Year-end housekeeping for
5 April 2025

Introduction

With the end of the current tax year (5 April 2025) fast approaching, we have outlined below some of the main things that individuals, entrepreneurs and their families should look at ahead of the tax year end, to ensure that their personal tax affairs are in good order and all available tax allowances and exemptions are utilised.

• Income tax and National Insurance
• Pensions 
• Capital Gains Tax (CGT)
• Using current year exemptions and allowances
• Abolition of the remittance basis and introduction of a new residence-based regime 
• Inheritance tax
• Tax administration

Income tax and National Insurance

In 2024/25 individuals with total income in excess of £125,140 pay the additional rate of income tax, currently 45% on most income, (48% in Scotland), although certain individuals with income between £100,000 and £125,140 are subject to an effective 60% tax rate (67.5% in Scotland) owing to the tapered removal of the personal allowance. Some options for consideration are outlined below; please contact us if you require assistance in this area.

Transferring assets to spouse or civil partner

If your spouse or civil partner has insufficient income to utilise their personal allowance (£12,570 for 2024/25) or their nil, basic or higher rate tax bands, it may be sensible for you to gift sufficient income-producing assets to them to enable them to do so. 

Calculating the effect of the transfer of income-producing assets can be complex, due to the interaction of the savings rate of tax, the savings and dividend nil rate bands and the withdrawal of the personal allowance from those with income of over £100,000. Furthermore, different tax rates apply to non-savings, non-dividend income of Scottish resident taxpayers, which would also need to be taken into account if relevant. The wider implications of making gifts to your spouse or civil partner must also be considered.

Preserving your personal allowance

Where your income is between £100,000 and £125,140 (for 2024/25), your personal allowance is phased out, resulting in an effective rate of tax of up to 60% (67.5% for Scottish residents) within this income bracket. Taxable income can be reduced through pension contributions (subject to restrictions set out later in this note) and charitable donations. The wider implications of making such contributions and donations should be considered.

Charitable donations

Tax relief is available for cash gifts to UK registered charities. 

If a 45% taxpayer makes a cash donation to a charity of £20,000 under the ‘Gift Aid’ scheme, the charity may reclaim £5,000 from HM Revenue & Customs (HMRC) and the donor will obtain tax relief of £6,250 via their tax return. The overall effect is that the charity receives a £25,000 donation at a net cost to the donor of £13,750. 

Tax relief may be available for certain charitable donations not made in cash form, but you should review this with your usual Deloitte contact to ensure that any tax relief is claimed appropriately.

Are your investments held in a sensible structure?

You need to think about the effect of corporation, income and Capital Gains Tax (CGT) rates on the way you own investments: 

• The main rate of corporation tax rate is currently 25%. Small companies may be taxed at an effective rate of between 19% and 25%.
• The additional rate of income tax is 45% for most income (48% in Scotland), and 39.35% for dividends after the £500 dividend nil rate band (2024/25).  
• CGT applies to gains realised in excess of the annual exemption, which is £3,000 in 2024/25. For gains realised before 30 October 2024, higher and additional rate taxpayers pay 20% CGT on most gains, 24% CGT on residential property gains and 28% on carried interest gains. For gains realised on or after 30 October 2024, a 24% CGT rate applies to all gains except carried interest gains, which are instead subject to a 28% rate. Anti-avoidance rules may apply in some cases that can result in income tax applying instead of CGT, notably including distributions received on the winding up of a close company if the shareholder is in some way involved in the same or a similar trade or activity following the liquidation. 

With this in mind, you should review how your investments are currently structured, taking into account the overall net effective rates of tax on investment returns, now and in the future.

When choosing the right investment vehicle, there are numerous tax and wider considerations to consider. Similar issues apply in respect of any income received from self-employment. The most appropriate vehicle will be largely driven by your circumstances and intentions, and so the position should be reviewed with your usual Deloitte contact. 

Pensions 

Fully utilising annual pension contributions

The amount of tax-efficient pension savings that can be made for each individual is limited to the lower of their “relevant UK earnings” and their “annual allowance”. The standard annual allowance increased from £40,000 to £60,000 from 6 April 2023. The allowance is reduced by £1 for every additional £2 of income above £260,000 in 2023/24 and 2024/25 (£240,000 for 2021/22 to 2023/24), subject to a minimum allowance of £10,000 in 2023/24 and 2024/25 (£4,000 for 2021/22 and 2022/23). Income for this purpose is taxable income plus most pension savings by the individual and/or their employer.

