There are just a few weeks left before the end of the tax year. With this in mind, here are a few last-minute but important things you should consider if you want to maximise your tax allowances.

Save up to £4,000 a year and receive an extra 25% on top with a Lifetime ISA

1: Top-up your ISA

You can top your ISA up to a maximum of £20,000 per year and you won’t pay tax on the interest, withdrawals or on any profits you make. So, if you haven’t reached your limit for the year, it’s worth thinking about transferring some of your savings into your ISA to make sure your money’s working as hard as it can.

2: Open a Lifetime ISA (LISA)

If you’re saving for a deposit to buy your first home, are you putting that money into a Lifetime ISA (LISA)? Because if not, you could be missing out on an annual bonus of £1,000, paid for by the government.

If you’re aged between 18 and 39 and haven’t yet bought your first home, you can save up to £4,000 a year and receive an extra 25% on top. The caveat is that you must use the money to buy a property below the maximum value of £450,000. Otherwise, you’ll face a penalty when you withdraw the money. But if you’re sure you’re going to use the money for a deposit, and the property is less than £450,000, a LISA a great way of getting on the property ladder faster.

Gift up to £3,000 each tax year, free of any IHT liability

3: Use up your gifting allowance

Helping out friends and family with a financial gift can be extremely rewarding, as well as a good way to reduce a potential inheritance tax (IHT) bill.

The tax-free inheritance threshold is £325,000 per person, above which a 40% rate of tax is due (subject to other allowances).

You can give away up to £3,000 each tax year, free of any IHT liability. You can gift more, but if you died within seven years of the gift, the recipient of your generosity could find themselves subject to a hefty IHT bill. If you don’t use your gift allowance, you can carry it over to the following tax year, effectively allowing you to gift up to £6,000 without creating a tax liability.

There are other gift allowances too, such as wedding or civil partnership gifts of up to £5,000 to your children and £2,500 to your grandchildren.

For more on this, see Gifting in your lifetime to reduce inheritance tax

4: Saving for your children

As a parent or guardian, you can open and save into a Junior ISA (JISA) for your child, which they will only be able to access when they’re 18.

A JISA is a great way to save monetary presents and gifts from parents, grandparents and other friends and relatives, for the child’s future. The annual limit is £9,000, and, just like a normal ISA, invested savings are not subject to tax on interest, withdrawals or any gains.

For more on children’s savings, see Savings and investments for children

Save up to £40,000 into a pension, completely tax-free

5: Pay what you can into your pension

A pension is one of the best ways to save for your retirement. That’s because the government is so keen to encourage us all to put enough money aside for later life, they offer generous incentives to anyone that does.

If you’re a UK taxpayer, you can save up to £40,000 into a pension completely tax-free every year. That’s 20% tax relief on your contributions for a standard-rate taxpayer, and 40% for a higher-rate taxpayers.

If you haven’t already maxed out your pension allowance, and have savings elsewhere, it’s well worth considering transferring them over to your pension before 5 April to make the most of your tax-free allowance.

For more on pension, see Supercharge your pension tax relief like a superhero

6: Use your capital gains allowance

Capital gains tax (CGT) relates to the gains you make on the value of your assets. This can include a second home, jewellery, antiques or stocks and shares.

CGT is liable when you sell an asset for profit. This year (before 5 April 2023) you have a tax-free allowance of £12,300, after which, the rate is dependent on the level of income tax you pay: 10% for basic-rate taxpayers and 20% for higher-rate payers (and 18% and 28% respectively if you’re selling a property).

From 6 April, the government will reduce the CGT allowance to just £6,000, and from 6 April 2024, it will drop a further £3,000.

Unlike the gift allowance, you can’t carry a CGT allowance over to the following year. So, if you’re planning on selling any of your assets you only have until 5 April to benefit from the allowance.

There have been significant changes to pension savings in the Spring Budget 2023 that may impact your retirement planning. To find out more, see: How does the 2023 Budget affect your pension and retirement planning?

Amber River Independent Financial Planning

If you need advice on managing your finances, be it tax-efficient investing or planning for retirement, an Amber River consultant will take a holistic view of your life, your ambitions, and your current financial situation, and map out a plan that helps you achieve your goals.

To speak to one of our team, arrange an appointment or find out more, call 0800 915 0000, or alternatively use our contact form here.