T<\/span>he tax year runs from 6 April to 5 April<\/strong> the next year. This means that the most crucial UK tax deadline occurs every April.<\/p>\n That\u2019s because there exist various annual allowances and tax reliefs that you need to make use of to legally mitigate<\/a> your income tax bill and stop taxes devouring<\/a> your investment returns.<\/p>\n Most of these are \u2018use it or lose it\u2019 allowances with a 5 April deadline.<\/p>\n It\u2019s no good bemoaning in June that you should have filled your ISA allocation by 5 April, but you were too preoccupied by the Donald Trump Show or the Six Nations rugby!<\/p>\n No point cursing if you create a \u00a3500 capital gains tax liability in July that you might have defused<\/a> in March!<\/p>\n Of course you read Monevator<\/em>. You know this kind of stuff. But it\u2019s still all too easy to overlook something.<\/p>\n Especially when the tax rules keep changing! For example, the capital gains allowance was halved in the 2024-25 tax year to just \u00a33,000.<\/p>\n So let\u2019s run through a checklist of what to think about as the UK tax deadline draws near.<\/p>\n Follow the links in each section to go deeper.<\/p>\n The annual ISA allowance is the maximum amount of new money you can put each year into the range of tax-free savings and investment accounts that comprise the ISA family.<\/p>\n The\u00a0ISA allowance<\/strong>\u00a0for the current tax year to 5 April is\u00a0\u00a320,000<\/strong>.<\/p>\n You cannot carry forward or rollback this ISA allowance. What you don\u2019t use in the tax year is lost forever. <\/p>\n ISAs are a superb vehicle for growing your wealth tax-free. But the fiddly rules \u2013 seemingly made up by a bureaucrat with a grudge against mankind\u00a0\u2013 are subject to change over time.<\/p>\n For example, as of the 2024-25 tax year you can now open multiple ISAs of the same type in the same tax year.<\/p>\n Previously you could only open one new ISA of each type in a tax year.<\/p>\n Note though that you can only contribute \u00a320,000 in total to your ISAs a year \u2013 old or new. And it\u2019s down to you to keep track of your running total.<\/p>\n Also, you can still only pay into one Lifetime ISA per year. The maximum contribution here is \u00a34,000. This counts towards your \u00a320,000 annual ISA allowance.<\/p>\n Another change is that you can now make partial ISA transfers \u2013 although not all platforms will accept them. (Under the old rules, if you contributed to an ISA and then wanted to transfer the funds to a different provider in the same tax year, you had to transfer all of that year\u2019s ISA contributions).<\/p>\n And another: fractional shares can now be held in a stocks and shares ISAs. They\u2019re listed as \u2018fractional interests\u2019 on this page of qualifying investments<\/a>.<\/p>\n My co-blogger wrote the definitive guide to the ISA allowance.<\/p>\n There is a limit to how much money you can contribute to your pension in a given tax year while still receiving tax relief on those contributions. <\/p>\n It is sometimes referred to as the pension annual allowance.<\/p>\n Despite massive speculation<\/a> with every Budget, the allowance is still \u00a360,000.<\/p>\n However the rules about inheritance tax and pensions were thrown into the Magimix blender in late 2024:<\/p>\n Note that saving into a pension is mostly a tax-deferral strategy. That\u2019s because you\u2019re eventually taxed on pension withdrawals, unlike money you take out of an ISA tax-free.<\/p>\n In theory this makes ISAs and pensions equivalent<\/a> from the perspective of tax.<\/p>\n In practice though, the fact that you can also draw a special tax-free lump sum from your pension gives pensions an edge in tax-terms\u00a0\u2013 albeit at the cost of locking away your money for years.<\/p>\n Weigh up the pros and cons<\/a> of each tax wrapper. We think most people should do a bit of both.<\/p>\n You can reduce your marginal tax rate by making pension contributions, if you can afford to go without the money today. Those on higher-rate tax bands should definitely do the maths:<\/p>\n Under the personal savings allowance:<\/p>\n Back when interest rates were very low, these savings allowances seemed quite generous.<\/p>\n But rising rates have changed everything. Even interest on unsheltered emergency funds<\/a> can now take you over the personal savings allowance and see some of your interest being taxed.<\/p>\n Redo your sums. Higher-rate tax payers might look into holding low-coupon short duration gilts instead. Recently these have offered a lower-taxed alternative<\/a> to savings interest.