Tax Planning UK – 2024 & Beyond!

Taking Charge of Your Financial Future

Tax planning isn’t just about minimising the amount of tax you owe; it’s also about maximising your financial potential and securing your future. One of the most effective ways to achieve this is by planning ahead, utilising tax-efficient vehicles such as pensions and Individual Savings Accounts (ISAs) to grow your wealth while enjoying valuable tax benefits.

Top Tax Planning Tips for 2024

Pensions:

Lifetime Allowance Limit 

With effect from 6 April 2024 the Lifetime Allowance for pensions has been abolished. However, we now have the introduction of the ‘Transitional Tax Free Cash Certificate’ which limits the amount you are able to withdraw as a lump sum from your pension arrangements. It is therefore important to review your arrangements to see how or if this will impact you.

Contributions

Currently the maximum annual allowance for contributions is £60k gross, however this allowance may be reviewed under a new Government, not for the better! Subject to how much you have contributed in previous years there may be scope to ‘carry forward’ unused allowances. It’s important to seek pension advice as these annual limits do not necessarily apply to everyone as they can be dependent on earnings and profits.
https://www.gov.uk/tax-on-your-private-pension

Beneficiaries’ Pensions

Whilst reviewing your pensions make sure you have nominated a beneficiary on your death. Most modern schemes allow the facility to pass funds onto your beneficiaries by the way of a beneficiaries drawdown. The new rules around ‘lump sum’ allowances are impacted by this and again a review is recommended.

ISA’s

Currently the annual allowance is £20k per annum, either held as cash or stocks and shares and provide tax efficient savings. If you have a ‘flexi ISA’ and plan to withdraw funds from the product this tax year, then you should be able to replace them up to the amount withdrawn. The £20k per annum allowance is for all UK residents and it’s a ‘use it or lose it’ allowance.

There are also Junior ISA’s and Lifetime ISA’s (LISA’s) to consider which can play a valuable part in saving for the younger generation and towards a deposit for property purchase.

Capital Gains Tax (CGT)

The annual allowance for individuals has reduced to £3k, a much reduced amount compared to previous tax years, to offset against crystalised gains which are subject to this particular tax e.g. investment property. Again, it is a ‘use it or lose it’ allowance so worth considering. For the 2024/25 tax year, CGT is charged at the rate of either 10% or 18% for basic rate taxpayers. For higher or additional rate taxpayers, the rate is either 20% or 24%.

Inheritance Tax Planning Advice (IHT)

There are annual allowances for tax exempt gifts to consider as follows:

• Give away £3,000 (annual exemption) – The first £3,000 given away each tax year does not form part of your estate so is not subject to inheritance tax. If you don’t use your full annual exemption in any given year, the remainder can be carried forward to the next tax year (but no further).
• Give £250 – Gifts of up to £250 per person each year are not subject to inheritance tax. So, somebody with 6 grandchildren could give each of them £250 each year as a birthday present. These gifts do not count towards the £3,000 annual gift exemption (described above) – though you can’t combine gifts for the same person. So if you’ve already gifted someone your £3,000 annual exemption, you couldn’t then give them £250.
• Give money freely from your income – Inheritance tax is a tax on your assets. As a regular income is not treated as an asset, you can regularly give money away from this income – tax-free – so long as it’s not detrimental to your lifestyle.
• Give wedding gifts – If a family member or friend is getting married, you’re able to gift them money tax-free. You can only make such a gift once a year, and there’s a limit on how much you can give: £5,000 to a child, £2,500 to a grandchild and £1,000 to anybody else. Wedding gifts can be combined with your £3,000 annual exemption (so they can be used on the same person) but not with the £250 small gift allowance.
• Fund a loved one’s living costs – For example, you can contribute to your child’s living costs and tuition fees at university. There are no caps on how much you can contribute, and it can be given tax-free as long as the money comes from your own regular income and doesn’t affect your own lifestyle. Such funding can be combined with your £3,000 annual exemption (so it can be used on the same person) but not with the £250 small gift allowance.

If you’re interested in inheritance tax planning advice, we encourage you to reach out to us. By providing details about your current situation and requirements, our team can offer personalised guidance on estate planning and minimising inheritance tax liabilities.

Strategic Tax Planning: Seizing Opportunities for a Better Financial Future

As we bid farewell to another tax year, let’s embrace the opportunity to take control of your finances and optimise your tax position. By planning ahead, investing wisely, and leveraging the available tax reliefs and allowances, we can pave the way for a better financial future. So, let’s seize the moment by ‘Thinking Ahead Today!