With 6 April approaching, here are 4 allowances to maximise before the tax year ends

An April 2025 calendar page.

6 April is an important date in the financial calendar as it signals the end of one tax year and the beginning of another.

It’s when many of your personal and business allowances, exemptions, and reliefs reset, giving you a whole new year to optimise your finances.

So, getting your financial ducks in a row before 6 April can help you maximise the current year’s allowances. It’s also a good time to get ready to take full advantage of the renewed opportunities available in the coming year.

Read on to discover four allowances and exemptions to make the most of before the end of the tax year.

1. ISA allowance

ISAs are a tax-efficient way to save and invest your money, offering tax-free interest and returns on your savings and investments.

For the 2024/25 tax year, you can add up to £20,000 across all your ISAs.

There are currently five types:

  • Cash ISAs – A Cash ISA is similar to a traditional savings account, except you pay no Income Tax on the interest.
  • Stocks and Shares ISAs – A Stocks and Shares ISA lets you invest your money and not pay any tax on your returns.
  • Innovative Finance ISAs – An Innovative Finance ISA allows you to provide loans in return for a fixed amount of tax-free interest over a set period.
  • Lifetime ISAs – A Lifetime ISA (LISA) allows you to save for your first home or retirement without paying tax on your savings of up to £4,000 a year (2024/25). You will also receive a 25% bonus on anything you contribute, meaning you can receive up to £1,000 a year plus interest. However, you’ll usually pay a 25% penalty if you withdraw funds before the age of 60 for any reason other than the deposit for your first home.
  • Junior ISAs – A Junior ISA (JISA) is a tax-efficient way to save on behalf of a child. The child can then manage the account once they reach 16, but they can’t make withdrawals until they are 18. JISA contributions are capped at £9,000 a year and they can be held in addition to your regular ISA allowance.

Before making additional contributions and maximising your ISA allowance, it’s a good idea to consider your financial goals and their time horizons.

For example, for your shorter-term objectives, a Cash ISA may be more suitable. However, if you’re saving for a goal more than five years away, a Stocks and Shares ISA could offer greater growth potential, though it comes with higher levels of risk.

2. Annual Allowance

Pensions offer a tax-efficient way to save for retirement, as your contributions benefit from tax relief and any interest or investment growth earned is tax-free.

Pension contributions typically receive 20% tax relief automatically. If you are a higher- or additional-rate taxpayer, you may be eligible to claim a further 20% or 25% relief by filing a self-assessment return.

Each tax year, you have an Annual Allowance that limits the amount you can contribute to your pension without incurring a tax charge.

For most people, the Annual Allowance in 2024/25 is £60,000 or 100% of your annual earnings, whichever is lower. However, this allowance may be reduced to a minimum of £10,000 if your adjusted income exceeds £260,000 or if you’ve already accessed your pension flexibly.

If you haven’t used your full Annual Allowance in previous years, you can carry it forward for up to three tax years. This means you have until 5 April to take advantage of any unused allowance from the 2021/22 tax year onwards.

So, maximising your pension contributions before the deadline can help you make the most of the tax benefits available.

3. Gifting exemption

If your estate is likely to be subject to Inheritance Tax (IHT) when you pass away, gifting wealth during your lifetime can be an effective way to reduce your future bill.

However, not all gifts are exempt from IHT. Some may remain part of your estate for up to seven years after you’ve given them before they fall outside the scope of IHT. These are known as “potentially exempt transfers”.

Furthermore, the annual gifting exemption allows you to give up to a certain amount each tax year IHT-free. For 2024/25, and set to remain so in 2025/26, it is capped at £3,000. If you haven’t used your exemption from the previous year, you can carry it forward.

So, giving gifts while you’re alive can help you minimise the IHT liability on your estate and ensures you can pass more of your wealth efficiently to your loved ones.

4. Other allowances

Other allowances you may want to maximise before 6 April include the Dividend Allowance and the Capital Gains Tax (CGT) Annual Exempt Amount.

Firstly, if you’re a business owner or hold shares in companies, you may receive dividend payments.

Dividends that fall within your Personal Allowance are tax-free. Additionally, the Dividend Allowance allows you to receive up to £500 in dividends without incurring Dividend Tax. This makes dividends a potentially valuable way to supplement your income while keeping your tax liability to a minimum.

Moreover, chancellor Rachel Reeves introduced several changes to CGT in the Autumn Budget, including increases to the main rates.

As of 30 October 2024, the standard rates of CGT are:

  • 18% for basic-rate taxpayers
  • 24% for higher- or additional-rate taxpayers.

The Annual Exempt Amount allows you to make gains of up to £3,000 in 2024/25 before CGT is applied.

So, timing the sale of assets to ensure you take advantage of this exemption can be a useful strategy for minimising your tax liability.

Get in touch

A financial planner can help you maximise your allowances and exemptions, and can work with you to ensure they align with your wider financial goals.

To speak to a financial planner, get in touch.

Email info@blueskyifas.co.uk or call us on 01189 876655.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Remember that taper relief only applies to gifts in excess of the nil-rate band. It follows that, if no tax is payable on the transfer because it does not exceed the nil-rate band (after cumulation), there can be no relief.

The Financial Conduct Authority does not regulate estate planning or tax planning.