Tax Year End Planning: Opportunities to Consider Before 5 April

With the end of the tax year approaching on 5th April, the coming weeks offer the last opportunity to take advantage of a number of valuable tax allowances and reliefs. Many of these allowances reset each tax year and cannot be carried forward, meaning that if they are not used before the deadline the opportunity is lost.

For many investors and families, a reviewing your tax position at this time of year can help ensure that income, investments and savings are structured as efficiently as possible - whether that means making use of ISA allowances, reviewing pension contributions, managing capital gains or considering gifting opportunities.

While not every strategy will be relevant to everyone, tax year end often highlights planning opportunities that can make a meaningful difference over time, particularly for those with more complex financial arrangements.

Below are several areas that are often worth reviewing before the tax year closes.

ISA Allowances

Each individual can contribute up to £20,000 into ISAs each tax year, where investments grow free from UK income tax and capital gains tax. For couples, this means up to £40,000 per year can be invested within a tax-efficient environment.

Making full use of ISA allowances each year can play an important role in building a tax-efficient investment portfolio over time.

Pension Contributions and Carry Forward

Pensions remain one of the most tax-efficient ways to save for retirement. The annual allowance is currently £60,000, although this may be reduced for higher earners due to the tapered annual allowance. In some cases it may also be possible to carry forward unused allowances from the previous three tax years, allowing larger pension contributions where appropriate.

For higher and additional rate taxpayers, pension contributions can provide valuable tax relief while also supporting long-term retirement planning.

Managing Adjusted Net Income

For some individuals, managing Adjusted Net Income before the end of the tax year can be particularly important. Income above certain thresholds can lead to the loss of valuable tax benefits, including:

• The tapering of the personal allowance once income exceeds £100,000

• The High Income Child Benefit Charge where income exceeds £50,000

In some circumstances, pension contributions or charitable donations can help reduce adjusted net income and restore these allowances.

Capital Gains Tax Planning

The Capital Gains Tax annual exemption is currently £3,000 per person, making it increasingly important to review investments held outside tax-efficient wrappers. In some situations, it may be appropriate to realise gains up to the available allowance before the end of the tax year.

Couples can also consider transferring assets between spouses, allowing both capital gains allowances and tax bands to be used where appropriate.

Bed and ISA / Bed and Pension Planning

Where investments are held outside tax wrappers, it may be possible to gradually move assets into more tax-efficient structures. This can involve selling investments and reinvesting them within an ISA or pension, helping reduce exposure to income tax and capital gains tax over time.

Dividend and Investment Income Planning

The dividend allowance is currently £500, meaning many investors holding assets outside tax wrappers may now face higher dividend tax liabilities. Reviewing how investments are structured - particularly between spouses - can help ensure both partners’ tax allowances and tax bands are used as efficiently as possible.

Inheritance Tax and Gifting Allowances

Tax year end can also be a useful moment to review Inheritance Tax planning opportunities. Each individual has an annual gifting allowance of £3,000, which can be carried forward one year if unused. In addition, gifts made out of surplus income may fall immediately outside the estate if structured correctly and properly documented.

Over time, making use of these allowances can help reduce potential inheritance tax exposure.

Venture Capital Trusts and Enterprise Investment Schemes

For some higher earners who have already used other allowances, Venture Capital Trusts (VCTs) or the Enterprise Investment Scheme (EIS) may provide additional tax planning opportunities.

These investments can offer income tax relief and other potential tax advantages, although they involve higher levels of risk and are only suitable in certain circumstances.

Reviewing you Tax Position

Tax year end planning does not necessarily require significant changes. Often it simply involves ensuring that existing allowances and reliefs are being used effectively as part of a wider financial plan. If you would like us to review your position before the tax year ends, or discuss whether any of the above opportunities may be relevant to you, please feel free to get in touch.

Important Information: This article is provided for general information purposes only and does not constitute personal financial advice. The value of investments and the income from them can fall as well as rise and you may not get back the amount originally invested. Tax treatment depends on individual circumstances and may be subject to change in the future. If you are unsure whether any of the strategies mentioned are suitable for you, please seek personalised advice before taking action.