Last Minute Tax Saving Strategies to Reduce Tax Bill Before 5 April

Why Year-End Tax Planning is Necessary

Tax planning before the 5 April deadline can make a big difference to how much you owe. With the right last-minute tax saving strategies, you can cut down your tax bill and make the most of available allowances. Whether you are employed, self-employed, or run a business, acting now can help you keep more of your hard-earned money.

Why Acting Before 5 April Matters

The UK tax year runs from 6 April to 5 April the following year. Once the deadline passes, many tax-saving opportunities are lost. This makes the final weeks leading up to 5 April a key time to take action.

If you don’t use tax-free allowances, they won’t carry over to the next year. For example, if you haven't used your ISA allowance or pension contribution limits, you could be missing out on valuable tax savings before year-end.

By reviewing your finances now, you can take advantage of last-minute tax saving options that reduce your taxable income and make better use of government incentives.

Key Tax Deadlines

The 5 April tax year-end is the most important date to remember, but here are other key tax year dates and deadlines to keep in mind:

• 31 January – The deadline for self-assessment tax returns and any tax owed from the previous tax year.
• 6 April – The start of a new tax year, meaning fresh tax-free allowances become available.
• 5 October – The deadline for registering as self-employed with HMRC if you’ve started working for yourself.

Acting now on year-end tax planning strategies can help you take full advantage of tax reliefs and allowances before they reset. Whether you're looking at last-minute ways to reduce your tax bill or considering tax-efficient investments, now is the time to act.

By using smart tax reduction strategies, you can lower your overall liability and be in a better financial position for the next tax year.

Last-Minute Tax Saving Strategies

Last minute tax saving strategies refer to the actions you take in the final weeks of the financial year to reduce your tax bill. These tactics include various last minute tax saving tips and options, such as:

Leverage Tax Allowances and Reliefs to Reduce Your Tax Bill

1. Claim Marriage Allowance

If you are married or in a civil partnership, you could reduce your tax bill by transferring unused Personal Allowance before the 5 April deadline.

Marriage Allowance lets a lower-earning partner transfer up to £1,260 of their unused Personal Allowance to their spouse or civil partner. This transfer can reduce the higher-earning partner’s tax bill by up to £252 per year. If you haven’t claimed in previous years, you might be able to backdate your claim by up to four years, which could mean a tax refund of over £1,000.

This tax relief applies to couples where:

• One partner earns below the Personal Allowance threshold (£12,570 for 2024/25).
• The other partner pays tax at the basic rate (income between £12,571 and £50,270).

2. Take Advantage of Dividend Allowance

Making full use of dividend allowance before the 5 April deadline is one of the best tax saving strategies to reduce your tax bill.

If you receive income from dividends, you can benefit from the dividend allowance, which lets you earn up to £500 in dividends tax-free for the 2024/25 tax year. Any dividends above this amount are taxed based on your income tax band:

• Basic rate taxpayers: 8.75%
• Higher rate taxpayers: 33.75%
• Additional

3. Utilise Your Capital Gains Tax Allowance

If you have sold assets such as shares, property, or valuable items, you may need to pay CGT on the profits. However, with careful year-end tax planning strategies, you can legally reduce your capital gains tax bill before the deadline.

• Use Your Annual CGT Allowance – The tax-free capital gains allowance for 2024/25 is £3,000. If you haven't used this allowance yet, selling assets before the deadline can help you avoid unnecessary tax on future gains.
• Spread Gains Over Two Tax Years – If you plan to sell assets worth more than the allowance, splitting the sales before and after 5 April can help you take advantage of two separate tax-free allowances.
• Transfer Assets to a Spouse – Gifts between spouses are tax-free, allowing you to share gains and use two separate CGT allowances. This is a simple and effective tax reduction strategy for married couples and civil partners.‍
• Offset Capital Gains and Losses Before 5 April - If you have assets that have decreased in value, selling them before the tax year ends can help lower your overall CGT liability. If you have made a profit from selling shares or property, but other investments have lost value, declaring those losses can reduce your taxable gain. Losses can be reported to HMRC and carried forward to offset future gains.

4. Use Annual Pension Allowance

Each tax year, you can contribute up to £60,000 (or 100% of your earnings, whichever is lower) into your pension without paying tax on it. This is known as the annual pension allowance.

If you earn over £200,000, your allowance may be reduced under the tapered annual allowance rules. However, you can still benefit from pension tax relief by making contributions before the 5 April deadline.

Here are some last-minute ways to reduce your taxable income using pensions:

• Increase your contributions before the end of the tax year.
• If you receive a bonus, consider putting some of it into your pension to lower your tax bill.
• If you're self-employed, pension contributions can be a key part of your year end tax planning checklist.