Where pension savings for the last three years have been lower than the annual allowance for the relevant year, there may be scope for catching up on pension savings in the current year. For example in 2024/25 unused allowances from 2021/22 onwards could be used. The allowances will be available if the individual was a member of a UK registered scheme in the relevant tax year (this may in some circumstances be extended to membership of overseas pension schemes). In some cases, contributions of up to £200,000 could attract tax relief in 2024/25, but the rules surrounding this are complex. You should review the position with your usual Deloitte contact and take financial advice from a FCA regulated pensions adviser before making any contributions. A separate briefing note is available on request.

Lifetime allowance protections

The lifetime allowance was abolished from 6 April 2024. The maximum 25% tax-free lump sum that individuals can take from their pensions is capped at £268,275, which is 25% of the lifetime allowance when it was abolished. The capped amount may be higher if certain lifetime allowance protections are in place (e.g., if the individual had a protected lifetime allowance of £1,250,000 under Fixed Protection 2016, their lump sum allowance should be £312,500). Applications for Fixed Protection 2016 and Individual Protection 2016, as well as certain other lifetime allowance enhancements, are due to close by 5 April 2025. Further transitional measures may also need to be considered, particularly for those who expect to take pension benefits under both the old and new regimes.

Furnished Holiday Lets (FHLs)

The FHL regime provides certain income tax and CGT benefits to letting businesses to the extent that they are comprised of short-term lets of holiday accommodation. This regime is due to be abolished from 6 April 2025, resulting in short-term lets being taxed in the same way as long-term lets. The main effects of the abolition include:

• Finance costs will no longer be deductible in arriving at taxable profits (a basic rate tax reducer will apply instead).
• Relief for capital expenditure will be more limited, particularly when furnishing a property for the first time.
• Profits will no longer be treated as “relevant UK earnings” for the purpose of pension relief.
  Several CGT reliefs will cease to be available, such as Business Asset Disposal Relief (subject to transitional measures).
• There will be less flexibility in splitting income from jointly held property between spouses and civil partners.

Where a property is in joint legal ownership of spouses or civil partners, their taxable profits will be split 50:50 from 6 April 2025 irrespective of their actual shares in the income or the property. If the shares of income and capital correspond to each other, and are unequal, it should be possible for income to continue to be split based on actual entitlement by making a valid declaration to HMRC on a Form 17. This declaration cannot be backdated and only applies to future income, so it would need to be made on 6 April 2025 to be effective for the full 2025/26 tax year. A separate briefing note is available at https://deloi.tt/4i40ssD.

Capital Gains Tax (CGT)

Claiming tax relief for capital losses

Capital losses must be claimed within four years of the end of the tax year in which the loss is realised. The deadline for claiming capital losses realised in 2020/21 is 5 April 2025. Claims are generally made as part of tax returns, but it is important to consider whether you may have any unclaimed losses (this is particularly relevant to non-UK domiciled individuals – further information on this is set out below). In addition, a capital loss claim may be possible if you own assets or investments which have fallen in value and are now worthless, or if you have made loans to a trading company (or other trader) which have become irrecoverable. For loans made before 24 January 2019, relief on irrecoverable loans is only available if the borrower is UK resident. 

Where a capital loss relates to shares in an unquoted trading company, it may be possible to offset the loss against income which would otherwise be subject to income tax at up to 45% (or 48% for Scottish residents). The loss that can be offset in this way is typically capped at the higher of £50,000 or 25% adjusted total income. 

The conditions to claim a loss and the claim itself can be complicated and so you should discuss this with your usual Deloitte contact. 

Business Asset Disposal Relief (BADR) 

A 10% CGT rate can apply to capital gains that qualify for BADR (previously called entrepreneurs’ relief). BADR can be claimed on a maximum of £1million of gains in a lifetime (2024/25). 
If you have business assets or shares or loan notes in a trading company, you should review your personal tax position as soon as possible to determine whether BADR is available. Various conditions apply. For shares these are, very broadly, that you must own at least 5% of the ordinary share capital in a trading company and hold an employment or office in the company for at least 24 months before disposal. BADR can also apply to sales of unincorporated trading businesses and furnished holiday lets. The detailed conditions are complex and should be reviewed carefully. 

