As we approach the end of the tax year, it’s important you’re fully utilising the available tax reliefs. Here are four key areas to consider before the year-end:
- Trivial Benefits: HMRC allows businesses to provide employees with small gifts without these being taxed, known as trivial benefits. To qualify, each gift must cost £50 or less, and it cannot be cash or a cash voucher. For employees, gifts such as hampers, small items, or gift vouchers (not exchangeable for cash) are not considered taxable benefits, meaning neither the business nor the employee needs to pay tax or National Insurance. However, the benefit must not be a reward for work or performance and cannot be part of an employment contract or salary sacrifice arrangement. For Directors of close companies, you can also enjoy these £50 benefits, but there is a limit of £300 worth of trivial benefits per tax year.
- Tax-Free Dividends: As part of the tax-efficient distribution of profits, directors and shareholders of companies may receive dividends free of income tax up to a threshold of £500. This tax-free dividend allowance allows individuals to extract profits from the business without incurring additional personal tax liability. If you have not yet taken full advantage of this allowance, now is the ideal time to ensure it is utilised before the tax year ends.
- Pension Contributions: Pension contributions are an effective way to reduce taxable income while saving for the future. The current annual limit for tax-relieved pension contributions stands at £60,000. If you have not already maximised your contributions for the year, it’s worth considering doing so before the deadline. Contributing to a pension not only helps you save for retirement but also provides valuable corporation tax relief if the contribution is an employer pension contribution.
- ISA Allowances: Individual Savings Accounts (ISAs) offer a great way to save and invest tax-efficiently. The current ISA allowance is £20,000 per individual for the 2024/25 tax year. This allows you to shelter up to £20,000 of savings or investments from income tax and capital gains tax. If you haven’t yet utilised your full allowance for this tax year, consider doing so before the year ends to ensure you maximise the benefits of tax-free growth.
If you have any questions or would like assistance in ensuring you’re making the most of these tax-saving opportunities, please don’t hesitate to reach out.
