Tax Year End

1 What Is the Tax Year End?

The term “tax year end” refers to the final day of a specific UK tax year. For example, if the tax year began on 6 April 2023, it will end on 5 April 2024. Any income, gains, or contributions up to that date fall into the 2023/24 tax year. When the new tax year starts on 6 April, the records and calculations reset for the next 12-month period.

Key Actions by 5 April

• Claim allowances: Ensure you’ve used any personal tax-free allowances and annual limits.
• Assess tax liabilities: Your income and gains for the year up to this date determine your tax bill.
• Review your investments: Pensions, Individual Savings Accounts (ISAs), and other investment vehicles should be maxed out where possible.
• Gather paperwork: Have records in place for a smooth transition into the new tax year.

2 Common Deadlines and Allowances

Personal Allowance

Most individuals get a personal allowance—an amount of income you can earn before paying Income Tax. For the current tax year, the standard personal allowance is often around £12,570, though it can be higher or lower depending on your total income. This allowance resets every tax year, making it crucial to plan your earnings and, where possible, avoid crossing thresholds that push you into a higher tax band.

ISA Allowance

ISAs (Individual Savings Accounts) allow you to save or invest money without paying tax on interest or capital gains. In the current tax year, you can put up to £20,000 in ISAs in total across different types of ISAs (Cash ISA, Stocks & Shares ISA, Lifetime ISA, and Innovative Finance ISA). This limit does not roll over: if you do not use it by the tax year end, you lose it. Consequently, many people top up their ISAs in March or early April to make the most of their tax-free allowance.

Pension Contributions

Pension contributions can be a powerful way to save for retirement and reduce your taxable income. Usually, contributions attract tax relief at your highest marginal rate (subject to annual and lifetime allowances). For the current tax year, the standard annual allowance for most people is £40,000 or 100% of your earnings—whichever is lower—though this can vary if you have a higher income or have already accessed your pension. If you have unused allowance from previous years, you may also be eligible for “carry forward,” enabling you to make additional contributions above the annual limit. Make sure any intended contributions are processed before the tax year ends, or you risk losing valuable relief.

Capital Gains Tax Allowance

Each tax year, you have a Capital Gains Tax (CGT) allowance (referred to as the annual exempt amount). Gains below this threshold are not subject to CGT. If you plan to sell shares, second properties, or other chargeable assets, consider the timing of disposals to take full advantage of this annual exemption. Splitting disposals across multiple tax years (if feasible) can help reduce your tax bill significantly.

Dividend Allowance

For individuals who receive dividends, there is a dividend allowance that reduces the amount of dividend income subject to tax. The allowance often changes or is under review, so be sure to check the rates for the specific tax year in question. Properly timing dividend payments within or across tax years can optimise your dividend strategy.

3 Action Steps as the Tax Year End Approaches

3.1. Review and Use Your ISA Allowance

• Check existing ISA balances: Ensure that you’ve used as much of the £20,000 limit as possible (if your financial situation allows).
• Evaluate your ISA mix: You can split money between a Cash ISA and a Stocks & Shares ISA, or invest in an Innovative Finance ISA. Some individuals might also consider a Lifetime ISA (LISA) for home purchase or retirement.
• Act before 5 April: If you don’t use your ISA allowance by the end of the tax year, you can’t carry it over to the next year.

3.2. Maximise Pension Contributions

• Check your annual allowance: Confirm how much you can contribute without incurring tax penalties.
• Consider carry forward: If you’ve contributed less than the annual allowance in the past three years and still qualify under the relevant rules, you may be able to carry forward unused allowances.
• Be mindful of deadlines: Workplace and personal pension providers need sufficient time to process your contributions before the tax year ends.

3.3. Harvest Gains or Losses

• Use your CGT allowance: If you are planning to dispose of assets, consider doing so in stages across more than one tax year to reduce any CGT liability.
• Harvest tax losses: Offsetting gains with losses (where permissible) could reduce your overall CGT bill. Keep records of losses for future use.

3.4. Organise Records and Documents

• Income details: Gather all P60s, P45s, and any self-employment or rental income statements.
• Dividend vouchers: Keep accurate records of any dividends received.
• Interest statements: Request statements from banks or savings institutions so you know how much interest you’ve earned.
• Expense documentation: For self-employed individuals, ensure expenses are correctly recorded and categorised.

3.5. Review Your Business Affairs

If you are a business owner, make sure you have:

• Paid any outstanding taxes (such as PAYE or Corporation Tax).
• Tidy up your books (ensuring income, expenses, and VAT records are accurate).
• Consider staff bonuses: Timing of bonuses can affect both your employees’ tax positions and your company’s deductions for the tax year.