Investors’ relief

Similarly to BADR, investors’ relief results in a 10% CGT rate. The amount of gains on which investors’ relief can be claimed over a lifetime was £10million until 30 October 2024, at which point the lifetime limit was reduced to £1million. 

Individuals who subscribed for ordinary shares in an unlisted trading company, in cash, on or after 17 March 2016 may be eligible to claim investors’ relief on disposals where shares have been held for at least three years. It is important to be aware of the conditions and the holding period so that relief can be claimed on disposals where appropriate. Very broadly, newly issued ordinary shares in unquoted trading companies must be held and the individual must not be an employee or paid director, although again the detailed conditions are complex and should be reviewed carefully. 

Use your CGT annual exemption

In 2024/25 individuals have a £3,000 annual exemption. If it is not used, it cannot be carried forward and is lost. If the annual exemption has not been used, consideration could be given to selling assets to realise gains if this is consistent with your overall investment strategy. However, anti-avoidance rules mean that if shares or securities are sold and repurchased on the same day, or within the following 30 days, the disposal will be matched with the later acquisition when calculating the gain.

Gift to spouse or civil partner prior to a disposal

Assets can usually be transferred between spouses and civil partners without a tax charge arising on the transfer. If an asset standing at a gain is transferred to a spouse before disposal, the gain on disposal may be covered by their CGT annual exemption, their capital losses (if any), and/or attract an 18% CGT rate instead of 24% or 28%, depending on their income level and the nature of the asset (rates are for disposals on or after 30 October 2024). In order for this to be effective, any gift of assets must be absolute and unconditional. If the transfer is from a UK domiciled individual to their non-UK domiciled spouse or civil partner, it should be borne in mind that the inheritance tax spouse exemption in such circumstances is capped, and so the gift may be a potentially exempt transfer for inheritance tax purposes.

Main residence relief 

Normally where a property is used as the owner’s only or main residence throughout the ownership period, any gain on disposal is exempt from CGT. Married couples and civil partners can only have one main residence between them. If more than one property is used as a residence by an individual or couple, it is possible to elect which one should be treated as the main residence for CGT purposes. 

UK resident individuals must make the election within two years of the residences available to an individual changing (e.g. within two years of a new property being acquired). Individuals who are non-UK resident at the point of disposal of the residence can make a main residence election at the point of disposal, though it is often advisable for non-UK residents to make a main residence election within the usual two-year time limit in case their circumstances change and they become UK resident at the point of disposal, in which case it would be too late to make a main residence election. 

It should be noted that rental properties on which a capital gain is unlikely to arise may constitute a “residence” for the tenant. This should be borne in mind when considering whether or not a main residence election is appropriate. 

Additional rules apply if the property is located in a different jurisdiction from the one in which the taxpayer resides. Broadly, taxpayers must occupy the elected property as a residence for at least 90 days in the tax year in order for it to qualify for relief in respect of that year. These rules are complex and those in this situation should take professional advice at the earliest opportunity. 

UK residential property disposals – standalone tax return requirement

UK residents who realise a taxable gain on disposal of UK residential property are generally required to file a standalone CGT return and make a payment on account of the CGT due within 60 days of completion. The payment on account will normally be the full expected CGT liability but may exceed it in some cases as only losses incurred up to the date of disposal of the property can be offset against the gain arising when the standalone return is filed. 

Losses incurred after the date of completion must be ignored in determining the CGT payment on account, even if they will ultimately be offset on the self-assessment tax return for the tax year of disposal. Any excess CGT will generally be repayable when the self-assessment tax return is filed. Interest and penalties may apply if returns are not submitted and/or insufficient payments are made. A separate briefing note is available at https://deloi.tt/CGT2020.

Non-Resident Capital Gains Tax (NRCGT)

Any gains realised by non-UK resident individuals and trustees who dispose of UK residential and/or non-residential property (including that held indirectly) are within the scope of CGT. Rebasing to 5 April 2015 or 2019 values (depending on the type of property being disposed of) may apply. Each disposal must be reported on a standalone CGT return within 60 days of the date of completion, irrespective of whether there is a taxable gain, subject to some very limited exceptions. Any CGT due will normally need to be paid within the same 60-day period. 

Using other current year exemptions and allowances 

The main exemptions and allowances not already mentioned in this briefing note are set out below.

