As you’re not actually Warren Buffett, let’s not rely just on your eerily accurate feel for where the market’s going—and instead take advantage of a few sensible tax steps that are always worth taking this time of year
People who are sniffy about ‘boring’ core savings tricks are like the guy who didn’t just look a gift horse in the mouth, but asked for its dental records, future diet plan—and a guarantee it wouldn’t age.
In other words, there are lots of safe, useful, smart things you and your partner could and should be doing at this time of year around ducking and diving a bit around tax allowances and non-glam savings ideas that just Plain Make Sense.
So, put your inner Gordon Gekko aside for a moment and get some easy wins on your side of the scoreboard versus the taxman’s… but before we go on, don’t forget we have to do this now and at the same time every year to get the most bang per buck out of them.
Capital gains: the allowance that quietly keeps shrinking
In the October 2024 UK Budget, the main CGT (Capital Gains Tax) rates for individuals rose—and quite sharply, from 10 to 18% (basic rate) and 20 to 24% (higher/additional rate). The annual CGT tax-free allowance has also been reduced drastically, from £12,300 in 2022/23 to just £3,000 for 2024/25, bringing far more taxpayers into the scope of the tax; plus, as of last April, the two rates of CGT on carried interest would be replaced with a single 32% rate.
So, what should we do about that £3,000: bin it/forget about it? That would be silly. Much better would be to dispose of some shares or funds in a general account that you don’t need and sell up to the £3k limit and zip it over into your ISA (see below). Selling nothing is a tax decision, just not a good one; harvesting gains inside the allowance is dull but effective (and really won’t take you long either). And as soon as we hit April, you can’t go back and resell assets you wish you had, so just do enough with CGT to make Future You grateful.
ISAs: that open goal you’re not scoring in
Told you this was next, and for a bloody good reason: ISAs—the most beautiful tax wrapper there is —matter more than ever. On the table is a vehicle for everyone over 18 and resident in the UK for tax purposes to sock away £20,000 in every tax year (April to April)—which can be £20,000 in one account, or split across multiple accounts… and that’s £40k if you’re a couple where you don’t pay either income or CGT tax on interest accrued.
I suppose some adventurous readers may even be in a throuple and could save even more, but that’s your business (personally, I’d find it exhausting, but you do you). Essentially, ISAs capture all your returns for now and forever, are income and CGT-free zones both within the fund and for you when you cash it in, and may not be around forever, either.
My advice: don’t suffer from paralysis by analysis. Miss it and it’s gone forever; the decision is not the vehicle per se; it’s using this free golden capital growth opportunity. (On the cash vs stocks divide, ISAs are too good to waste on cash as you’re stopping yourself from investing in something that will create a good long-term return: just buy some Premium Bonds for folding stuff genuinely burning a hole in your pocket.
Pensions: boring, powerful, and still misunderstood
In its various attempts to maximise how much they can get us to contribute to fixing all those Black Holes (what is this, Star Trek?), it cannot be denied that the Crown has taken a few potshots at pensions over the last few years.
High-net-worth savers, in particular, have had to sit through a lot of policy tinkering: the £1.073m lifetime allowance (LTA) was frozen, used to penalise high savers (especially GPs), then ceremonially scrapped—only to reappear in spirit through new caps on tax-free cash and lump sums (take a bow, our friends the Lump Sum Allowance and Lump Sum and Death Benefit Allowance (LSDBA)).
Add frozen income tax thresholds and ever-shifting rules, and it is little wonder that many successful professionals now approach pensions with the same enthusiasm they reserve for HMRC hold music. But it would ultimately be as much a mistake to think that a party with 8 MPs (as of today) will take down one with a 400-seat majority as it would to go along unthinkingly with the narrative that pensions are somehow “broken”. Auto-enrolment has brought millions into the system, but without necessarily improving understanding, leaving higher earners wondering why they should commit serious capital to a vehicle that appears to change direction every November Budget-time.
Especially for those with higher incomes, pensions remain one of the most powerful wealth-building tools available to UK savers. Tax relief on contributions is still unmatched, investment growth remains tax-free, and employer contributions continue to represent that rarest of financial phenomena: a subscription service that never gets annoying–sorry, I mean free money.
Even within tightened allowances, pensions allow individuals to move capital out of the immediate reach of income tax, capital gains tax, and dividend tax, while maintaining linkage to long-term growth assets. And to be honest, employer contributions are often the most tax-efficient money you will ever receive.
All in all, getting your head into pensions encourages lots of other good savings thinking, as they’re all about patience, discipline, and long-term thinking. Side-by-side with ISAs and other vehicles, for high-net-worth individuals who ‘get’ the importance of diversification and tax efficiency, pensions are an essential pillar. Many clients tell us that the real cost of pension contributions after tax relief is much lower than it feels.
In the current UK environment of rising taxes and shrinking allowances, pensions still offer a legally protected, tax-advantaged way to invest for the future. So, like with ISAs, when it comes to your annual allowance of £60k, it’s a matter of use it or lose it; you cannot catch up later (unless carry forward applies). (We did a nice guide to being nimble about tapering here—and see below on how company directors can be even more agile with all this.)
Attention, company directors and business owners: get pension contributions sorted before the financial year end
Employer contributions are usually treated as an allowable expense for Corporation Tax purposes and as a company director, if you pay into your pension through your limited company, you can contribute up to £60,000 each year and still claim a reduction on your corporation tax bill. But, again, there’s always an annual portcullis coming down that you can’t afford to ignore and you must get this into your chosen pension vehicle before your financial year end.
Why I’m telling you all this: It’s already February!
Too many of us put this off until late March, but good intentions can be derailed by reluctance to get into all the detail and admin, platforms get busy, providers get slow and it’s very easy to tell yourself things like, ‘The markets feel a bit high’/’I don’t want to lock money away.
The reality is ‘I’ll do it next week’ is how allowances die. And you’re not getting any younger, the world more stable, or that Suzuki DRZ400 for your dream round-the-world trip any cheaper. Now’s the time to do all or at least the best part of all this, not the 1st of April.
Summing up, end-of-tax-year planning is not about predicting markets or tax changes, it’s about not carelessly or lazily wasting allowances you can’t say you don’t know about and which are literally there to help you.
A short review before the end of tax year deadline on the 5th of April can be worth more than a year of clever investing; if you’re really on the ball, you can do both and end up even further ahead in the game.
Drop me a line and let’s see what we can do. You know it makes sense 🙂
Ah, what the hey. You can wear the braces to the meet if you like, ‘Gordon’.
- This blog is for information purposes and does not constitute financial advice, which should be based on your individual circumstances.
- The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.
- The favourable tax treatment of ISAS may be subject to changes in legislation in the future
- An investment in a Stocks & Shares ISA will not provide the same security of capital associated with a cash ISA
- The value of pensions and any income from them can fall as well as rise. You may not get back the full amount invested.