequences.

Checklist for IHT and Estate Planning

1. Have you utilised your Nil-Rate Band and Residence Nil-Rate Band allowances?
2. Are you taking advantage of lifetime gifting exemptions, including the annual £3,000 and small gifts allowance?
3. Have you reviewed the potential IHT impact of your pension assets after April 2027?
4. Are you leveraging Agricultural and Business Property Relief effectively?
5. Have you considered using trusts to protect assets and minimise IHT exposure?

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Key Dates and Deadlines

Staying informed of critical tax dates ensures compliance and helps you optimise your financial planning. Use this table for quick reference:

Deadline	Requirement
5 October 2024	Register for Self-Assessment if you’re a new taxpayer or have new income sources.
31 October 2024	Submit paper Self-Assessment tax returns for the 2023/24 tax year.
31 January 2025	Submit online Self-Assessment tax returns and pay any tax owed for 2023/24.
31 January 2025	First payment on account for the 2024/25 tax year due.
31 July 2025	Second payment on account for the 2024/25 tax year due.
19th of each month	Deadline for postal payments of PAYE and Class 1 NICs to reach HMRC.
22nd of each month	Deadline for electronic payments of PAYE and Class 1 NICs.
7th of each month	Submit VAT returns and payments for the previous VAT quarter.
9 months + 1 day after	Pay Corporation Tax after the end of your accounting period.
12 months after	File Corporation Tax return after the end of your accounting period.
5 April 2025	Make pension contributions and ISA investments for the 2024/25 tax year.

The specific dates for PAYE, NICs, and VAT returns may vary based on your individual circumstances and accounting periods. It’s advisable to consult with a tax professional or refer to official HMRC guidance to confirm dates applicable to your situation

Checklist for Key Dates and Deadlines

1. Have you registered for Self-Assessment by 5 October 2024, if required?
2. Are you prepared to submit your tax return by the appropriate deadline (31 October 2024 for paper returns or 31 January 2025 for online returns)?
3. Have you scheduled your payments on account for 31 January 2025 and 31 July 2025?
4. Are your PAYE and National Insurance payments set up to meet monthly deadlines?
5. Is your VAT return schedule aligned with the 7th of each month deadline?
6. Have you planned your Corporation Tax payments and filings according to your accounting period?
7. Are you on track to maximise your pension contributions and ISA investments by 5 April 2025?

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Tax Compliance and Record-Keeping

Maintaining accurate records and ensuring compliance with tax regulations is essential for avoiding penalties and simplifying financial management.

Our tax compliance and planning services ensure you stay on track with HMRC requirements.

Record-Keeping Requirements

HMRC requires individuals and businesses to keep detailed records of their income, expenses, and tax-related documents for at least 6 years. This includes:

• Bank statements and invoices.
• Receipts for business expenses.
• Payroll records (for employers).
• VAT and Corporation Tax returns.

Failure to keep accurate records can result in penalties or increased scrutiny from HMRC.

Making Tax Digital (MTD)

HMRC’s Making Tax Digital initiative mandates the use of approved digital software for submitting VAT, Income Tax, and Corporation Tax returns.

• VAT: Businesses earning above the VAT threshold (£90,000) must use MTD-compatible software for VAT returns.
• Income Tax: MTD for Income Tax Self-Assessment (ITSA) is set to become mandatory in April 2026 for self-employed individuals and landlords earning over £50,000.
• Corporation Tax: Digital record-keeping for Corporation Tax is expected to follow in future phases.

Annual Self-Assessment Compliance

To comply with Self-Assessment requirements:

• Register by 5 October if filing for the first time.
• File tax returns by the appropriate deadline (31 October for paper returns, 31 January for online).
• Retain all documentation supporting your declared income and expenses.

Tips for Simplifying Compliance

1. Use cloud-based accounting software to automate record-keeping and ensure compliance with MTD.
2. Schedule regular reviews of your financial records to identify gaps or inaccuracies early.
3. Consult a tax professional for guidance on complex compliance requirements.