Inheritance tax annual exemption of £3,000 per annum

This is the amount individuals can give away each tax year without any inheritance tax implications. If all or part of the previous tax year’s (2023/24) £3,000 annual exemption was unused the remainder can be carried forward. This means that up to £6,000 can be given away tax-free in 2024/25. Other reliefs and exemptions may also be relevant.

Stakeholder pensions of £3,600 per annum (gross)

Any UK resident individual under the age of 75 can contribute up to £2,880 (net) into a stakeholder pension each year, irrespective of their earnings or whether or not they are employed, so these pensions can be funded for non-working spouses and children. The pension provider will reclaim 20% tax relief direct from HMRC, so the policy will be credited with a gross contribution of £3,600. Pension funds will not be accessible until the minimum pension age. This is currently 55. The government have however confirmed that they intend to increase the minimum pension age to 57 in 2028. 

Individual Savings Accounts (ISAs) 

The annual ISA subscription limit for 2024/25 is £20,000. This can be invested in cash, UK stocks and shares, foreign shares, corporate bonds and other permitted investments. ISAs are available to UK resident individuals aged 18 or over (age 16 or over for cash ISAs for individuals born before 5 April 2008). Investment returns from ISAs are free from income tax and CGT.

Other types of ISA exist, including the Innovative Finance ISA and the Lifetime ISA. The annual investment limit applies across all ISAs in total. It is important to be aware of the conditions and features of the various ISAs before investing to ensure that the appropriate ISA vehicle is used for your specific circumstances. A comparison with saving into a pension is also important. Regulated financial advice may be required.

Junior ISAs

Junior ISAs are available to children under the age of 18 who are UK resident and who do not have a child trust fund. The annual subscription limit in 2024/25 is £9,000, which can be split between stocks and shares and/or cash. The funds are locked in until the child is 18, when the account will default to a normal ISA if the funds are not withdrawn. Ordinarily, when a parent gives money to a child, if the income arising from the gift exceeds £100, the whole of the income is taxable on the parent (while the child is under 18). This provision does not apply to a Junior ISA.

Tax efficient investments

Numerous statutorily provided tax efficient investments are available, including National Savings (www.nsandi.com), the Enterprise Investment Scheme (EIS), Seed Enterprise Investment Scheme (SEIS) and Venture Capital Trusts (VCTs).

EIS, SEIS and VCT investments all have annual limits, as follows:

• EIS - £1,000,000 with income tax relief of 30%, or up to £2,000,000 provided the additional £1,000,000 is invested in ‘knowledge-intensive’ companies.
• SEIS - £200,000 with income tax relief of 50%. 
• VCT - £200,000 with income tax relief of 30%.

Any gains realised on disposal of EIS, SEIS or VCT shares may be exempt from CGT. In addition, gains made on disposal of other assets may be deferred if EIS investments are made, or partially exempted if SEIS investments are made.  

The EIS, SEIS and VCT tax rules are complicated and it is important to take professional advice. Regulated financial advice may also be required.

Abolition of the remittance basis and introduction of a new residence-based regime 

Remittance basis

2024/25 is the last tax year of the existing regime of taxing non-UK domiciled individuals. Individuals who are not legally or deemed to be UK domiciled can claim the remittance basis in 2024/25, which means that most foreign income and gains are only taxable if remitted to the UK. Legally non-UK domiciled individuals with less than £2,000 of unremitted foreign income and gains in 2024/25 will be automatically taxable on the remittance basis in 2024/25, though it is possible to opt out of this.  

New residence-based regime

From 6 April 2025 a new regime is to be introduced which will tax UK resident individuals based on residence – domicile is to be removed as a relevant factor from most parts of the tax regime. Broadly, individuals who have been UK resident for four tax years or fewer and who were non-UK resident throughout the preceding ten tax years can claim relief from UK taxation of most foreign income and gains. Individuals who do not make a claim or who do not meet the residence requirements for the new regime to apply will be taxable on worldwide income and gains. 
The remittance basis will cease to apply on 5 April 2025, though remittances of pre-6 April 2025 foreign income and gains to which the remittance basis applied will remain taxable post-5 April 2025. 

Temporary Repatriation Facility (TRF)

The TRF enables foreign income and gains taxable on the remittance basis which have not yet been taxed to be subject to a flat 12% rate during the 2025/26 and 2026/27 tax years, and a 15% tax rate during the 2027/28 tax year. As the TRF can only apply to foreign income and gains to which the remittance basis has applied, the latest date on which remittance basis users can receive foreign income and gains eligible for the TRF is 5 April 2025. 

