As the tax year-end approaches, it’s easy to feel overwhelmed and think it’s too late to ensure you have utilised all your tax savings before the tax year end, but don’t worry – you still have time! We’ve compiled some last-minute steps you can take to strengthen your financial position before midnight on April 5th.
1. Buy back missing national insurance years for state pension
Are you a man born after April 5th, 1951 or a woman born after April 5th,1953? If so, you have until April 5th, 2025 to check and potentially buy back missing national insurance payments for years from 2006-2016.
Why is it vital to check?
If you have gaps or incomplete years of paying your national insurance, correcting this through buying the missing time back could improve your state pension by far more than it costs. Everyone in that age group should be checking this as a matter of urgency! The Money Saving expert’s website gives an excellent explanation: How to buy voluntary national insurance contributions >
The starting point is to check your national insurance record here: Check your National Insurance record – GOV.UK
As with anything on the HMRC site, you need your government gateway login. While you are logged in why not check your current State pension estimate?
2. Settle your annual allowance tax bills with the HMRC.
Following the McCloud Remedy, many of you will now be in possession of a Remediable Pension Savings Statement (RPSS).
As your annual allowance (AA) liability may have changed it is important to act if your AA charge has increased or the figures now reveal you have a liability in any year.
Typically, any annual allowance tax liability uncovered should be paid by January 31st, 2025. However, if you received your RPSS after October 31st, you have three months from the date of receipt to settle the payment with HMRC.
If you have chosen to utilise Scheme Pays you need to tackle that ASAP too. Normally you have until July 31st the year after the end of the tax year the liability exists to make an application. For example, for the 2022/23 tax year, the Scheme Pays deadline would be July 31st 2024.
This has been extended for some years due to the recalculation of the McCloud Remedy necessitated. The Scheme Pays deadline for an annual allowance charge in tax years 2019/20 – 2022/23 is extended from July 31st 2024 to July 6th 2025. It is extended to July 6th 2027 for members who retired before October 1st 2023. This isn’t strictly something you need to do before the tax year ends, but it isn’t something you can pull together overnight so take action now. Check all details here: NHS Pensions – Annual Allowance Scheme Pays Election
3. Double-check your tax code
An incorrect tax code can be annoying and time-consuming to fix, and means you may need to find additional money to pay an under-taxation tax bill. So, best avoided and resolved quickly if an error occurs.
The most common tax code is 1257L, however, there are many other tax codes. Having something different doesn’t mean it’s wrong. Checking your code is especially important if you are being paid arrears, possibly as part of the pay uplift. Many of those back payments arrived in November 2024. If you are no longer working at the same trust you may have received additional payslips. Check all tax codes carefully for errors. You are liable for any tax underpayment an overly generous tax code creates and conversely, if you have been overtaxed you can claim this back from the last four tax years. Use the HMRC’s Tax code guidance >
4. Use it or lose it…your ISA allowance
Your ISA is a rare and beautiful thing….money the tax man cannot touch! You can choose between holding it in cash or a stocks and shares portfolio depending on your timescales, goals and attitude to risk, but whatever you decide you can save £20,000 into an ISA each tax year. Your children have their own ISA Allowance of £9,000 and anyone between 18 and 40 has the LISA options. See here for full details: Individual Savings Accounts (ISAs): Overview – GOV.UK
But be warned if these ISA allowances are left unused you lose them. Try to contribute something rather than nothing before the turn of the tax year. Many ISAs can be contributed to online and once they are within an ISA wrapper you can transfer them to other types of ISAs. The key thing to do here is to contribute to the end of the tax year.
Do seek advice if you are contemplating taking any sort of risk ISA to check it is appropriate, and that you fully understand the potential for loss and costs involved.
5. “Bed and ISA”
In the past, you may not have had to worry much about paying tax on investments outside an ISA, as capital gains tax (CGT) and dividend tax-free allowances were more generous. However, both allowances have now been reduced, leaving you more likely to have additional tax bills.
The tax-free dividend allowance has been halved from £1,000 to £500. The capital gains tax tax-free allowance has also been reduced to £3,000.
To shield savings from tax, keep moving them into an ISA each tax year by performing bed and ISA transfers. This means selling funds outside the ISA and then rebuying funds within the ISA. This may create a CGT liability but once within the ISA, they are tax-free in the future. Due to the CGT issue, always speak to your adviser before carrying this out.
6. Transfer Investments to your spouse
You can transfer investments to your spouse or civil partner without incurring capital gains tax if they haven’t used up their annual tax-free allowance and still have ISA allowance available. This is a good way to maximise all the family’s tax allowances.
You will need to record the original cost of the asset or investment when you bought it as this will dictate the tax payable when your spouse eventually sells it.
This is especially useful if your spouse pays income tax at a lower rate. Even if they do end up paying some tax it will be lower as not only will there be a savings in income tax but also, if capital gains or dividend taxation come into play they are also at lower rates for basic rate income taxpayers than a higher rate.
7. Claim the marriage allowance
The marriage allowance allows couples where one partner does not pay income tax or earns the personal allowance of £12,570 (2024/25) and the other is a basic-rate taxpayer to transfer part of their tax-free allowance. This could save up to £252 annually in tax.
The HMRC estimates that 2.1 million couples could benefit from marriage allowance they don’t currently claim1. And it could be even more beneficial if you have never claimed it as, if you were eligible in previous years you can go back up to 4 years and claim retrospectively. If you claimed for all 4 years that would be a total improvement of £1004!! So make sure you check this before April 5th.
8. Act to reduce your Inheritance tax liability (IHT)
There are many ways to reduce your IHT liability on death. The simplest of all your annual exemptions, details are here >
Gifting allowances are per tax year but if unused last year they can be carried forward to this year, but lost thereafter, so it’s another ‘use it or lose it’ situation.
Why not take a look at our other article here to find out about an often-overlooked way of reducing your IHT bill?
9. Help Your Children with an ISA or Pension
In addition to funding your own pension contributions, you can fund pensions for your children too. Contributions attract basic rate tax relief, even if the non-taxpayer. By contributing £3,600 annually (the maximum allowed), you only need to contribute £2,880, with the taxman giving them £720. This could be coupled with your £3000 gifting allowance in point 8 to make it doubly tax-efficient.
10. Review Your Child Benefit
From April 6th, the rate for your eldest or only child will go up to £26.05 per week. The rate for your other children will increase to £17.25 per week.
The high-income child benefit charge causes many clients a headache. Parents with earnings over £60,000 lose ALL of their valuable child benefits. If you earn between £50,000 and £60,000 there is a partial reduction.
Don’t forget, even if you suffer the high-income charge and stop receiving child benefit, if one parent is staying at home to care for the little one they will receive a national insurance credit, which helps to build their state pension for later in life but being registered for child benefit2.
There are some ways to reduce your taxable income and keep more of your child benefit. Consider using salary sacrifice schemes, like NHS car leases, childcare vouchers, or a cycle-to-work scheme. These can lower your taxable income but may negatively affect your annual allowance, and potentially cause an increase in your tax liability once the scheme ends. Again, it’s not a straightforward decision. Consult with your financial adviser to avoid any potential issues.
All this may seem rather daunting, but each task is relatively simple and short, so why not try to fit at least some of them in over a coffee while the nippers are asleep? Or any other time you can manage in the coming weeks, while you still can.
Tax is dependent on your own circumstances and personal situation, and is subject to changes based on UK legislation and taxation regime. This article is based on our understanding of current legislation.
References
1 Millions of couples missing out on marriage tax allowance | MoneyWeek
2 Child Benefit: Make a change to your claim – GOV.UK