Tax planning opportunities for individuals

Tax management is a crucial aspect when it comes to personal financial planning; understanding the tax planning opportunities avilable to individuals can lead to significant savings. Frequent changes in tax laws and allowances, means staying informed about tax planning opportunities becomes more important than ever. 

It doesn't matter whether you're a high-income earner, self-employed, or just looking to make the most of your annual allowances, exploring strategic tax planning opportunities can help reduce liabilities and enhance long-term wealth. 

In this article, we'll look into the most relevant and timely tax planning opportuntities for individuals, taking into consideration the 2024 Autumn budget.

Gift aid and tax planning opportunities for individuals: Simple actions, big impact

For example, charities can claim basic rate tax relief through HMRC when they receive your payment.

By ticking the relevant box, you inform the charity that you are a UK tax resident. Also, you have sufficient taxable income to make the payment.

For instance, people typically make payments for membership fees, sponsorship, and donations.

Ideally, the person with the highest marginal tax rate should make the payment. Afterwards, you record this on your tax return. In turn, higher-rate taxpayers will receive additional relief through a reduction in their tax liability.

Using ISAs to maximise tax planning opportunities for individuals

ISAs are a great strategy to incorporate in your tax planning. Furthermore, all members of your family can use them. Parents and grandparents can transfer money to future generations. As a result, this helps children save for the future.

Importantly, both income and capital gains are tax-free.

With some ISA's the government will allocate a bonus.

UK residents over 18 have an annual allowance of £20,000 (16 or over if a cash ISA)

Similarly, with a Junior ISA, a £9,000 allowance applies per child.

Lifetime ISAs: A long-term tax planning opportunity for individuals aged 18–40

You can contribute up to £4,000 from your ISA allowance.

However, these are only available to those aged 18 to 40 at the time of account opening.

However, you can make payments up to the age of 50.

The government adds 25% of that year's payments, but you only keep the bonus under the following conditions.

The purchase of a first home for less than £450,000.

The monies are withdrawn after the age of 60.

Key allowances and reliefs: Tax planning opportunities for individuals and families

Effective tax planning requires knowing which allowances and reliefs are available. As such, you can make the relevant changes to take advantage of them. In turn, this can benefit both you and your wider family.

Tax planning opportunities for individuals using savings and dividend allowances

In practice, families can organise their savings and dividends to make use of the allowances.

Taxpayer Type	Savings Allowance	Tax Saving (at 20%)	Dividend Allowance
Basic rate	£1,000	£200	£500
Higher rate	£500	£100	£500
Additional rate	£0	£0	£500

 

Marriage allowance: A simple yet effective tax planning opportunity for individuals

You can transfer up to 10% of your personal allowance (£1,260) to your spouse or civil partner. This can be done when one party is a basic rate taxpayer and the other has income below the personal allowance.

Trading and property allowances

Small incomes, such as eBay sales, may qualify for exemption. The allowance is £1,000 tax-free.

For instance, if you rent out part of your home, you can claim rent-a-room relief. You can receive up to £7,500 tax-free.

Tax planning opportunities for employees: Mileage, home working, and more

A few reliefs are available regarding your employment. These include working from home, business miles in your car, and professional subscriptions.

Capital Gains Tax: Navigating 2024 budget changes and tax planning opportunities for individuals

Following the Autumn Budget, Capital Gains Tax increased immediately. They were increased to 18% and 24%, thus aligning with residential CGT.

The government staggered the rates for Business Asset Disposal Relief (BADR). After 5 April 2025, they increase to 14%. From 5 April 2026, they increase to 18%.

Therefore, business owners looking to withdraw from the business may wish to sell sooner. As such, they will benefit from lower rates if they withdraw before April 2026.

Pension contributions: Long-term tax planning opportunities for individuals and families

Fortunately, both you and your family can benefit from making pension contributions. In addition, you can make contributions for your children and grandchildren.

Benefits include:

The pension scheme claims back basic tax from HMRC.

If your tax rate is above 20%, you can claim additional relief.

Your contributions build a pension pot for your retirement or future generations.

For 2024 -25, the maximum allowable contribution is £60,000 gross or your relevant earnings, whichever is the lower.

Any UK resident can make contributions of £3,600 gross under the age of 75. This is regardless of income.

The annual allowance differs for those with an adjusted income above £260,000. Adjusted income is usually your taxable income plus your employer's pension contribution. For every £2 of income over the threshold, the annual allowance reduces by £1.

Consequently, for those with an adjusted income over £360,000, there is a minimum gross level of £10,000.

People aged over 75 cannot claim tax relief on contributions.

Looking ahead, the government will remove the Inheritance Tax exemption for pensions in April 2027. As a result, many will need to revisit their IHT planning.

Tax-Efficient investments: Exploring high-impact tax planning opportunities for individuals

Venture Capital Trusts (VCTs)

Maximum annual investments up to £200,000 qualify for 30% tax relief and tax-free dividends. No CGT payable on gains when sold.

Enterprise Investment Scheme (EIS)

An annual maximum allowance of £1 million into qualifying companies, attract 30% tax relief.

If an investment is made to a knowledge-intensive company, the annual allowance increases to £2 million. This is subject to a minimum investment of £1 million.

No CGT on gains if the investment is held for a minimum of 3 years.

If any gain is reinvested into a company that qualifies for EIS, relief from CGT is available.

The original capital gain is deferred until the EIS shares are sold. At this point, the capital gain is chargeable.

Seed Enterprise Investment Scheme (SEIS)

An individual can invest a maximum £100,000 per tax year into start-up qualifying companies.

50% income tax relief of the investment.

No CGT on the gain if the investment is held for 3 years.

You can reduce your capital gains by up to 50% of the SEIS investment in the same year.

Furnished Holiday Lets (FHL)

From 6 April 2025, the government will abolish tax benefits for qualified FHL, including IHT, CGT relief and finance costs against income received. 

Inheritance tax planning changes made in the first Labour government budget 

The Autumn Budget made significant changes to IHT relief. Specifically, two major areas were Business Property Relief (BPR) and Agricultural Property Relief (APR). 

Previously, these reliefs helped families pass farms on to future generations. On death, they allowed families to pass businesses to the next generation without paying tax. As a result, there has been much outcry from the farming community with regard to this new tax.

Therefore, for many, the changes will mean a need for new approaches, thus allowing them to transfer the businesses efficiently.

These could include lifetime gifts and family trusts. However, rules on lifetime gifts could change in the future. As such, professional advice may be needed for future planning.

Many people regard IHT as the cruellest tax of all. Moreover, it is unlikely to disappear or become more favourable any time soon. However, some steps can be taken to reduce any future liability.

IHT reliefs

An annual gift of £3,000. Small gifts of £250 per person. You can make as many gifts as you like each tax year.

Gifts out of surplus income could count as regular and care should be taken. That said, this is a difficult issue. Nonetheless, it can afford tax relief. 

Gifts can be made to children or grandchildren and can include:

• Pension contributions
• ISA subscriptions
• University fees
• Accommodation costs
• Family holidays
  

Get specialist expert advice

Indeed, taxes in the UK rarely seem to go down. In fact, increases are the norm. However, there are ways to reduce some of the burdens. You can use some or all of the above reliefs by seeking professional advice. 

Let Regulated Advice match you with a financial advisor for expert advice.