Ease Your 2024/25 Tax Burden

Whether you’re looking to reduce your tax burden or plan for your long-term financial health, Harmonic Financial Planning can help you with a tailored plan.

As the April 5th end-of-tax-year deadline approaches, January offers the perfect opportunity to regroup and take stock of your personal finances. Many use this time to reflect and plan ahead, setting goals and ensuring they’ve made the most of the allowances available to them.

There may still be opportunities to reduce your HMRC bill that you haven’t yet taken advantage of. From pensions to partner allowances, and kids’ ISAs to carry forwards, working with a financial advisor can help you cover all bases and avoid leaving money lying on the table.

Here are some key points to consider:

1. Carry Forward Unused Allowances

Technically, you may be able to put up to £200,000 into your pension this year using the “carry forward” allowance rule. Depending on how much you paid in previous years, you can use unused allowances from the past three tax years to maximise your contribution towards your future.

To take full advantage, however, certain conditions must be met. Contributions must be backed by relevant earnings, and prior annual allowance tapering might affect how much you can carry forward.
For those with fluctuating incomes, such as business owners, or anyone considering a large one-off contribution, this rule can be an especially useful option. The Harmonic FP team can guide you through the complexities, from verifying eligibility to understanding how tapering might apply to you.

2. Maximise Paying into Your Pension

A rise in annual pension contributions allowance in 2023 means, even if you dan’t have any “carry forward” allowance, you can still save up to £60,000 a year tax-free into your pension – or 100% of your annual earnings, whichever is lower. (Although, if you have total earnings above £200,000 a year, your annual allowance will gradually reduce to £10,000 in the current tax year. This is known as the tapered annual allowance).

As you may know, pension contributions also benefit from tax relief at the tax-payer’s marginal rate. So, if you are a higher-rate tax payer, every £1,000 contributed will cost only £600 after tax relief, while additional-rate tax payers pay as little as £550.

3. Use Your ISA and Junior ISA Allowances

You likely know that ISAs offer one of the most tax-efficient ways to save and invest. Each year, each individual can invest £20,000 free of tax in an ISA.

But did you know, you can contribute an additional £9,000 a year into a Junior ISA for each of your children?

Funding your child’s Junior ISA doesn’t affect your own adult ISA allowance, and will give them a safe nest egg. This can grow alongside them untouched by taxes, providing a potentially considerable pot for their education, a first home, or even their entrepreneurial ventures when they turn 18. Starting early ensures they have the longest time to benefit from the advantage of compounding growth.

4. Make Use of your Spouse’s Allowances

A tax tip that many couples overlook: you are able to transfer assets in order to share gains to make the most of both of you and your partner’s annual allowances.

Working together with an advisor to build separate saving pots helps you not only strengthen your combined retirement savings, but also create a financial safety net for both partners—offering additional security in the face of unexpected life changes…

By moving assets to your spouse without triggering tax on the transfer, you can potentially reduce your overall Capital Gains Tax (CGT) and dividend tax liabilities. This strategy is particularly effective if your partner is in a lower tax band, enabling you to make full use of their allowances.]

Visit the Harmonic FP website to read 4 more strategies you can use to reduce your end of tax year bill.

Financial planning goes far beyond questions around specific tax bills; it creates a secure financial foundation so you can afford to pursue the things that matter to you most in life – whether it’s running a business, school fees, university costs, helping your children buy their first home, or planning for your legacy during your well-earned retirement.

Speaking to experts can help you put a harmonised and personalised plan in place to make sure your finances are in safe hands. Send us a message with your details, and one of our specialists will be in touch with you for a no-fee first meeting.