Year-end tax planning for maximum returns

As the tax year comes to a close, now is the time to review your financial affairs and make strategic decisions to minimise liabilities, maximise available reliefs, and set a strong financial foundation for the year ahead. With tax laws evolving and deadlines approaching, a well-thought-out approach can lead to significant savings and prevent costly mistakes.

Whether you’re managing an estate, overseeing a trust, or handling your personal tax situation, there are key steps you can take before the year-end to ensure you’re making the most of available opportunities. By acting now, you can take advantage of tax reliefs, optimise your investments, and avoid last-minute pressure.

We’ve pulled together a list of the most important tax considerations to keep in mind when considering your year-end tax planning.

Inheritance tax (IHT) planning

• Look at annual exemptions: You can use the annual gift allowance of £3,000 per person to reduce IHT exposure. And, if you haven’t used the allowance from the previous year, you can carry it forward.

• Consider gifting strategies: Larger gifts may benefit from the seven-year rule, where they fall outside the estate for IHT purposes if the donor survives for seven years.

  
  

Trust tax considerations

• Income tax on trusts: Trustees should review trust income and consider distributing funds to beneficiaries in lower tax brackets to minimise overall tax liability.

• Capital Gains Tax (CGT) on trusts: Trusts have an annual CGT exemption (£1,500 for the 2024/25 tax year). Realising gains within this limit can help avoid unnecessary tax exposure.

  
  

Capital Gains Tax (CGT) planning

• Use the annual exemption: Individuals can realise gains up to £3,000 tax-free (2024/25). Trustees and personal representatives should time asset sales carefully to take full advantage of exemptions.

• Offsetting losses: Capital losses can be used to reduce taxable gains. Reviewing investment portfolios for underperforming assets may create tax-saving opportunities.

• Spouse and civil partner transfers: Transfers between spouses and civil partners are tax-free, allowing gains to be allocated strategically to maximise both individuals' CGT exemptions.

  
  

Income tax and allowances

• Personal allowances: Ensure full use of the personal tax allowance (£12,570 for 2024/25), especially for beneficiaries receiving distributions from trusts or estates. If your taxable income exceeds £100,000 and your personal allowance is reduced, consider making additional pension contributions or charitable donations to be able to claim the full personal allowance.  

• Dividend and savings allowances: Take advantage of tax-free dividend allowances (£500 and savings income allowances (£1,000 for basic rate taxpayers, £500 for higher rate taxpayers).

• Child Benefit High Income Charge: Consider making additional pension contributions or charitable donations by gift aid to reduce any charge may have if the higher earner has taxable income in excess of £60,000 in 2024/2025.

• Personal allowance transfer to spouse: If a spouse or civil partner will not use all of their personal allowance consider making an election to transfer 10% to the other spouse or civil partner.

• Trading and Property Allowances: Consider whether any income could be generated for family members in order to use the trading allowance or property allowance.  

  
  

National Insurance Contributions

• Voluntary contributions to enhance state pension: check your national insurance record to see if there are gaps in your contributions and consider making voluntary contributions to secure a higher state pension entitlement.

Individual tax-efficient wealth planning

• Maximising pension contributions: Pension contributions receive tax relief up to certain limits and can help reduce an estate’s taxable value for IHT purposes.

• Utilising ISAs and tax-efficient wrappers: Maximising ISA contributions (£20,000 per individual) before the tax year-end allows for tax-free growth on savings and investments.

  
  

Why year-end tax planning is key

Tax rules change frequently, and waiting until the last minute can mean missing out on valuable reliefs and allowances. A timely review of your financial and estate plans can lead to significant tax savings and ensure compliance with evolving regulations.

Need some support with your year-end tax planning?

Year-end tax planning is all about strategy. At Finch Tax, we provide clear, personalised guidance on tax planning, estate administration, and trust management. Our goal is to help you make the most of available reliefs, minimise tax burdens, and secure long-term financial stability.

Now is the time to take action to ensure you’re set up for success in the new tax year. Get in touch to find out more about how we can help you get the most from your year-end tax planning.

Disclaimer: The information provided in this article is intended for general informational purposes only and should not be construed as specific financial, tax, or legal advice. We strongly recommend consulting with a qualified tax, IFA or legal advisor to discuss how these updates may impact your personal or business affairs.