How to prepare for the 5th April tax year end

Are you prepared for changes the April 5th tax deadline will bring?

We are fast approaching the end of the tax year on the 5th of April 2025; ensure you are prepared by staying updated with tax changes and ensuring that you are ready for any challenges ahead. Proper preparation not only ensures compliance but can also uncover opportunities for savings, tax efficiency and growth. In this article, we have put together 6 things to consider when preparing for the year-end.

Dividend tax-free allowance Every individual has access to a tax-free dividend allowance, which cannot be carried forward into the following year. For the 2024/25 tax year, the dividend allowance has been reduced to £500. This means you will be able to receive a total dividend income of up to £500 without being liable for tax regardless of the amount of non-dividend income received, from sources such as salary, rental income, and bank interest.

Utilise the full basic rate tax band If you are a shareholder or director of a company, it’s important that you look to take advantage of your tax-free and lower rate tax allowances. Every person has a personal tax allowance of £12,570 in addition to their dividend allowance of £500 which is taxable at 0%; dividend income above this band up to the limit of the Basic Rate tax band of £50,270 is taxable at only 8.75%.

Even if you don’t require funds in that year, it’s still advisable to declare a dividend for the full amount of the basic rate band, building up your loan account in the business at favourable tax rates, which can be drawn down tax-free in the future. These low tax rates are also available to other family members, but make sure you take appropriate advice in order to make sure the whole family is benefitting from their tax allowances.

Pension contributions Personal pension contributions can be offset against income in order to reduce any higher rate tax or made from companies as part of a commercial remuneration package, a deductible expense for corporation tax. Every individual has access to a pension contributions allowance of up to £60,000 per tax year (£40,000 prior to the 2023/24 tax year), subject to income tapering restrictions.

Once an individual has made contributions to a registered pension scheme, you can carry forward any unused annual pension contributions allowance into future tax years, for up to 3 years. For example, a couple who both have full carry-forward allowances can make pension contributions of up to £400,000 which can then be offset against their taxable income. 

Interest allowancesAnother area that should be looked at is interest received on loans. A company can pay interest on loans provided by shareholders or directors where there is a formal loan agreement in place which charges a fair market rate of interest. The interest is then tax-deductible for corporation tax purposes.

Interest income benefits from some additional income tax allowances not available to other sources of income. Personal savings allowance – this is a tax-free allowance for interest income that attracts a 0% tax rate. If you are a basic rate taxpayer (total income of up to £50,270), your personal savings allowance is £1,000. For higher rate taxpayers that reduces to £500. There is no personal savings allowance for additional rate taxpayers. 

Starting rate for savings
This gives tax-free interest income up to £5,000, as long as your other income is less than £17,570. This other income does not include dividend income, meaning that a director may take a small salary below the £17,570 threshold and may also be able to benefit from this starting rate. Any interest income in excess of these allowances will be charged at your marginal rate of income tax. 

Making financial giftsAlthough most monetary gifts to individuals will remain in your estate for Inheritance Tax purposes as a ‘Potentially Exempt Transfer’ for 7 years following the gift, each individual has an annual gifting allowance of £3,000 which is exempt from Inheritance Tax.  You may also make small gifts of up to £250 each per recipient per tax year, provided any recipient of a small gift has not received any other gifts from you during that tax year.

Utilising your Capital Gains tax allowancesIn the 2024/25 tax year most individuals will be entitled to an exemption from Capital Gains tax of up to £3,000 of total gains. This allowance cannot be carried forward into the next tax year, therefore we recommend utilising it where possible in order to reduce future Capital Gains Tax liabilities.  

It is also important to note that the rates of tax applicable to gains qualifying for Business Asset Disposal Relief (formerly Entrepreneur’s Relief) are increasing from 10% to 14% from the 2025/26 tax year, with a further increase to 18% planned for the 2026/27 tax year, so it will be beneficial to realise any gains qualifying for BADR ahead of the end of the current tax year.

As long as you are well prepared for the tax year-end, it doesn’t have to be overwhelming. With the correct planning in place and professional support, your business can meet its obligations, whilst also being tax-efficient.

Tax affairs are complicated, and we would always suggest you to speak with your advisers before making any changes. For more information on how we can help you and your business on this please reach out to us via the below form.

For more information on how we can help you and your business, please contact us via email or phone and we will be happy to advise on the best solutions for your business.

Please note: This article is provided for information only and was correct as at the time of writing (11/12/24). Any lists and details provided above are not exhaustive and are not intended to be full and complete guidance.  No action should be taken without consulting detailed legislation or seeking independent professional advice. Therefore, no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this article can be accepted.