The 2024 Autumn Budget introduced several tax changes affecting individuals and businesses. With the tax year-end approaching (5 April), there is still time to review the new rules, optimise your affairs, make use of allowances and consider ways to reduce your tax liabilities. In this email we highlight some of the key changes, and how to make the most of your options.
Topping up your State Pension
If approaching retirement, there is still time for you to boost your State Pension by making voluntary National Insurance (NI) contributions. Until 6 April, the government is allowing individuals to fill any gaps dating back to 2006. To receive the full State Pension, you need 35 qualifying years for the full amount and at least ten years of contributions to receive any payment. Normally, you can only pay for missing contributions from the past six years, but the current scheme, which ends this tax year, allows you to backfill nearly 20 years.
Therefore, if you have any gaps, topping up now could boost the amount you will receive from your pension. You can check your NI record via HMRC, and use the State Pension forecast tool to see if making extra payments will help you. Acting now could increase your pension payments for life.
Using your annual pension allowance
Pension tax relief is a valuable benefit that boosts retirement savings by allowing you to reclaim tax on the contributions you make. With tax year-end approaching, now is a good time to boost your retirement savings by making use of your annual pension allowance before it resets.
The annual allowance allows most people to pay up to £60,000 into their private pension and receive income tax relief. When you pay into a private pension, the government adds basic rate tax relief on top of the amount you contribute. For higher-rate and additional-rate taxpayers, they can claim extra pension tax relief (up to 40% and 45%, respectively) through self-assessment, further reducing their tax bill. This is also effective to help those in the 60% “tax trap” where your personal allowance is gradually lost when you have income over £100,000. So from £100,000 to £125,140 you effectively pay 60% income tax.
Pension allowance carry forward rules
If you have not used your full pension allowance in recent years, you may still have time to benefit. The ‘carry forward’ rule allows unused pension allowances from the past three tax years to be used, allowing you to contribute more than the annual limit and earn tax relief. Additional payments must be made before 6 April 2025, to count for this tax year. Higher-rate taxpayers should also check whether they need to claim extra relief via their self-assessment forms.
Changes to Capital Gains Tax
Capital Gains Tax (CGT) applies to profits from selling assets like investments or valuable possessions. In the Budget, CGT increased immediately from 10% to 18% for basic-rate taxpayers and from 20% to 24% for higher and additional-rate taxpayers.
Gains can be offset against losses, so keeping records of asset sales is essential. Additionally, CGT on carried interest will rise to 32% from April 2025, with further changes planned for April 2026. Understanding these changes and planning ahead can help minimise your tax bill. If you have recently sold assets, and suspect you will have a CGT bill, contact us to see whether there are ways in which we can help to offset the bill, for example, through an Enterprise Investment Scheme, discussed below.
Tax-efficient investing: VCTs and EISs
The Budget confirmed that Venture Capital Trusts (VCTs) and the Enterprise Investment Scheme (EIS) will be extended until 2035, giving investors long-term certainty. Both continue to offer up to 30% income tax relief on qualifying investments, and with CGT rates rising, these tax-efficient schemes may become even more appealing. Additionally, EIS allows investors to defer a CGT bill by reinvesting gains into qualifying companies, providing further tax benefits. While these schemes are extremely tax efficient vehicles, it is crucial to take care when investing due to the high-risk nature associated with investing in small businesses.
ISA allowances
Existing ISA limits remain frozen until 5 April 2030. The annual ISA allowance remains at £20,000, with Lifetime ISAs capped at £4,000 and Junior ISAs/Child Trust Funds at £9,000 per year.
Although limits remain unchanged, inflation may reduce their real value over time. Investors should maximise their ISA contributions before the tax year-end to take full advantage of tax-free investment growth while allowances remain at current levels.
Non-UK Domiciles or Temporary Residents
From 6 April 2025, the UK will move to a residence-based tax system, ending the remittance basis for non-domiciled individuals (non-doms). To retain some international competitiveness a Foreign Income and Gains (FIG) regime will be introduced. If you are a non-dom with untaxed foreign income under the current remittance basis rules, you might benefit from transitional accommodations, such as the Temporary Repatriation Facility (TRF). This is a significant change for affected individuals, so it is recommended taking professional tax and financial planning advice to optimise your affairs and help prevent any unexpected bills.
We’re here to help
With tax year-end fast approaching, now is the time to revisit your finances and stay ahead of the new rules. You may have already reviewed each of the above relevant points with your advisers as part of your annual review. If not, or if you wish to discuss additional considerations, please do let us know, so that we can ensure all the tax planning allowances available for you have been fully implemented prior to the end of this financial year. Please contact your PWM adviser directly or telephone us on 020 7444 4030 or email us.
The information and/or any reference to specific instruments contained in this article does not constitute an investment recommendation or tax advice. The contents of the article have been prepared solely for information purposes. The article contains information on financial products and services and such information is designed for and addressed solely to individuals seeking generic industry information. This document reflects our understanding of current legislation. Past performance is no guide to future returns.