Tax year end planning

The end of the tax year is fast approaching – it’s time to review your financial position and ensure you take advantage of the tax planning opportunities available before April 5.

Tax thresholds have been frozen since 2022/23, resulting in more people moving into higher tax brackets without a meaningful increase in real income. This can also result in the loss of valuable benefits simply due to inflation.

Here are some key issues to consider.

Loss of Personal Allowance/Child Support

The Personal Allowance starts to reduce once income (known as Adjusted Net Income) exceeds £100,000 and disappears completely when income reaches £125,140. For income between this range, the effective tax rate is 60% for income above £100,000.

Similarly, Child Benefit is taken back in stages if income exceeds £60,000 and taken back in full if income exceeds £80,000.

In both scenarios, consider making pension contributions as these reduce your Adjusted Net Income for this purpose and can therefore be used to reduce your income to below £60,000/£100,000.

Savings and investments

Basic rate taxpayers have a savings allowance of £1,000. This amount is reduced to £500 for higher rate taxpayers and disappears entirely for additional rate taxpayers.

If these limits are in danger of being breached, consider using a tax-free ISA. The annual limit for investing in an ISA is £20,000 – ISA allowances cannot be carried forward so any unused allowance will be lost after 5 April.

Business owner

The tax-free dividend allowance is now only £500 but should be used wherever possible.

With changes to IHT relief taking effect from 6 April 2026, business owners should consider whether giving away shares is the right action to maximize the relief available.

Capital gains tax

Each individual has an annual exemption of £3,000 which is lost if not used in the tax year.

Planned asset disposals before April 5 may allow gains to be realized within the exclusion, or losses can be crystallized and offset against other gains if necessary.

Employees – what you need to consider!

If a salary sacrifice arrangement for pension payments is available through your company, consider using this to reduce your Adjusted Net Income.

Nowadays, salary sacrifice can also result in national insurance savings.

The next step

Ultimately, tax year-end planning is about ensuring that available relief and exemptions are not lost through inaction. Reviewing your current position can provide an opportunity to reduce unnecessary tax costs and put you in a stronger position for next year. If you would like to understand how ETC Tax can help you with year-end planning, please contact us.