A quick view on your 2024/25 tax allowances

Here, Jamie Stanford , Chartered Financial Planner at Magus Wealth , gives you a quick view on your 2024/25 tax?allowances

It's the start of a new tax year, which is an excellent opportunity to review the suitability of any investments you already have in your ISAs and pensions and make sure your savings and investments are as tax-efficient as possible by using your available allowances and exemptions.

Income tax and National Insurance

The personal allowance (the amount of income you don’t have to pay tax on) remains at ￡12,570. The basic rate is still 20%, and the higher-rate threshold (at which you start paying 40%) is ￡50,270. The additional-rate tax threshold, at which you pay 45%, remains at ￡125,140, and these will remain frozen until 2028.

?Dividend and savings income

Through the Personal Savings Allowance, basic-rate taxpayers can continue to earn ￡1,000 interest on savings before paying tax in 2024/25. The allowance remains at ￡500 for higher-rate taxpayers and zero for additional-rate taxpayers.

There are significant changes to Dividend Tax. The dividend allowance has dropped by 50% to ￡500 for the 2024/25 tax year. This will likely affect you if you own company shares or receive dividends from funds or investment trusts.

Because of these changes, you may want to discuss your options for making better use of the more generous tax allowances for ISAs and pensions.

Personal pensions

The Lifetime Allowance will no longer exist. There is no limit on how much you can accumulate in your pension.

The standard annual allowance for pension contributions (the maximum total pension contribution you, your employer, or third parties can make and receive the full benefits of tax relief in a year) remains at ￡60,000.

However, the pension tax-free lump sum is capped at ￡268,275 (for those without any form of transitional protection*) or 25% of your actual pension pot, whichever is lower. This means the most you can draw down, tax-free, from your pension is ￡268,275. After that, anything you take from your pension will be subject to income tax at your marginal rates.

?*For those with transitional protection, the maximum tax-free amount will vary depending on the protection in place.

ISAs

Your ISA allowance remains at ￡20,000 for 2024/25 for both Stocks and Shares and Cash ISAs.

?A new proposed ISA, the British or UK Stocks and Shares ISA, is currently in consultation until June 2024. This proposed ISA, designed to encourage investment in British companies, allows you to save an additional ￡5,000 per year tax-efficiently into the new ISA on top of your existing ￡20,000 ISA allowance.

Although interest rates are still high, they will likely remain below inflation for most of 2024. Inflation isn’t predicted to fall to 2% until early 2025, meaning the spending power of your savings in any Cash ISAs or cash accounts is eroded, as they can’t grow as fast as prices rise. Investing in Stocks and Shares ISAs still has more potential to achieve the best long-term results for ISA savers.

The Junior ISA allowance remains at ￡9,000. These are a great way to give your children or grandchildren a financial head start. They can't access the money until they're 18, so their savings have a greater chance of growing in the long term.

Capital Gains Tax CGT)

This tax year's capital gains tax allowance is ￡3,000, half what it was in 2023/24.

?This is the amount of profit you can make from an asset this tax year before any tax is payable.

If your assets are owned jointly with another person, you can use both of your allowances, which can effectively double the amount you can make before CGT is due.

Reviewing your finances

Now is the perfect time to check your finances are in good shape, take stock, and review your family finances and goals.

Contact us today and ensure you're making the most of your allowances.

This article is distributed for educational purposes and should not be considered investment advice or an offer of any security for sale. This article contains the opinions of the author but not necessarily the Firm and does not represent a recommendation of any particular security, strategy, or investment product.

Information contained herein has been obtained from sources believed to be reliable but is not guaranteed.

Past performance is not indicative of future results, and no representation is made that the stated results will be replicated.

While Magus Wealth makes reasonable efforts to ensure that the information contained within articles is current and accurate at the publication date, no warranties are made, expressed or implied, regarding the information's reliability, accuracy, or completeness. Magus Wealth accepts no liability for any loss arising directly or indirectly from the use of or action taken in reliance on such information.

Magus Wealth is a trading style of Magus Private Wealth Limited, which is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales No. 3611274. Registered address: Endeavour House, Crawley Business Quarter, Manor Royal, Crawley RH10 9LW

The levels and bases of taxation and reliefs from taxation can change at any time and depend on individual circumstances.

Source *Economic and fiscal outlook, Office for Budget Responsibility November 2023.

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