Checklist for Tax Compliance and Record-Keeping

1. Are you consulting a professional for advice on complex tax compliance issues?
2. Are you maintaining accurate records for income, expenses, and taxes for at least six years?
3. Have you adopted MTD-compatible software for VAT, Income Tax, or Corporation Tax submissions?
4. Are you aware of and meeting Self-Assessment registration and filing deadlines?
5. Have you reviewed your financial records for accuracy and completeness?

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Future Planning for 2025/26 and Beyond

Effective tax planning extends beyond the current tax year. Staying ahead of upcoming changes can help you maximise opportunities and avoid potential pitfalls.

Changes to Employer NICs

From April 2025, the employer National Insurance contributions (NICs) rate will increase from 13.8% to 15%. The threshold above which employers pay NICs will also be reduced to £5,000 (from £9,100).

Smaller employers will benefit from the expanded Employment Allowance, which rises to £10,500.

Action: Reassess your employment costs and consider how these changes might affect your workforce planning.

Inheritance Tax on Pensions

From April 2027, unused pension funds and death benefits may become subject to Inheritance Tax.

Action: Review your pension strategies to mitigate future IHT liabilities and explore options like withdrawals or reinvestments.

Proactive succession planning helps secure your legacy and financial stability.

Capital Gains Tax Adjustments

Changes to capital gains tax (CGT) rates will continue to impact investments:

• The main rates of Capital Gains Tax that apply to assets other than residential property and carried interest from 10% and 20% to 18% and 24% respectively, for disposals made on or after 30 October 2024
• The rate of Capital Gains Tax that applies to trustees and personal representatives from 20% to 24% for disposals made on or after 30 October 2024
• The rate of Capital Gains Tax that applies to Business Asset Disposal Relief and Investors’ Relief from 10% to 14% for disposals made on or after 6 April 2025, and from 14% to 18% for disposals made on or after 6 April 2026.

Action: Plan asset sales carefully to take advantage of current rates before these increases take effect.

Residence-Based Taxation for Non-Doms

From April 2025, the UK will implement a residence-based taxation regime for non-domiciled individuals, replacing the current remittance basis.

Action: Review your residency status and foreign income strategies to ensure compliance and optimise tax efficiency.

Checklist for Future Planning for 2025/26 and Beyond

1. Are you prepared for increased employer NICs rates and thresholds from April 2025?
2. Have you reviewed your pension strategy to address IHT changes effective April 2027?
3. Are you timing asset sales to optimise current CGT rates before upcoming increases?
4. Have you reassessed your residency and foreign income strategies under the new regime for non-doms?
5. Are you exploring tax-efficient investments to align with future corporation tax and relief changes?

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How Nichols & Co Can Help

At Nichols & Co, we specialise in delivering tailored tax planning and financial solutions to help individuals and businesses navigate the complexities of the UK tax system. Our personalised approach ensures you maximise your financial opportunities while remaining fully compliant with HMRC regulations.

Expert Tax Planning

Our experienced team provides proactive advice to optimise your tax position, including:

• Utilising allowances and reliefs effectively.
• Developing tax-efficient strategies for income, investments, and pensions.
• Preparing for future tax changes and their impact on your finances.

Compliance and Record-Keeping Support

We ensure that your records meet HMRC requirements, helping you avoid penalties and streamline your reporting process. Services include:

• Assistance with Making Tax Digital (MTD) implementation.
• Guidance on maintaining accurate and complete financial records.
• Support with Self-Assessment, VAT, and Corporation Tax filings.

Strategic Business Planning

For business owners, we offer insights to align tax efficiency with your growth objectives:

• Profit extraction strategies to minimise liabilities.
• Corporate tax planning tailored to your specific industry.

Personalised Client Support

Every client is unique, and we pride ourselves on delivering customised solutions. Whether you’re managing personal wealth, running a business, or planning your estate, we’re here to guide you every step of the way.

Get in Touch

Ready to take control of your tax planning? Contact Nichols & Co today to arrange a consultation. Together, we’ll develop a strategy that works for you and your financial goals.ls.

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FAQ’s

We’ve compiled answers to some of the most frequently asked questions to help you navigate your tax planning more effectively.