End-of-Tax-Year Planning Guide: Maximising Tax Efficiency Before 5 April

Introduction

As the tax year draws to a close, businesses and individuals have a important opportunity to review their finances, optimise tax efficiencies, and take advantage of available allowances before they reset on 6 April. Effective tax planning ensures that businesses and individuals make full use of reliefs and exemptions, reducing unnecessary tax liabilities.

The UK tax landscape evolves annually, with changes affecting income tax, capital gains, inheritance tax, pensions, and property-related taxes. Ensuring compliance while leveraging all available reliefs can lead to significant savings. This guide provides a structured overview of key areas to focus on before the tax year ends, helping businesses and individuals plan efficiently and avoid missed opportunities.

The areas covered in this guide include strategies for individuals, businesses, and investors, offering practical steps to take before the deadline.

Partner Statement – Jordan Cowsill

In today’s climate, it’s clear that economic uncertainty—both in the UK and globally—is becoming the new normal. Businesses and individuals alike are facing an environment where financial stability isn’t just about increasing revenue but about protecting and optimising what you already have.

Now, more than ever, it’s vital to ensure you have a solid plan to build and maintain wealth, optimise your tax position, and prepare your business for future challenges. Tax efficiency isn’t just about reducing your liabilities today—it’s about ensuring your long-term financial resilience, making sure you retain more of what you earn, and putting yourself in the strongest possible position for whatever comes next.

At COPA Accounting, we believe in taking a proactive approach to financial planning. Whether it’s maximising reliefs and allowances before they reset, restructuring your business for efficiency, or planning ahead for future tax changes, the right strategy now can make all the difference.

As the deadline approaches, take the time to review your position, make informed decisions, and act before opportunities are lost. The businesses and individuals that thrive in uncertain times are those who plan ahead—and we’re here to help you do just that.

Tax Planning Checklist

With the 2024/25 tax year ending on 5 April, now is the time to review your financial position and make sure you’re maximising all available tax reliefs and allowances before they reset. Consider the following:

• Have you utilised your £3,000 Capital Gains Tax (CGT) exemption, or can you offset gains against losses to reduce your tax bill?
• Are you making full use of your £60,000 annual pension allowance, or carrying forward any unused allowances from the past three years?
• If your income exceeds £260,000, have you checked whether your pension allowance has been tapered?
• Have you used your £20,000 ISA allowance before it resets, or considered a Lifetime ISA (LISA) for homeownership or retirement?
• If your taxable income is over £100,000, could pension contributions or charitable donations help retain your personal allowance?
• Have you planned for the reduction in the dividend allowance (£500) and structured your income tax-efficiently?
• Have you considered EIS, SEIS, or VCT investments to benefit from tax relief and capital gains deferral?
• If you have surplus company cash, have you explored charging interest on director’s loans to make use of your £1,000 savings allowance?
• Have you used your £3,000 annual gift exemption for inheritance tax planning, or structured your estate tax-efficiently?

Taking action now ensures you maximise reliefs, reduce liabilities, and stay in control of your tax position before the deadline.

Maximising ISAs

ISAs (Individual Savings Accounts) remain one of the most tax-efficient savings and investment vehicles in the UK, offering tax-free growth and withdrawals. With the annual allowance resetting on 6 April 2025, it is essential to maximise contributions before the deadline to make full use of the available tax benefits.

Types of ISAs and Allowances for 2024/25

• Cash ISA – A tax-free savings account that earns interest without incurring tax.
• Stocks & Shares ISA – Allows investment in stocks, bonds, and funds with tax-free capital gains and dividends.
• Innovative Finance ISA (IFISA) – Enables investment in peer-to-peer lending and crowdfunding platforms.
• Lifetime ISA (LISA) – Designed for first-time homebuyers and retirement savings, offering a 25% government bonus on contributions (up to £4,000 per year).
• Junior ISA (JISA) – A long-term savings account for children, with an annual contribution limit of £9,000.

Key ISA Rules and Considerations

Annual Allowance of £20,000

• Each adult can invest up to £20,000 per tax year across any combination of ISAs.
• The allowance does not roll over, so unused amounts are lost after 5 April.

Tax-Free Growth & Withdrawals

• Interest, dividends, and capital gains within an ISA are completely tax-free.
• Unlike pensions, withdrawals are not subject to income tax.

Flexibility in Contributions & Withdrawals

• Some ISAs allow withdrawals and replacements within the same tax year without affecting the annual limit.
• Junior ISAs automatically convert into an adult ISA when the child turns 18, with full control transferred to them.

Potential Changes to ISA Rules

• There have been discussions about reducing the ISA annual allowance in future budgets. Maximising contributions now ensures long-term tax-free growth.

Strategic ISA Planning Before 5 April 2025

• Use the Full £20,000 Allowance – If possible, contribute the maximum amount before the deadline.
• Consider a Stocks & Shares ISA for Growth – Historically, investments in equities have outperformed cash savings over the long term.
• Junior ISAs for Children – Parents and grandparents can fund tax-free savings for the next generation.
• Lifetime ISAs for Homebuyers & Retirement – Eligible individuals under 40 should take advantage of the 25% government bonus.
• Review & Transfer ISAs – It may be beneficial to switch providers for better rates or investment options.

Pension Contributions and Retirement Planning

Pensions remain one of the most tax-efficient ways to save for retirement, offering income tax relief, tax-free investment growth, and potential inheritance tax benefits. With the tax year ending on 5 April 2025, individuals should review their pension contributions to ensure they maximise available allowances and avoid unnecessary tax charges.

