Full disclosure: this is more than one word. But please bear with me as I strive to help those hardy souls involved in planning for tax year end to take into account some important issues. This is certainly not financial or tax advice; I’m simply sharing my thoughts with the adviser community at this pressured time of year.
Following the Autumn Budget, I don’t expect big changes in the forthcoming Spring Statement impacting TYE planning, many of the obvious components of tax planning are still in train. This includes maximising ISA allowances up to the limit, while making sure not to accidentally subscribe to more than one ISA of the same type in the same tax year. Maximising pension contributions is key too, remembering that the limits on tax relief are the higher of 100% of UK taxable earnings or £3,600, subject to the annual allowance set at £60,000. Unused amounts can be brought forward from three tax years prior.
Note that for directors taking dividends instead of salary, and private equity owners taking carried interest, these amounts do not count as earnings. Make sure your total gross earnings at least equal your pension contributions if you want the tax relief.
Loss relief from the previous year can be brought forward – consider amending the 2023-24 tax return if it’s more useful to benefit this tax year from relief from the now higher rates of CGT (18% and 24%) that arrived with the Budget. Bear in mind that as we are now past the 31 January HMRC deadline, the tax return for the 2022-23 tax year can’t be amended.
If you have not yet notified HMRC of a loss in a tax year then don’t worry, you have four years from the end of that tax year to do so (so you have until 5 April to notify HMRC of losses in the 2020-21 tax year). You do not have to notify via the tax return.
Capital losses must be offset against gains made in the same tax year. But recognise that with some assets where a gain is made – for example offshore non-reporting funds –these will be charged to income tax whereas a loss is a capital loss, so they cannot be offset against one another. Likewise with deeply discounted securities, such as US Treasury bills, where redemption tends to be pegged to inflation and there’s no loss relief, so profits can’t be reduced by a loss elsewhere. If a profit is made, tax will be payable. In short, know the tax treatment of the assets you dispose of!
Moving on to other tax strategies, I see that some advisers are looking at other tax advantageous products, such as insurance bonds. These offer tax benefits in that the investor can withdraw up to 5% a year tax-free, and the money will stay in the wrapper and won’t trigger tax on a yearly basis, as happens when keeping cash in an ordinary bond or fund.
EIS, SEIS and VCTs may be interesting avenues to explore, with sums invested in small companies and start-ups as well as later selloffs attracting some tax relief. An income tax reducer of 30% of the amount subscribed for EIS shares is available, 50% for SEIS share subscriptions, and 30% for VCT share subscriptions (plus dividends from the first £200,000 of VCT shares subscribed for in a tax year are exempt from income tax). There are a variety of rules and reliefs involved which need to be interrogated, and of course there’s the risk that a company can fail, and money invested is irrecoverable.
For second property owners and landlords, if thinking of selling up, the time has probably passed when the government would raise the CGT rate for disposal of residential property. Regardless of chatter in the media, I feel it’s unlikely that the tax rate will change in the Spring Statement, so I am not overly concerned about property income or disposals.
However, the stamp duty initial threshold for home moves and additional property purchases is reverting on 31 March 2025 from £250,000 to £125,000, so it’s tax beneficial if home purchases are completed before that date. The different rules applying to first-time buyers remain, but the purchase price at which they start having to pay stamp duty reduces from £425,000 to £300,000 at the end of March.
Salary sacrifice to boost workplace pension contributions is worthy of examining, as both employee and employer don’t incur National Insurance (NI) on these. For business owners, as mentioned earlier, remember that dividends are not ‘earnings,’ so make sure the salary paid covers pension contributions by both the employee and employer.
The situation for non-doms changes significantly from 6 April 2025. People who currently claim the remittance basis should consider which overseas assets would benefit from rebasing to their 5 April 2017 values. These may be worth disposing of now and nominating under the Temporary Repatriation Facility (TRF) to be subject to as low as a 12% tax rate. I strongly recommend affected individuals seek tax advice from a qualified professional.
I hope this summary of some key aspects sitting behind this year’s TYE planning is helpful to the advice sector. I empathise with the practitioners dealing with these complex issues, as it’s quite an ask to keep all the plates spinning as tax year end rushes towards us.
Alex Ranahan
Alex Ranahan is a Tax Reporting Analyst at investment tax solutions provider FSL.
