Tax incentives for UK savings and investments are projected to jump to £41.2 billion in the 2024-25 tax year, a 7% increase on the £38.7bn in tax breaks for saving and investments in 2023-24, shows new research by Bowmore Financial Planning.
The jump in investment tax breaks has been driven predominately by higher tax breaks available through ISAs. This will rise 22% from £7.7bn in 2023-24, to £9.4bn in 2024-25.
Bowmore says the recent reductions in the tax-free allowance for capital gains made outside of an ISA means that the CGT exemption for gains made within an ISA have become even more valuable. In April 2023, the annual tax-free CGT allowance was slashed from £12,300 to £6,000. It halved again this tax year 2024/2025 to £3,000.
Bowmore says the latest figures show that UK savers and investors can still benefit from extremely generous tax breaks. However, they also say that the spring statement proves that investors should take advantage of these tax breaks whilst they can as the current Government could remove these tax breaks in the future.
71%, or £29.5bn, of personal finance tax breaks are related to pension schemes, in the 2024/25 tax year. Mark Incledon, CEO of Bowmore Financial Planning says that this shows how pensions should remain the main vehicle for UK savers.
The personal finance tax incentives that have seen the largest increases over the past year include:
- Tax incentives for ISAs will have increased by 22% to £9.4bn during the 2024-25 tax year, up from £7.7bn in 2023-24, as taxpayers look to maximise tax efficient options for their savings
- Venture Capital Trusts, which would have risen to £330m in 2024-25, compared to £320m in the previous tax year***
Says Mark Incledon: “Higher CGT means it is more important than ever for investors to maximise the tax incentives available through ISAs. As CGT rates go up, avoiding these avoidable taxes becomes even more difficult – and with the government’s spring statement rapidly approaching, there is no guarantee that these incentives will last.”
“The autumn Budget has shown the government won’t shy away from increasing taxes on savings and investments, meaning It has become even more vital to take advantage of tax reliefs.”
“By prioritising action now, taxpayers can shelter their savings and investments from the worst of these tax increases and keep more of their gains in the long term.”
