As the end of the tax year approaches, it’s the perfect time to review your personal finances and ensure you’re making full use of the allowances available to you. Personal allowances are key to minimising your tax bill and maximising your income, but they must be used within the current tax year. Here’s how you can take advantage of these opportunities before the deadline.

Maximise Your £12,570 Personal Allowance

Every individual in the UK has a personal allowance of £12,570, meaning you don’t pay income tax on earnings up to this amount. If your income exceeds this threshold, consider whether you can restructure it to remain within the allowance. For example, you might defer bonuses or adjust your salary and dividend balance if you’re a company director.

If your income exceeds £100,000, your personal allowance is reduced by £1 for every £2 earned above £100,000. In such cases, pension contributions or charitable donations could be used to reduce your taxable income and reinstate some or all of your allowance.

Tax on Savings

Tax on savings interest depends on your income and available allowances. The Starting Rate for Savings allows you to earn up to £5,000 in interest tax-free if your other income (such as wages or a pension) is below £17,570. This allowance reduces by £1 for every £1 of other income above your Personal Allowance (£12,570). Additionally, most individuals benefit from the Personal Savings Allowance, which lets basic rate taxpayers earn up to £1,000 of interest tax-free, and higher rate taxpayers up to £500. Additional rate taxpayers do not receive a Personal Savings Allowance.

Marriage Allowance

If you’re married or in a civil partnership and one partner earns less than the personal allowance, you can transfer up to £1,260 of unused allowance to the higher-earning partner through the Marriage Allowance. This simple adjustment could save up to £252 in tax. Be sure to apply before the tax year ends to maximise this benefit.

Dividend Allowance

The Dividend Allowance for 2024/25 remains at £500, meaning the first £500 of dividend income is tax-free. This has been significantly reduced from previous years, making tax-efficient investing even more important.

If you rely on dividend income, you could consider:

  • Holding dividend-generating assets inside an ISA or pension to mitigate tax.
  • Spreading investments between spouses or civil partners to make use of both allowances.

The allowance resets at the start of each tax year, so any unused allowance from this year cannot be carried forward. Acting now ensures you maximise your savings and reduce your tax bill, especially if you have a complex income structure or multiple streams of earnings.

More information on Personal Allowance can be found here.

If you would like to discuss anything mentioned in this article, please contact us.

See the other topics in our Bitesize Tax Planning series:
Personal Reliefs
Planning for Retirement
Savings & Investments
Employee Benefits
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Personal circumstances differ and not all of this information is applicable to every client and/or their business, this information is general in nature and should not be relied upon without seeking specific professional financial advice.

The Financial Conduct Authority (FCA) does not regulate tax advice, estate planning, trusts or will writing.

The content in this article is for your general information and use only and is not intended to address your particular requirements. Articles should not be relied upon in their entirety and shall not be deemed to be, or constitute, advice.

Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough examination of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of any articles.

Thresholds, percentage rates and tax legislation may change in subsequent finance acts. Levels and bases of, and reliefs from, taxation are subject to change and their value depends on the individual circumstances of the investor. The value of your investments can go down as well as up and you may get back less than you invested. Past performance is not a reliable indicator of future results.

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