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Tax Planning Advice From Horsham, East Grinstead & Crawley Based IFAs

Taxing questions

Most of us risk being taxed on our income, our capital gains and the value of our estate when we die. It is worth getting a clear grasp of how these taxes work and then discussing with your independent financial adviser the most tax efficient financial planning for you.

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Income tax

The single person’s income tax allowance for the year to 5th April 2025 is £12,570. If your total income is less than this during the tax year then there is no tax to pay.

Income Tax Allowances

Tax year 2024-2025
Personal allowance £12,570
Income limit for personal allowance £100,000
Marriage allowance £1,260
Blind person’s allowance £3,070
Dividend allowance £500
Personal savings allowance for basic rate taxpayers £1,000
Personal savings allowance for higher rate taxpayers £500

Income Tax Bands

Rate 2024 to 2025 tax year
Personal Allowance Up to £12,570
Basic Rate 20% £12,571 to £50,270
Higher Rate 40% £50,271 to £125,139
Additional Rate 45% Over £125,140

The self-employed can claim business expenses against their income. So make sure you include all possible justifiable business expenses on your self-assessment form. This also applies to capital allowances for expenditure on plant and equipment, including computers and tools, for example, used for your business.

Don’t forget pension payments either. You may be able to pay further contributions to your pension, which can soak up some unused tax relief.

One other point to remember, if one spouse is a tax payer and the other is not or pays tax at a lower rate it is worth considering switching some investments to take advantage of their unused tax allowances.

Dividend Allowances

Rate 2024 to 2025 tax year
Dividend Allowance £500
Basic Rate 8.75%
Higher Rate 33.75%
Additional Rate 39.35%

Capital Gains Tax

In the tax year to 5th April 2025 the CGT allowance is £3,000.

This means that you do not have to pay tax on gains from buying and selling shares or other investments during the tax year up to that amount. Remember also that you do not normally have to pay tax on any gain you make when you sell your main residence.

The following Capital Gains Tax rates apply (the tax rate you use depends on the total amount of your taxable income, so you need to work this out first):

  • 10% and 20% tax rates for individuals (not including residential property)
  • 18% and 24% tax rates for individuals for residential property

If you have used your CGT allowance, don’t forget your ISA allowance. An “ISA” can shelter capital gains and dividends on investments, for example shares, worth up to £20,000 per year.

Tax Free Savings Accounts

Tax year 2024-2025
Individual Savings Account (ISA) subscription limit £20,000
Junior ISA subscription limit £9,000
Child Trust Fund (CTF) subscription limit £9,000

Special Tax Rates For Trustees’ Income

Tax year 2024-2025
Trust income up to £1,000 Up to 20%, depends on the type of income
Dividend-type income 8.75%
All other income 20%
Trust income over £1,000
Dividend-type income 39.25%
All other income 45%

Inheritance Tax (IHT)

Inheritance tax is hanging over more and more of us each year. This is largely due to the rise in residential property values. The current IHT allowance for 2024/2025 is £325,000. Depending on the value of your house and other assets this may not be that big an allowance. If you die leaving an estate worth more than £325,000 and you have no spouse your estate will come in for IHT at 40% on the balance.

Even if you do have a spouse to inherit then this only puts off the time when tax will be payable because he or she will also pass away one day. It is worth doing some forward planning with a tax adviser to decide whether it would be appropriate to gift some of your estate, perhaps to children or other relatives, during your lifetime; or possibly redirect assets up to the value of the nil rate band into a trust on death.

The nil rate band is effectively transferable between husband and wife such that where one spouse has died with a chargeable estate for IHT of less than the nil rate band at the time, the unused proportion will be added to the nil rate band of the surviving spouse on the second death.

 “Main Residence Nil-Rate Band” & Nil-Rate Band:

This introduced an additional nil-rate band when a residence is passed on death to a direct descendant. This will be:

  • £175,000 in 2024 to 2025
  • Maintained up to and including 2025 to 2026

Who is likely to be affected:

Individuals with direct descendants who have an estate (including a main residence) with total assets above the Inheritance Tax (IHT) threshold (or nil-rate band) of £325,000 and personal representatives of deceased persons.

One thing is for sure with all forms of tax; if you do nothing the government will use its considerable powers to make sure a share of your hard earned wealth ends up in their coffers.

* Trusts and Taxation advice are not regulated by the Financial Conduct Authority.


Levels, and bases of, and reliefs from taxation are subject to change.


 

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Adam Reeves

Author: Adam Reeves

DipPFS Cert CII (MP&ER)
Independent Financial Planner, Wealth Manager, Director

Last updated on

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Adam was quick to assess & understand my situation, and was able to discuss & communicate in a very concise and simple way the various options available to me, taking time for me to understand and clarify where necessary. My understanding & knowledge of taxation & pensions has increased significantly allowing me to feel much happier making financial decisions for the future.

Rob – West Sussex

Adam and his team undertook in-depth research into our existing QROPS schemes and clearly set out both pros and cons of transferring the funds back to the UK. Having decided to go ahead with the transfer, Adam and his team worked extremely hard to facilitate the transfer. The QROPS pension trustees were not always the most professional or responsive organisation – however we were very grateful for the perseverance and commitment that Adam showed us as clients.

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Adam offered a range of financial products , the one he suggested was affordable and proved to be a good choice.  Returns on investments have exceeded my expectations, based on Adam’s advice and guidance. Profits have enabled house improvements to take place.

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Adam arranged an appointment very timely, he explained his role and qualifications as an IFA giving me reassurance , we went through my retirement and investment goals. Adam discussed my options explaining in great detail, I felt relaxed during our discussions allowing me to fully understand my choices. I feel very confident in the financial advice allowing me to enjoy my retirement.

I was very happy with Adam’s recommendations and explanations of financial products which would suit my retirement goals, I feel this has helped me review and reduce my financial risk as I reach retirement, leaving me feeling confident that I can enjoy my retirement plans.

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After initial meeting Adam put together a very detailed and thorough written plan. At our second meeting he went through the whole booklet and explained everything in layman’s terms which made it a lot easier to understand.

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Adam did a thorough review of my pension policies, clearly explained how well they had performed, how flexible they were, how the market regulation has changed, and, crucially, what the tax implications would be if I were to leave them untouched. He accurately assessed my attitude to risk and recommended an up-to-date solution that will offer me the greatest flexibility at retirement.

Greg – East Sussex
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