Income Tax – Check List 2024-25 

To lower the impact of higher rate tax (or marginal rates), consider sharing ownership of income producing assets with your spouse, especially if your spouse pays no income tax, or tax at lower rates.

Similarly, consider sharing ownership of income producing assets with your adult children (over 18 years). Your children, whatever age, can earn up to £12,570 this tax year without paying income tax. Transfers of certain assets may create a CGT liability, and so planning is key.

If you have a pension scheme, take advice from your pension’s advisor on the level of contribution you should make this year. The maximum you can pay in is £60,000 unless you pay tax at 45% in which case the annual limit could be as low as £10,000.

And now that the pensions’ Lifetime Allowance has been abolished (the allowance was £1,073,100 prior to April 2023) pensions’ savings can be accumulated in excess of £1,073,100 without a punitive tax charge. However, tax free lump sums will be pegged at a maximum of £268,275 (25% of £1,073,100) even if your pension pot exceeds £1,073,100.

There are no limits to the amount of gift aid donations you can make. These contributions extend your basic rate income tax band and are an effective strategy for avoiding the higher and marginal rates of income tax. Charitable donations are also one of the few remaining reliefs that you can carry back, in certain circumstances, to the previous tax year.

You can transfer up to £1,260 of your personal allowance to your spouse if you don’t earn enough to fully utilize this allowance against your own earnings. You can only do this if their income is between £12,571 and £50,270.

If you are provided with a company car and your employer pays for your private fuel, you should consider repaying this private fuel cost to your employer in order to avoid the punitive car fuel benefit charge. This will also save your employer National Insurance charges.

A further consideration for company car drivers is to discuss changing your vehicle for a lower CO2 emissions model. The car benefits charge increases in direct proportion to these CO2 ratings.

Don’t forget to use your ISA allowance. In this way you can invest up to £20,000 in the current tax year and any interest earned will be tax free.

There are a number of specialist investments you can make that are qualifying deductions for income tax purposes. They include: the Enterprise Investment Scheme, investments in certain Social

Enterprises, Seed Enterprise Investment Schemes and Venture Capital Trusts. Income tax relief varies between 30% and 50% of the qualifying investments. You will need to consider the commercial risks as well as the tax advantages.

Don’t forget that the State Pension is treated as taxable income for tax purposes. You are paid without deduction of tax. If your total income (including your State Pension) exceeds £12,570, this may produce unwelcome bills from the tax office at the end of the tax year.

Although not strictly a tax planning matter, if you have an outstanding mortgage on your home, the current upward pressure on interest rates will be causing concern. The funds you use to repay your mortgage come from your after-tax income. If you can afford to increase loan repayments by paying-off part of the loan or converting from an interest only mortgage to a repayment variety this may drastically reduce the interest cost over the term of your loan. Discuss these ideas with your mortgage advisor.