Carry Forward Unused Pension Allowance from Previous Years

If you haven’t used your full allowance in the past three tax years, you can carry it forward to the current year. This means you could contribute more than £60,000 and still benefit from tax relief.

To use this option, you must:

• Have been a member of a registered pension scheme in the years you are carrying forward from.
• Use up your current year’s annual allowance first before using the carried-forward amounts.

This is one of the best tax saving strategies for those who have had fluctuating income or want to make a large contribution before the 5 April deadline.

Investment Strategies for Tax Reduction

5. Maximise Your Pension Contributions

Making the most of your pension contributions before the 5 April deadline is one of the best tax saving strategies. Pensions offer generous tax benefits, allowing you to cut your taxable income while securing your financial future. If you haven’t yet used your full allowance, now is the time to take action and make the most of last-minute tax saving options.

How Pension Contributions Reduce Taxable Income

When you put money into a pension, the government offers tax relief. This means that part of what you would have paid in tax goes directly into your pension pot instead. The higher your income tax rate, the bigger the relief:

• Basic rate taxpayers (20%) – For every £80 you contribute, the government adds £20, making it £100 in your pension.
• Higher rate taxpayers (40%) – You can claim back an extra 20% through self-assessment tax return, reducing your overall tax bill.
• Additional rate taxpayers (45%) – You can reclaim 25% in your tax return, which further lowers your tax liabilit.

6. Invest in ISAs

An Individual Savings Account (ISA) is one of the best tax-efficient investments available in the UK. Any interest, dividends, or capital gains earned within an ISA are completely tax-free. However, the annual ISA allowance resets on 6 April, meaning any unused allowance from the current tax year will be lost. Taking action before the 5 April deadline can help you maximise your tax savings before year-end:

Tax-Free Savings Opportunities Before the 5 April Deadline

The ISA allowance for the 2024/25 tax year is £20,000, and you can split this amount between different types of ISAs, including:

• Cash ISAs – A safe option for tax-free interest on savings.
• Stocks & Shares ISAs – A way to invest in the stock market while benefiting from tax-free growth.
• Innovative Finance ISAs – Includes peer-to-peer lending and other alternative investments.
• Lifetime ISAs (LISAs) – Designed for first-time homebuyers and retirement savings, with a government bonus.

Once the 5 April deadline passes, any unused ISA allowance cannot be carried forward. Using your full allowance before then is a key part of year-end tax planning strategies.

ISAs keep your returns safe from:

• Preventing dividend tax, which can reach up to 39.35% for additional-rate taxpayers.
• Avoiding the 20% Capital Gains Tax on stocks and shares.
• Exempting interest income from tax, so you pay no tax on cash savings or bonds held within an ISA.

7. Consider Tax-Efficient Investments

Investing in tax-efficient products before 5 April can help lower your taxable income and reduce your overall tax liability. Some of the best tax-efficient investments include:

• National Savings & Investments (NS&I) Bonds – These government-backed savings options offer tax-free interest on certain accounts, helping you keep more of your returns.
• Venture Capital Trusts (VCTs) and Enterprise Investment Schemes (EIS) – These offer generous tax relief for investors willing to support early-stage companies.

Invest in Venture Capital Trusts (VCTs) and EIS Schemes

For those willing to take on a higher level of risk, Venture Capital Trusts (VCTs) and Enterprise Investment Schemes (EIS) provide significant tax advantages. These schemes encourage investment in small businesses and startups by offering tax relief.

• Venture Capital Trusts (VCTs) – Investors can receive 30% income tax relief on investments of up to £200,000 per year, provided shares are held for at least five years. Additionally, dividends from VCTs are tax-free, and there is no capital gains tax on profits from the sale of VCT shares.
• Enterprise Investment Schemes (EIS) – EIS investments offer 30% income tax relief on up to £1 million per year (£2 million if investing in knowledge-intensive companies). If shares are held for at least three years, any capital gains are free from tax. Investors can also defer capital gains tax by reinvesting profits into an EIS.

MaSmart Planning for Business and the Self-Employed

8. Claim All Available Tax Deductions

Many people miss out on valuable tax deductions simply because they are unaware of what they can claim. As part of your end of year tax planning strategies, reviewing all eligible business expenses can help maximise your tax savings before year-end.

Essential Last-Minute Tax Deductions to Claim

There are several tax deductions available depending on your employment status and business setup.

