February 2025 Newsletter | Cylchlythyr Misol Chwefror 2025
As we approach the end of the tax year, here are some matters to consider before 5 April:
1) Bonus payments - are you anticipating a large bonus from your employer before the end of the tax year? If so, you should review whether the bonus will tip your total income for the year into a higher tax bracket, or whether you will cross the threshold to have to repay child benefit/childcare vouchers.
If the bonus takes your total income over £50,270, you will pay income tax at 40% on the excess above £50,270. If your bonus takes your total income to between £100,000 and £125,140, you may end up in the dreaded 60% tax bracket!
This can be mitigated through options such as personal pension contributions or charitable donations via Gift Aid, but these need to be actioned before 5 April 2025.
2) Gifts - are you planning to make financial gifts to family members? Remember, you can give up to £3,000 each tax year exempt from inheritance tax. You can also carry forward any unused allowance, but only from the previous tax year. Any unused allowances before this are lost.
3) ISAs - have you fully utilised your £20,000 tax-free ISA allowance this year? Higher interest rates on savings accounts mean many are receiving interest over and above their tax-free allowances (£1,000 allowance for basic-rate taxpayers, £500 for higher-rate taxpayers).
Check with your spouse/partner if they have also used up their ISA allowance and remember your children also receive a separate ISA allowance of £9,000 per year.
4) Marriage allowance - a married couple/civil partnership could save up to £252 of income tax per year if the lowest earning spouse earns less than £12,570 and the highest earning spouse is a basic-rate taxpayer. HMRC report that more than 2 million couples could be missing out on this relief. Please check your eligibility online and apply directly to HMRC.
5) Selling a business - are you contemplating, or in the process of, selling your business? Currently, Business Asset Disposal Relief (aka Entrepreneurs Relief) is available, subject to strict criteria, to allow you to pay capital gains tax at a rate of only 10%. This rate is increasing to 14% in April 2025, with a further increase to 18% in April 2026.
6) Furnished Holiday Lets (FHLs) - the tax treatment for FHLs is being abolished from 6 April 2025. If you run a holiday let, have you assessed the impact on future profitability as a result of the tax changes? If you are selling your property, do you realise the tax implications of selling after 5 April 2025 due to the loss of capital gains tax reliefs?
Cysylltwch os hoffech drafod unrhyw fater cyn diwedd y flwyddyn dreth.
Please get in touch if you wish to discuss any matter before the end of the tax year.
