The end of the 2024/25 tax year is just around the corner. To help you get ready, we’ve put together some practical tips—from maximising your tax-free allowance to planning your pension—to help you finish the year strong and hit the ground running in the new tax year.

In the meantime, you are very welcome to get in touch with us by either phone or email, if you have any questions or would like to discuss anything further.

Utilise your tax-free allowances

The current personal allowance allows for you to take £12,570 of income, tax free in 2024/25. If you are taking a salary below the personal allowance and have no other income outside of the company then you may wish to utilise the remainder of this allowance by declaring dividends.

In addition to this you also receive a £500 tax-free dividend allowance which you can utilise, regardless of your income level, provided you have the profit available to do so.

Maximise your tax band

If you are a director operating outside of IR35, you can take a salary of your own choosing, as well as dividends to top up your income.

Dividends can be paid as frequently and in as tax-efficient a way, as you wish, provided that you have the profit available to do so. A breakdown of the tax bands can be found here.

Plan your pension

You can pay a maximum of £60,000 into your pension pot in the 2024/25 tax year using personal and/or company contributions.

Company contributions will be deductible from profits before tax, provided that the contribution made is wholly for business use.

Personal pension payments will be grossed up by your pension provider and your tax bands extended by the gross contribution, allowing income that may ordinarily be taxed in a higher tax bracket to be taxed at a lower rate.

Tax relief on personal pension contributions is capped at either £3,600 or 100% of your relevant earnings for the year (whichever figure is higher), excluding dividends. Any unused pension allowances can be carried forward for up to three years.

Review your shareholding

It can be efficient to gift shares to a spouse or civil partner. Please contact your accountant to discuss this, as there are strict rules around it. Alternatively, you can read more here.

Gifting shares will entitle the holder to a proportion of the business, which means they have a right to dividend income, as well as voting rights. 

What to be aware of when preparing for the end of the tax year

Payments on account

You are required to make payments on account to HMRC unless your self-assessment tax bill was less than £1,000, or 80% or more of your tax was deducted at source through PAYE.

Payments on account are a pre-payment of the following year’s tax bill made in two instalments: one on 31st January and a second on 31st July, following the end of the tax year.

You can reduce the payments on account to as low as £0.00. However, if a tax bill does arise in the following year, HMRC may charge interest on the element that was reduced.

Student loans

Both salary and dividends count towards your income for student loan purposes. If your total income exceeds the repayment threshold, the loan repayment will be based on 9% (6% for postgraduate loans) of your overall income above the repayment threshold. This is for students who studied in England; other parts of the UK will vary. More details on student loans can be found here.

Child benefit

If your overall net adjusted income exceeds £60,000, HMRC will ask that you begin to repay any child benefit received in the period. This is done proportionately on income between £60,000 and £80,000, with all child benefit received being repaid once you earn £80,000.

Capital Gains Exemption

The tax-free capital gain exemption currently sits at £3,000 for the 2024/25 tax year.

Planning for closure

If you wish to consider future planning for closure, there are two options about which you should be aware: Informal striking off (available if your profits equal less than £25,000, and something we at Caroola can help with) and formal liquidation (where an external liquidator like SFP Insolvency must be appointed to complete the process).

Effective tax planning throughout the lifetime of your company can ensure that you position it in the best place for closure. 

Upon closing, you may also be able to take advantage of business asset disposal relief (BADR).

In short, there are many things to consider before the end of the tax year, and we know that it can get overwhelming. Please feel free to reach out at any point between now and 5th April 2025 and get in touch for tailored advice, based on your specific circumstances.

Contact us

Any questions at all please, please don’t hesitate to reach out. While we have offices of Warrington accountants and Blackpool accountants, we work with sole traders and limited companies all across the UK.