<\/p>\n As of 6 April 2024, the annual\u00a0tax-free dividend allowance was reduced to \u00a3500.<\/p>\n Dividends you receive within the tax-free dividend allowance are not taxed. But breach the allowance and you\u2019ll pay a special dividend tax rate on the rest, according to your income tax band.<\/p>\n You can avoid the whole palaver by investing inside an ISA or pension.<\/p>\n Everyone has an annual capital gains tax allowance, or \u2018annual exempt amount\u2019 in the lingo of HMRC.<\/p>\n This allowance was halved to \u00a33,000 from 6 April 2024.<\/p>\n It is (for now) frozen at this level.<\/p>\n Capital gains tax is levied on the profits you make when you\u00a0sell or transfer<\/strong>\u00a0most assets. These assets include\u00a0everything from shares and buy-to-let properties to antiques and gold bars.<\/p>\n You can shield your gains from capital gains tax by investing within ISAs and pensions. Go re-read the relevant bits above if you skimmed them!<\/p>\n You can also reduce your taxes by investing in Venture Capital Trusts (VCTs) and Enterprise Investment Schemes (EIS).<\/p>\n These vehicles are mostly marketed at wealthy high-earners for whom the large income tax breaks are attractive.<\/p>\n But be aware that these tax reliefs come with all kinds of risks, rules, and regulations.<\/p>\n VCTs are venture capital funds run by professional managers who make investments into startup companies.<\/p>\n But somewhat quixotically, VCTs don\u2019t even pretend to try to deliver high venture-style returns<\/a> for investors.<\/p>\n Instead they aim to return cash via steady tax-free dividends.<\/p>\n You can invest up to \u00a3200,000 a year into VCTs. You must hold them for at least five years to keep your 30% income tax relief.<\/p>\n VCT fund charges are invariably expensive, and the returns mostly mediocre \u2013\u00a0especially if you back out the tax reliefs.<\/p>\n EIS investing is even riskier. Qualifying companies are usually very young, and many investors buy into them via crowdfunding platforms rather than professional fund managers.<\/p>\n The quality of these EIS opportunities is extremely variable, and information usually scanty.<\/p>\n And while there have been a few big crowdfunded winners, the majority do poorly and often go to zero.<\/p>\n If you\u2019re a baller who buys Lamborghinis before breakfast, you may already know you can put up to \u00a31m a year into EIS investments. (Up to \u00a32m if you\u2019re investing in \u2018knowledge intensive companies\u2019).<\/p>\n Again, you can knock 30% of your EIS investment amount from your income tax bill \u2013 and there are other reliefs should things go wrong.<\/p>\n You must hold EIS investments for three years to qualify for the tax relief. <\/p>\n Most people shouldn\u2019t put more than fun money into EIS or even VCT schemes, in our opinion. Certainly not unless they\u2019re very sophisticated investors or getting excellent financial advice.<\/p>\n The rate of income tax you pay depends on your total income from all sources. This includes salary, interest, dividends, pensions, property letting, and so on.<\/p>\n You add up all this income to get your total income figure.<\/p>\n You then subtract your personal allowance<\/strong> from the total to see which tax bracket you fit into.<\/p>\n Everyone starts with the same personal allowance, regardless of age:<\/p>\n Your personal allowance may be bigger if you qualify for Married Couple\u2019s Allowance or Blind Person\u2019s Allowance.<\/p>\n However the Personal Allowance goes down by \u00a31 for every \u00a32 of income above a \u00a3100,000 limit. It can go down to zero.<\/p>\n For England, Wales, and Northern Ireland, the income bands after deducting allowances<\/strong> are:<\/p>\nCh-ch-changes<\/h4>\n
ISA allowance<\/h3>\n
![\"ISAs](\"https:\/\/i0.wp.com\/monevator.com\/wp-content\/uploads\/2008\/11\/265.-stocks-and-shares-ISA-e1599405705366.png?resize=400%2C505&ssl=1\")
<\/a><\/figure>\n<\/div>\nWatch out for rule tweaks<\/h4>\n
Pension contributions annual allowance<\/h3>\n
Personal savings allowance<\/h3>\n
![\"\"](\"https:\/\/i0.wp.com\/monevator.com\/wp-content\/uploads\/2022\/06\/best-savings-accounts-social.jpg?resize=400%2C268&ssl=1\")
<\/a><\/figure>\n<\/div>\n\n
Dividend allowance <\/h3>\n
Capital gains tax allowance<\/h3>\n
EIS and VCT investments<\/h3>\n
VCTs<\/h4>\n
EIS<\/h4>\n
Check in on your tax band and personal allowances <\/h3>\n
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