8 Key Allowances to Consider Before 5th April to Save Tax

The UK personal financial year-end runs from 6th April to 5th April the following year. While company year-ends vary, personal year-ends are fixed for everyone. Below is a structured Q&A covering key points you need to know.

Company vs Personal Financial Year-End

Q: What’s the difference between a company financial year-end and a personal financial year-end?

A company financial year-end depends on the date of incorporation. For example, if a company is formed in June, its year-end will be June the following year. After that, each financial year runs from 1st July to 30th June.

Every five years, companies can change their year-end (extend up to 18 months or shorten to a minimum of 6 months).

The personal financial year-end is the same for everyone: 6th April to 5th April.

Key Allowances to Consider

Q: What are the key allowances people need to look at before 5th April?

There are eight main ones:

• Dividend allowance
• Personal allowance
• Marriage allowance
• Pension allowance
• Capital gains allowance
• ISA allowance
• Gift allowance
• Charitable contributions

Most of these are “use it or lose it” allowances (except pensions, where you can carry back three years).

Dividend Allowance

Q: How does the dividend allowance work?

When companies make a profit, they first pay corporation tax. The remaining profit can be paid to shareholders as dividends.

Dividend tax was introduced in 2015.

The first £2,000 of dividends are tax-free.

After that:

• Basic rate taxpayers pay 7.5%
• Higher rate taxpayers pay 32.5%
• Additional rate taxpayers pay 38.1%

Dividends don’t roll over, so they must be used before 5th April.

Personal Allowance

Q: How much is the personal allowance?

Currently £12,500 (increasing to £12,570 from 6th April).

If your income is over £100,000, you start losing the allowance. At £125,000+, you lose it entirely.

This allowance is tax-free (though NI may still apply).

Property owners may benefit by owning property jointly with a spouse/partner to use both allowances.

Always check your tax code (e.g., zero T codes mean HMRC hasn’t applied your allowance correctly). Filing a return may help reclaim lost allowance.

Marriage Allowance

Q: Is marriage allowance only for married couples?

No. It also applies to those in civil partnerships.

Q: Who qualifies?

If one partner earns below the personal allowance (£12,500) and the other is a basic rate taxpayer, the lower earner can transfer up to £1,250 of their allowance.

This increases the higher earner’s allowance and reduces their tax bill.

Applications can also be backdated for a few years.

Pension Allowance

Q: How much can you contribute to pensions?

Annual allowance is £40,000 per person.

You can carry back unused allowances from the past three years.

If income is above £240,000, taper rules apply, reducing allowance by £1 for every £2 earned over that threshold.

Lifetime pension allowance is £1,040,000.

Q: Can everyone get the 20% tax relief on pension contributions?

No.

If contributions are made directly from salary (employed/umbrella workers), tax relief is already applied.

If you pay personally (from net salary), your pension provider reclaims 20% relief.

Higher rate taxpayers (income over £50,000) can claim an extra 20% relief through their self-assessment return.

Capital Gains Allowance

Q: What’s the difference between capital gains and regular income?

Regular income is salary, rent, or trading profits.

Capital gains come from selling assets (property, shares, cryptocurrency, etc.) at a profit.

Q: How does the allowance work?

First £12,300 of gains are tax-free.

Tax rates:

• Property: 18% (basic rate), 28% (higher rate)
• Shares/crypto: 10% (basic rate), 20% (higher rate)

Allowance cannot be carried forward.

Selling assets across different tax years helps maximize allowances.

ISA Allowances

Q: What is an ISA?

ISA = Individual Savings Account.

Money saved into ISAs grows tax-free (no income tax or capital gains).

Types include cash ISAs, stocks & shares ISAs, junior ISAs, lifetime ISAs.

Q: What are the limits?

Adults: £20,000 per year.

Juniors: £9,000 per year.

Lifetime ISA (for under 40s buying a first home): Save up to £4,000 annually, with a £1,000 government bonus.

Gift Allowance

Q: What is the gift allowance?

Relates to Inheritance Tax (IHT) planning.

Everyone has a £325,000 IHT threshold.

Gifts up to £3,000 per year per person are tax-free and excluded from estate calculations.

Larger gifts may be subject to IHT if the donor dies within 7 years.

Charitable Contributions

Q: How do charitable donations affect tax?

Donations to UK-registered charities qualify for Gift Aid.

Gift Aid boosts the donation value and increases your personal allowance.

Keep records of donations for your tax return.

Other Points to Remember

Child Benefit:

Reduced if income exceeds £50,000.

Stopped completely at £60,000.

If income has dropped recently (e.g., due to redundancy), you may become eligible again.

Property Owners:

Renovation expenses are deductible in the year they occur.

Timing renovations can affect which tax year’s calculation they fall under.

Company Owners:

Consider waiting until after 1st April for capital investments due to the super deduction allowance.

Final Reminder

These points may or may not apply to everyone. Always check with an accountant before making financial decisions.