Capital losses

The ability to claim relief for capital losses is restricted for individuals who claim the remittance basis unless an election is made to claim relief for foreign capital losses. If a claim is made, all losses, both UK and foreign, must be offset in a prescribed order. The deadline for making the election is four years from the end of the tax year in which the remittance basis is first claimed, so the deadline for making an election in respect of 2020/21 is 5 April 2025. Claims for relief for capital losses also have a four-year deadline, so any unclaimed capital losses for 2020/21 must be claimed by 5 April 2025 at the latest. 

Trusts 

The existing regime for taxing trusts settled by non-UK domiciled individuals is also changing. The “protected trust” regime is to be abolished, which potentially increases the extent to which settlors will need to pay income tax and CGT on trust income and gains. Trust beneficiaries will also cease to be able to claim the remittance basis, and so the tax position of any benefits received will also need to be considered. 

Individuals who may be affected by the abolition of domicile or the introduction of a residence-based regime should contact their Deloitte contact as soon as possible. Information on changes to inheritance tax is included below. 

Inheritance Tax (IHT)

Under current law, all assets owned by UK domiciled or deemed UK domiciled individuals, whether UK or foreign, are within the scope of IHT. Individuals who are both legally non-UK domiciled and not deemed UK domiciled for IHT purposes are only within the scope of IHT on UK situated assets and certain foreign assets that derive value from UK residential property. 

From 6 April 2025, a new residence-based system of IHT will be introduced under which, broadly, an individual will be within the scope of IHT on worldwide assets if he or she has been UK resident for at least 10 of the last 20 tax years. There are variations to this rule. Notably, if an individual ceases UK residence the amount of time it will take to cease being within the scope of IHT on worldwide assets can be reduced depending on the length of UK tax residence.  

In general, 40% IHT is payable on the value of the estate on death, subject to any relief or exemptions available. Gifts made within the seven years preceding death may also be taken into account. The taxable amount of lifetime gifts can be reduced by reliefs and exemptions such as the £3,000 annual exemption (as above) and the exemption for gifts made out of income as part of a normal pattern of expenditure where the donor retains sufficient income to maintain their normal standard of living after the gift. Where relevant, it is recommended that the intention to make regular gifts out of income is documented from the outset of the arrangements and that appropriate records are maintained.

On a more general level, it is important to review any lifetime planning and your will at regular intervals to ensure that they continue to meet your objectives for succession and are appropriate in the light of current legislation. You should also ensure that the conditions for any available reliefs or exemptions (for example business property relief on unquoted shares) are met. Particular rules apply to couples where one spouse or civil partner is UK domiciled and one is not. This will change to one partner being long-term UK resident and the other not from 6 April 2025. The detailed IHT rules are beyond the scope of this note, but should you require assistance in this area please speak to your usual Deloitte contact. 

Tax administration

Keep adequate records

It is important to be able to substantiate tax return entries with underlying records, particularly in the event of an enquiry. Depending on the source of income or gains, there is a requirement to retain underlying records for up to 5 years from the 31 January following the tax year. HMRC have up to 12 years to raise assessments relating to offshore matters. The time limit for cases where deliberate errors were made remains 20 years. 

Common Reporting Standard (CRS) and trusts

HMRC receives information from foreign jurisdictions under the CRS. The CRS requires Financial Institutions (as defined) to report financial account information relating to residents of participating jurisdictions so that this can be exchanged between the relevant jurisdictions. Professionally managed trusts which derive income primarily from financial assets are likely to come within the definition of Financial Institution. UK resident trusts which are Financial Institutions will need to review their Account Holders (mainly the settlor and beneficiaries of the trust) and report the necessary information to HMRC by 31 May 2025 (see here). Such trusts will also need to consider whether they have any reporting responsibilities under US FATCA.  

Time limits

A number of claims and elections relating to the 2020/21 tax year have a time limit of 5 April 2025, and so need to be considered before that date. In addition to the points included above, relief for tax overpaid in 2020/21 must be claimed by 5 April 2025. The most likely scenario in which this could occur is for those taxed under PAYE, where the PAYE deductions are excessive, although overpayments could arise in other cases.