April marks both the start of the 2024/25 tax year and Stress Awareness Month – a coincidence not lost on those of you who are turning your attention to tax planning for the coming year.

However, tax planning doesn’t need to be stressful. The theme of this year’s Stress Awareness Month is ‘Little by Little, a Little becomes a Lot’, so we’re urging everyone to take small steps to keep their tax liabilities to a minimum.

Get to know our expert advice for effective tax planning that takes the stress out of your finances.

Break it down

How do you tackle a challenging task? Break it down into manageable sections.

As you enter the new financial year, consider incorporating these small steps into your tax planning strategy to stay on top of your finances and keep stress at bay:

• Make note of all changes from the Budget and identify how you’ll be affected
• Seek advice on all reliefs and allowances available to you
• Check for mistakes or inaccuracies in your accounting
• Conduct a regular self-audit to ensure you are compliant with tax regulations
• Speak with your accountant regularly
• Address issues as they arise and don’t let them get bigger

Get your timing right

Getting your strategy in place as soon as possible can help to remove the pressures of tax planning.

By getting to know deadlines and thresholds, you can get your priorities in order and reduce the stress that accompanies the end of the financial year.

This year, you should also remember that the Spring Budget has introduced changes to personal and business taxes which may impact your tax liabilities, including a reduction in National Insurance for employees.

Staying updated on changes as soon as they come in will help you to destress and view your financial planning more clearly.

Allowances and reliefs

Tax reliefs offer deductions on taxable income and are typically applied to business expenses in order to promote investment in certain capital.

However, certain reliefs are applicable to individuals, such as pension contributions.

It’s also important to stay up to date on commercial tax reliefs if you are a business owner.

Tax allowances, by contrast, are specific thresholds which help to reduce the amount of income tax you have to pay, which means it is important to maximise the allowances you use.

You only pay Income Tax on taxable income that exceeds your Personal Allowance, currently set at £12,570.

This is the standard allowance allocated to each person, but you may be able to boost your tax-free income threshold through:

• Marriage Allowance – You can transfer up to £1260 of your Personal Allowance to your spouse or civil partner if you earn below the £12570 threshold, which can save you up to £252 per tax year as a couple.
• Married couple’s allowance – An older form of Marriage Allowance, this can reduce your tax bill as a couple by between £401 and £1,037.50 per year, applicable if one of you was born on or before 6 April 1935.
• Blind Person’s Allowance – You may be eligible to add £2,870 to your Personal Allowance if you are registered blind.
• Tax relief for maintenance payment – If either of you were born before 6 April 1935 and you’re making maintenance payments to an ex-spouse under a court order, you may be able to reduce your taxable income.
• Dividend allowance – If you have the option to receive both a salary and dividends, make sure you use your dividend allowance of £500.

UK tax allowances generally have residency requirements, meaning you are only eligible if you:

• Reside in, or are a national of, the United Kingdom
• Are formerly a resident in the UK but resident abroad for the sake of the health of either you or a member of your family who lives with you, or
• Are employed in the service of the Crown (or if this applied to your late spouse or civil partner), any territory under His Majesty’s protection, or a missionary society.

If you have a substantial estate, you might also consider taking the stress off by planning ahead if you want to sell an asset or give a gift.

• Gifting – To reduce Inheritance Tax, you can give gifts tax-free each financial year, with an annual exemption of £3,000, a small gift allowance of £250 and up to £5,000 for wedding gifts to certain family members.
• Capital Gains – The Capital Gains Tax threshold is falling to £3,000, so remember to plan ahead if you want to sell an asset.

It is important you understand what allowances you are entitled to and how you can claim them if you want to take the stress out of your new tax year processes.

Keep your cool

Minimising your tax liability is central to your financial planning, so it’s important that you understand the allowances you can use and how to apply for them.

Ultimately, it’s down to you to be proactive and speak with your accountant early to address any issues and optimise your financial plan.

With 5 April fast approaching, it’s time for you to enhance your tax efficiency and reduce stress for the coming financial year.

To maximise your tax allowances for the new tax year, please get in touch with our team to discuss your needs.