Tax Planning

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.

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.

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.

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.