With the end of the UK tax year (April 5) approaching, it’s a good time to take advantage of allowances that can reduce your tax liability or make the most of tax-free savings. Here are 5 key allowances to use before the tax year ends:

Personal Allowance (£12,570)

What it is: The amount of income you can earn tax-free each year.

Use it: If your income is below £100,000, you can use your full personal allowance to reduce taxable income. If you’re earning more, consider tax planning strategies (e.g., pension contributions or charitable donations) to keep your income under the threshold and retain the full allowance.

Putting savings and income producing assets in a non-tax paying (or lower tax rate) spouse or partner can be a powerful way of reducing the tax drag on income.

ISA Allowance (£20,000)

What it is: You can invest up to £20,000 in an Individual Savings Account (ISA) each tax year without paying tax on interest, dividends, or capital gains.

Use it: If you haven’t maxed out your ISA contributions yet, consider putting your savings or investments into an ISA before April 5. This can be for yourself or you and a partner.

In addition it is possible to put up to £9,000 into a Junior ISA (JISA) for a child or children.

Capital Gains Tax (CGT) Annual Exemption (£3,000 for 2024/2025)

What it is: This is the amount of profit you can make from selling assets (such as stocks, property, or other investments) without paying Capital Gains Tax.

Use it: If you have appreciated assets, consider selling them before the tax year ends to make the most of the allowance. The exemption has dropped considerably in recent years, but it is still good planning to use the allowance where possible and perhaps shelter into an ISA to reduce future exposure?

Pension Contributions (up to £60,000 Annual Allowance)

What it is: You may be able to contribute up to £60,000 to your pension (or up to 100% of your income if lower) and receive tax relief at your marginal rate.

Use it: If you’re aiming for a larger pension pot and want to reduce your taxable income, consider making additional contributions. Contributions are also a great way to carry forward unused allowance from the previous three years (if you’re eligible).

Marriage Allowance (£1,260)

What it is: If one partner earns less than the personal allowance (£12,570), they can transfer up to £1,260 of their unused personal allowance to their spouse or civil partner, provided the recipient is a basic-rate taxpayer.

Use it: If you’re married or in a civil partnership and your income is below the personal allowance threshold, don’t miss out on this opportunity to reduce your partner’s tax bill

Bonus: Gift Aid Donations

What it is: Donations made to charity under Gift Aid are tax-efficient, as you can claim back the tax you’ve paid on the donation.

Use it: If you’ve made charitable donations, ensure you’ve claimed Gift Aid to maximize your tax relief. You can also consider making additional donations before April 5 to reduce your taxable income for the current tax year.

Taking advantage of these allowances can help you reduce your tax bill, increase your wealth tax-efficiently, or even support charitable causes. There is still over 7 weeks to go before the end of the tax year so time to make good decisions.

Thanks for reading and enjoy the journey.