• Professional Subscriptions – If you pay for membership in a professional body related to your work, you may be able to claim the cost as a tax deduction.
• Work-Related Training – Courses that improve your current job skills could qualify for tax relief.
• Tools and Equipment – If you have purchased work-related tools, IT equipment, or office supplies, these can be deducted from your taxable income.
• Charitable Donations – Gift Aid donations allow charities to claim extra money from the government while you receive tax relief on the donation.
• Pension Contributions – Contributions to a private pension not only help with retirement planning but also lower your taxable income.
• Mileage and Travel Costs – If you use your personal vehicle for work, you may be able to claim mileage allowances.
• Home Office Costs – Self-employed individuals and employees working from home can claim tax relief on a portion of their home expenses.

9. Tax Planning Strategies for Self-Employed Individuals

Self-employed individuals have additional tax-saving opportunities that should be used before 5 April.

• Buy Necessary Equipment Early – If you need a laptop, phone, or tools for your business, buying them before 5 April allows you to claim the cost against this year’s tax bill.
• Delay Invoices Where Possible – If you expect to cross into a higher tax bracket, deferring income until the next tax year may help keep your tax bill lower.
• Claim All Business Expenses – Office rent, advertising costs, software subscriptions, and internet bills all qualify as deductible expenses.
• Using the Annual Investment Allowance (AIA) – This allows you to deduct the full cost of certain purchases, such as machinery or business vehicles, instead of spreading the cost over multiple years.
• Maximise Work-from-Home Expense Claims - If you work from home, you may be eligible for work from home tax relief on household costs related to your job, at £6 per week (£312 per year) without the need to provide receipts.

10. Corporation Tax and VAT

Reduce your corporation tax by:

• Investing in Business Assets: Claim capital allowances on items like equipment, vehicles, and software.
• Making Pension Contributions: Employer contributions towards pensions are tax-deductible.
• Efficient Dividend Payments: Dividends attract lower tax rates compared to salaries.

VAT also plays a significant role for many businesses. If your turnover is above £90,000, you are required to register for VAT. However, selecting an appropriate scheme can help save money:

• Flat Rate Scheme: Simplifies VAT accounting and can reduce your overall VAT bill.
• Cash Accounting Scheme: Allows you to pay VAT only when invoices are settled, which can improve your cash flow.

Tax Planning for High-Income Individuals

11. Tapered Annual Allowance and Pension Contributions

For higher-income earners, the tapered allowance may affect the amount you can contribute to your pension each year. When your adjusted income increases above £260,000, your annual allowance is reduced. For every £2 your adjusted income goes over £260,000, your annual allowance for the current tax year reduces by £1, with a minimum limit of £10,000.

It is wise to make full use of your current pension allowance by contributing as much as possible. These contributions help lower your taxable income. Keep in mind that employer contributions also count towards your annual allowance. Taking advantage of salary sacrifice schemes can be beneficial too, as they decrease your taxable income while increasing your pension pot.

Gift-Giving and Inheritance

12. Make Charitable Donations

Charitable donations is not only a generous act but also a smart way to reduce your tax bill before the 5 April deadline. Donations to registered charities can provide valuable tax relief while supporting good causes. If you are looking for last-minute ways to save on taxes, making Gift Aid donations is an effective option.

Gift Aid allows UK taxpayers to boost their donations at no extra cost while reducing their taxable income. When you donate through Gift Aid, the charity can claim an extra 25p for every £1 donated from HMRC. If you are a higher or additional rate taxpayer, you can also claim tax relief on your donation through your Self Assessment tax return.

Here’s how it works:

• Basic Rate Taxpayers (20%) – The charity claims 25% on top of your donation, but you do not receive additional tax relief.
• Higher Rate Taxpayers (40%) – You can claim back 20% of the donation value through your Self Assessment.
• Additional Rate Taxpayers (45%) – You can claim back 25% of the donation value through your tax return.

For example, if you donate £1,000 under Gift Aid and you are a higher rate taxpayer, you can claim £250 back in tax relief. This makes Gift Aid one of the best tax saving strategies before the tax year ends.

13. Use Small Gift Allowance

The small gift allowance is a useful way to reduce your taxable estate while helping loved ones. In the UK, you can give up to £250 per person to as many people as you like each tax year without it being subject to inheritance tax.

It allows you to reduce the value of your estate without using your £3,000 annual gift exemption, which can be applied separately.

Gifting small amounts regularly is one of the best tax-saving strategies for long-term planning. It ensures that more of your wealth is passed on to your family or friends without incurring inheritance tax in the future.

Get Professional Advice to Reduce Your Tax Today

Once the tax year ends, unused allowances and deductions cannot be carried forward (except for pensions). As the 5 April deadline approaches, act before the deadline to reduce your overall tax bill. Leaving it too late could mean missing out on valuable savings.

Tax rules can be complex, and everyone’s situation is different. Consult with a tax accountant to benefit with the personalised tax services and make the most of available tax-saving strategies. Whether you're self-employed, a contractor, or a business owner, expert advice can help you make smart financial decisions before the deadline.