With the 2024/25 tax year fast approaching, it’s worth considering the various allowances available to individuals. Such allowances will ‘reset’ from the beginning of the new tax year; 6th April 2024.

Below, we have outlined some of the key considerations and the current rules:

ISA Allowance

This is the maximum amount that can be invested into an ISA each tax year and is currently £20,000. This allowance can be split across the following:

– Stocks & Shares ISA
– Cash ISA
– Lifetime ISA (maximum of £4,000 pa)
– Innovative Finance ISA

A new rule coming into force in the new tax year is that you are now able to contribute into multiple ISAs of the same type, as long as you keep within the overall limit.

Money held within an ISA is free from Income and Capital Gains Tax and withdrawals can be made tax-free.

Pension Allowance

Your Annual Allowance is the maximum amount you can save into pensions each tax year and receive tax relief, before incurring a tax charge. The standard Annual Allowance is £60,000 pa, although separate limits may apply that can reduce this i.e. Tapered Annual Allowance.

The maximum you can contribute to a pension and qualify for Income Tax relief is the higher of 100% of your relevant UK earnings or £3,600 gross. This is however limited by the Annual Allowance. Income Tax relief can only be received until age 75.

Capital Gains Tax (CGT) Annual Exempt Amount

Every tax year, individuals have an Annual Exempt Amount for Capital Gains Tax. This is the amount that capital gains can be realised without tax implications. A gain is the ‘profit’ that is made on the disposal of certain assets.

The annual exempt amount for 2023/24 is £6,000, which is reducing to £3,000 for the 2024/25 tax year.

Inheritance Tax Gifting Exemptions

Every individual is entitled to an annual gifting exemption of £3,000 pa. This amount can be gifted and will immediately fall outside of their estate for the purposes of Inheritance Tax. Any unused amount can be carried forward to the next tax year, but no further.

Individuals can also take advantage of the ‘gifts out of surplus income’ exemption, which also immediately fall outside of their estate for inheritance tax purposes. Certain requirements must be met to be eligible.

Summary

Within our ongoing service, we manage the above allowances and exemptions within our clients’ wider financial planning. This ensures that they are making good use of their resources each tax year.

If you would like any more information on the above, please do not hesitate to contact a member of our team.