The tax year end is coming: How to help your clients boost their wealth

Whatever stage of life your clients are in, they’ll probably be interested to learn how they could maximise their tax savings and boost their wealth.

Annual allowances and exemptions provide your clients with valuable opportunities for protecting their wealth from tax.

However, many of these allowances reset after the tax year ends on 5 April 2024. So, if your clients want to make the most of them, they need to act soon.

With this in mind, here are six ways your clients could mitigate their tax liability before the end of the tax year.

1. Maximise their ISA contributions

ISAs offer a tax-efficient way to save as any interest or returns your client earns are free from Income Tax and Capital Gains Tax (CGT).

In the 2023/24 tax year, your client can put up to £20,000 into their ISAs tax-efficiently and they can spread their savings across different types of ISAs.

Under current rules, they can’t pay into multiple ISAs of the same type within a single tax year, but this is due to change on 6 April 2024. After this date, your client can hold multiple ISAs of the same type in the same tax year and partial transfers will be allowed, which could give them more choice and help them access better interest rates.

Your client’s ISA allowance will reset at the start of the new tax year, so they’ll lose the chance to use any allowance remaining if they fail to top up before then.

Instead, by using their full ISA allowance, your client could maximise their tax-efficient savings. Additionally, if they’re part of a couple, they could combine their individual allowances and save up to £40,000 tax-efficiently.

2. Top up their children’s Junior ISA

If your client has children or grandchildren, contributing to a Junior ISA (JISA) on their behalf is a great way to save.

Your client can choose a Cash JISA or a Stocks and Shares JISA, and they can deposit up to £9,000 (2023/24) for each child without paying Income Tax or CGT on the interest or returns.

As with adult ISAs, the JISA allowance cannot be carried forward to the next tax year. So, if your client wants to make full use of their allowance, they must do so before the tax year ends in April 2024.

Setting up regular payments throughout the tax year could be a useful way to ensure that your client maximises their JISA savings until the child reaches 18 and can access the funds.

So, not only can JISAs offer a tax-efficient way to save, but they can also build a savings habit from an early age, which could help your client’s child achieve adult goals such as going to university.

3. Use the Marriage Allowance

If your client is married or in a civil partnership, they may be able to transfer up to £1,260 of their Personal Allowance to their spouse or civil partner, potentially reducing their tax bill by up to £252 (2023/24).

The Personal Allowance – which has been frozen at £12,570 until April 2028 – is the amount most individuals can earn each tax year without paying Income Tax.

To be eligible for the Marriage Allowance, one party must earn less than the Personal Allowance, and the other must be a basic-rate taxpayer – most people earning between £12,571 and £50,270 pay the basic rate of Income Tax.

The government website has a free online Marriage Allowance calculator that your clients could use to work out how much tax they might save as a couple before the tax year ends.

Read more: 6 practical ways couples can be more tax-efficient and boost savings

4. Make tax-efficient pension contributions using their Annual Allowance

The Annual Allowance is the maximum amount of pension contributions a client can make in a single tax year without facing an additional tax charge.

In the 2023/24 tax year, your client may be able to contribute more to their pension tax-efficiently than in previous years because the Annual Allowance was increased from £40,000 to £60,000 on 6 April 2023. Your client’s Annual Allowance may be lower if their income exceeds certain thresholds, or they have already flexibly accessed their pension.

Whatever your client’s Annual Allowance is, if they have any remaining, topping up to the full amount before the end of the tax year could allow them to make valuable tax savings.

5. Realise capital gains before the Annual Exempt Amount falls

Your client might have to pay CGT if they sell certain assets – such as second properties or non-ISA investments – and make a profit that exceeds their Annual Exempt Amount. This is £6,000 for the 2023/24 tax year but it will fall to £3,000 on 6 April 2024.

So, your client may want to consider disposing of assets and crystallising gains up to the Annual Exempt Amount to take advantage of this tax break. They could also spread the disposal of assets across tax years to reduce their CGT bill.

And remember, there is usually no CGT to pay on any profits from investments held in an ISA wrapper. So, your client could minimise their CGT bill by using their full ISA allowance.

The rules on CGT can be complex so it may benefit your client to seek professional financial advice to ensure that they don’t pay more tax than they need to.

6. Reduce a potential Inheritance Tax bill by gifting assets

Your client’s beneficiaries may have to pay Inheritance Tax (IHT) on their estate – including all property possessions, and money – when they die.

The standard IHT rate is 40% but this is only charged on the amount of your client’s estate that exceeds the nil-rate tax band, which is currently £325,000 (2023/24). If they leave their home to children or grandchildren, they could use their additional residential nil-rate band – £175,000 in the 2023/24 tax year – to increase their tax-free threshold to £500,000.

As married couples or civil partners can usually transfer any unused nil-rate band to the other on death, it may be possible to leave up to £1 million without IHT being due.

However, any assets that exceed these thresholds may be subject to IHT.

So, if your client wants to reduce a potential IHT bill for their loved ones, it might be worth using their annual gifting exemption of £3,000 before the tax year ends.

This could allow them to give away gifts worth up to £3,000 – whether to one person or split between multiple people – and see them deducted from the value of their estate.

You can carry forward any unused gifting exemption for one tax year, so if a client did not use this in the 2022/23 tax year they could gift up to £6,000 now and this would usually fall outside their estate.

Download your guide: 7 allowances you might want to use before the end of the 2023/24 tax year

Get in touch

If your client would like help understanding and accessing their annual tax allowances and exemptions, we can help.

Please email us at mail@delaunaywealth.com or call 0345 505 3500.

Please note

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate estate planning, cashflow planning or tax planning.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.