Maximising Your Tax Benefits: Year End Tax Planning Strategies 2025

Given the current economic climate, with low growth forecasts of just 1.7%, the threat of tariffs and the rise in Employers’ National Insurance and Minimum Wage, the pressure on businesses and individuals is not letting up. Taking proactive measures in end-of-year tax planning makes it more important than ever to undertake a detailed review to identify any tax savings in the current year and plan for the year ahead. 

The Chancellor has confirmed that the Budget is taking place on 26 March 2025, possibly introducing changes for the upcoming tax year. Key changes already scheduled for April 2025 include adjustments to Capital Gains Tax, Dividends Tax Allowance , Research and Development Tax Credits, National Insurance, and Pensions Annual Allowance. 

 

Here are some important considerations for your end-of-year tax planning: 

 

 

Income Tax and National Insurance: 

 

• Utilise the personal allowance for income tax, currently at £12,570. 

 

• Consider optimising salary payments to maximize personal allowances and minimize Class 1 National Insurance contributions. 

Where your income is between £100,000 and £125,140 (for 2024/25), your personal allowance is phased out, resulting in an effective rate of tax of up to 60% within this income bracket. Taxable income can be reduced through pension contributions and charitable donations. 

 

 

• Take advantage of the current tax-free dividend allowance of £500, 

 

 

• Explore the option to transfer 10% of personal allowance to a spouse or civil partner to potentially reduce the tax bill. 

 

 

• Leverage the Pensions Annual Allowance of £60,000 for the 2024/25 tax year. 

 

• Ensure efficient use of additional tax thresholds, such as the £125,140 level triggering the additional rate of income tax. 

Consider opening a Self-Invested Personal Pension (SIPP) 

You can secure 20 - 45% tax relief when you put money into a SIPP and any growth will be free from UK income and capital gains tax. 

Profits from Furnished Holiday Lets will no longer be treated as “relevant UK earnings” for the purpose of pension relief. 

 

The Annual Exemption is the amount individuals can give away each tax year without any inheritance tax implications. If all or part of the previous tax year’s (2023/24) £3,000 annual exemption was unused the remainder can be carried forward. This means that up to £6,000 can be given away tax-free in 2024/25. Other reliefs and exemptions may also be relevant. 

 

Tax-Efficient Investments: 

ISAs: 

• Consider ISAs as a tax-efficient saving option, with a maximum allowance of £20,000. Bare in mind the rumours that this limit may be reduced in the upcoming budget. 

 

Enterprise Investment Schemes (EIS) and Seed EIS Shares: 

 

• Explore tax relief benefits when investing in qualifying shares under EIS with Income Tax relief of 30% and Seed EIS with Income Tax relief of 50%. 

 

 

• Be mindful of the annual allowance for Capital Gains Tax, which has been reduced to £3,000 in the 2024/25 tax year. 

The rate for basic rate taxpayers has increased from 10% to 18% and for additional and higher rate tax payers it has increased from 20% to 24%. 

 

• Consider balancing gains and losses to optimize tax liabilities also remember that losses should be recorded within 4 years and evidence kept for it to be offset in the future. They can be carried forward indefinitely. 

 

 

Mortgage Interest Relief: 

 

• Review the implications of the reduced income tax relief on mortgage interest for buy-to-let investors since April 2020. 

 

• Evaluate the merits of setting up a limited company for holding buy-to-let properties personally. 

 

 

Group Structures: 

 

• Review group structures for tax efficiency. 

Annual Investment Allowances and Capital Allowances: 

 

• Leverage the increased Annual Investment Allowance and explore eligible capital allowances for tax relief. 

Research and Development Tax Relief: 

 

• Explore R&D Tax Relief opportunities, applicable to a broad range of industries, and take advantage of changes introduced in April 2023. 

Full Expensing Tax Relief: 

 

• Understand the implications and benefits of full expensing on plant and machinery investments until March 2026. 

IR35 for Private Sector: 

 

• Stay informed about IR35 rules and ensure compliance, especially with the responsibility now placed on private sector clients to determine worker status. 

 

 

• Acknowledge the increase in Corporation Tax to 25% and incorporate it into cash-flow calculations. 

 

 

• Evaluate accounting dates and consider aligning year-end dates with key business events. 

• Assess the potential benefits of incorporating as a limited company. 

 

In conclusion, meticulous end-of-year tax planning is essential to make the most of available allowances and relief opportunities. 

For personalised advice and guidance, don't hesitate to reach out to our specialist tax team at [email protected]. Act now to secure your financial future!