End of tax year ‘To-Do’ checklist

The end of the financial tax year is fast approaching (5th April) and time is almost up to complete those tax year sensitive tasks. The end of tax year obviously is of particular significance when managing your finances and investments and offers planning opportunities for each individual. Therefore I have compiled an end of year checklist to help you get your finances in order and make the most of the available tax breaks.

Pensions

• Pay into your pension – pensions offer a tax-efficient way to invest for your retirement. A pension fund grows tax-free and any contributions you make into the plan also receive income tax relief at your highest marginal rate. But you cannot access your pension fund until you are 55 (rising to 57 from April 2028). You receive tax relief on any contributions up to 100% of your earnings (capped at the current Annual Allowance of £60,000) or £3,600, whichever is greater. Making pension contributions can lower your income tax bill, restore lost personal allowances or help you avoid the child benefit tax charge.
• Carry forward pension contributions - unused pension contribution Annual Allowances can be carried forward, and used, from the previous 3 years.
• Pay into your spouse’s pension – even non-earners can get tax relief on pension contributions. A non-earner can pay £2,880 each tax year into a pension and receive an additional £720 from HMRC.
• Pay into a Junior SIPP - contribute up to £2,880 per year into a Junior SIPP. In addition, the pension will attract an additional £720 in tax relief. Anyone can contribute towards a Junior SIPP, but only a parent or legal guardian can open one on behalf of a child.
• Boost your state pension by paying voluntary national insurance contributions - if you have gaps in your National Insurance (NI) record then you can make voluntary contributions in order to plug the gaps and boost your state pension. You still have time to plug gaps going back as far as 2006, however, this is due to end in April 2025, meaning you'll only be able to go back as far as 6 years. We explain the process in detail in our article 'Deadline looms for paying voluntary NI contributions and boosting your state pension'.
• Use a pension calculator - if you're unsure how much you need to be paying into your pension each month to be comfortable in your retirement use our pension calculator to find out.

Investments

• Use your annual ISA allowance - You can shelter up to £20,000 this tax year in a Stocks and Shares ISA (also called an investment ISA), Cash ISA, Lifetime ISA (up to a maximum of £4,000) or an Innovative Finance ISA. But you must stay within the overall £20,000 limit. All income, interest or capital gains are tax-free within an ISA. Here is a roundup of the best cash ISA rates and best investment ISAs available at the moment.
• Pay money into your child’s Junior ISA  - up to the maximum of £9,000 for the 2023/24 tax year. Unused allowances are lost and can’t be carried over to the new tax year. Here is our roundup of the Best Stocks and Shares Junior ISAs.
• Last chance for 16 and 17-year-olds to have both a Junior ISA and Adult ISA - A loophole that allows 16 and 17-year-olds to save into both a Junior ISA and Adult ISA will be closed from 6th April 2024. Under current rules, 16 and 17-year-olds can save up to £20,000 in an adult ISA and up to £9,000 in a Junior ISA each year, in effect providing them with a £29,000 tax free ISA allowance.
• Utilise your Capital Gains Tax (CGT) allowance – If the value of your investments has increased enough during the current tax year to exceed the capital gains tax allowance of £6,000 for the 2023/24 tax year, you may want to consider selling enough of your units or shares to use that allowance, as well as consider splitting this over more than one tax year. You can also take advantage of Bed and Breakfasting rules. It is worth noting that the capital gains tax allowance will be reduced from to £3,000 for the tax year 2024/25.
• Consider tax incentivised investments - certain legitimate investments, such as Venture Capital Trusts (VCTs), attract generous tax reliefs which are tax year sensitive. However, these investments are only suitable for sophisticated investors. But never make an investment just for tax reasons and always seek independent financial advice.

Tax

• Consider disposing of any capital losses to offset against capital gains made elsewhere which may be liable to capital gains tax. You can also carry forward excess capital losses but you must declare them on your tax return within four years.
• Consider taking dividends - from April 2024 the annual tax-free allowance for dividend income will reduce from £1,000 to £500. It is therefore tax efficient to utilise this allowance before it is reduced. It is especially relevant for directors of limited companies who have the ability to pay themselves dividend income.
• Marriage tax allowance - if your spouse has unused personal tax allowance then you may be able to use it by claiming a proportion of their income tax personal allowance. In this article, we explain how marriage tax allowance is calculated, how you can make a claim and how it is paid. If you have not claimed the Marriage tax allowance before you can backdate your claim for up to 5 years, providing you qualified in each of those tax years. Our article ‘What is marriage tax allowance and how do you claim it’ explains more.
• Be generous and reduce your Inheritance Tax (IHT) bill – there are a number of annual IHT allowances which are tax year sensitive. By using them you can reduce any potential IHT bill payable on your death. IHT is charged at 40% on estates over £325,000. Each tax year you can give away
  • • £3,000 and if you don’t make full use of your exemption in one year you can carry it forward to the next year, for one year only.
    • up to £250 a person (but not in conjunction with any other inheritance tax allowance).
    • £5,000 to a child who is getting married and £2,500 to a grandchild or great-grandchild getting married.
    • regular gifts from income which are IHT free. Size is irrelevant as long you can maintain your normal lifestyle after making them. But grandparents could use these to fund a pension for a grandchild which is obviously tax year sensitive.
    • For other ways to reduce your tax bill see my article how to avoid inheritance tax.