Maximising Pension Contributions

Annual Allowance – The standard annual pension allowance is £60,000 for the 2024/25 tax year. Contributions up to this limit receive income tax relief at the highest marginal rate.

Carry Forward Unused Allowances – If you haven’t used your full allowance from the last three tax years, you may be able to carry it forward to increase this year’s contributions.

Employer Contributions – If in employment, check whether your employer offers salary sacrifice schemes, which can reduce both income tax and National Insurance while increasing pension contributions.

Tax Relief on Contributions

• Basic rate taxpayers (20%) – For every £80 contributed, HMRC adds £20, making a total of £100 in the pension.
• Higher rate taxpayers (40%) – Additional tax relief can be claimed through self-assessment, reducing the net cost to £60 per £100 contributed.
• Additional rate taxpayers (45%) – The effective cost of a £100 contribution is £55 after tax relief.

Pension Tax Rules and Thresholds

Tapered Annual Allowance – High earners with adjusted income over £260,000 have their pension allowance reduced. The allowance tapers down to a minimum of £10,000 for individuals with total income exceeding £360,000.

Money Purchase Annual Allowance (MPAA) – If you’ve accessed pension funds flexibly, future contributions may be limited to £10,000 per year.

Tax-Free Lump Sum – Up to 25% of your pension pot can be withdrawn tax-free after reaching the minimum pension age (currently 55, rising to 57 from April 2028).

Lifetime Allowance (LTA) Changes

The Lifetime Allowance (LTA) has been abolished from April 2024, meaning there is no longer a limit on the total value of pension savings. However, a new Lump Sum Allowance restricts the tax-free portion of withdrawals to £268,275.

Pension Planning Before 5 April 2025

• Check if you can carry forward unused pension allowances from previous years to maximise tax relief.
• Review employer pension contributions, particularly if salary sacrifice can enhance savings.
• Ensure high earners do not exceed tapered allowances, as exceeding the annual limit incurs a tax charge.
• Consider making additional contributions to reduce taxable income and retain the full £12,570 personal allowance if earnings exceed £100,000.

Enterprise Investment Scheme (EIS), Seed Enterprise Investment Scheme (SEIS), and Venture Capital Trusts (VCTs)

Tax-efficient investments such as EIS, SEIS, and VCTs provide significant tax reliefs, making them attractive for investors looking to reduce their tax liabilities while supporting early-stage and high-growth businesses. These schemes offer income tax relief, capital gains tax advantages, and loss relief, making them powerful tools for wealth management and portfolio diversification.

Enterprise Investment Scheme (EIS)

The Enterprise Investment Scheme (EIS) is designed to encourage investment in high-growth, unlisted companies. Investors benefit from the following tax reliefs:

• Income Tax Relief – Up to 30% relief on investments of up to £1 million per year (or up to £2 million for knowledge-intensive businesses).
• Capital Gains Tax (CGT) Deferral – Gains from other investments can be deferred if reinvested in EIS shares.
• Tax-Free Growth – No CGT is payable on the sale of EIS shares if held for at least three years.
• Loss Relief – If the investment is unsuccessful, losses can be offset against income or capital gains tax.
• Inheritance Tax (IHT) Exemption – EIS shares qualify for 100% Business Relief (BR) after being held for two years.

Seed Enterprise Investment Scheme (SEIS)

The Seed Enterprise Investment Scheme (SEIS) offers even greater tax incentives to encourage investment in smaller start-up companies:

• Income Tax Relief – Up to 50% relief on investments of up to £200,000 per year.
• Capital Gains Tax Exemption – 50% of reinvested gains can be exempt from CGT.
• Tax-Free Growth – No CGT is payable on SEIS shares if held for at least three years.
• Loss Relief – If the business fails, the investor can claim loss relief against income or capital gains.
• Inheritance Tax (IHT) Exemption – SEIS shares qualify for 100% Business Relief after two years.

Venture Capital Trusts (VCTs)

Venture Capital Trusts (VCTs) are listed companies that invest in small, high-growth businesses. They provide the following benefits:

• Income Tax Relief – 30% relief on investments of up to £200,000 per year, provided the shares are held for at least five years.
• Tax-Free Dividends – Dividends received from VCTs are exempt from income tax.
• Tax-Free Growth – No CGT applies to the sale of VCT shares.

Choosing the Right Tax-Efficient Investment

Key Planning Points Before 5 April 2025

• EIS and SEIS investments can be carried back to the previous tax year, providing flexibility for tax relief.
• VCTs offer tax-free dividends, making them attractive for income-focused investors.
• Combining EIS/SEIS with CGT deferral strategies can significantly reduce capital gains liabilities.
• Investments must be held for the minimum period to retain tax reliefs.

Income Tax Planning: Maximising Allowances and Understanding Tax Rates

With income tax thresholds frozen until at least 2028, more individuals are being pulled into higher tax brackets, increasing overall tax burdens. Strategic tax planning before 5 April 2025 ensures that allowances are fully utilised and taxable income is structured efficiently to minimise liabilities.

Income Tax Rates for 2024/25 and 2025/26

There are no announced changes to income tax thresholds for 2025/26, meaning they will remain the same as in 2024/25:

2024/25 & 2025/26 Income Tax Bands

• Personal Allowance: £12,570 (phased out for incomes over £100,000).
• Basic Rate (20%) – Income between £12,571 and £50,270.
• Higher Rate (40%) – Income between £50,271 and £125,140.
• Additional Rate (45%) – Income above £125,140.

Key Considerations for High Earners

• Losing the Personal Allowance: If income exceeds £100,000, the personal allowance reduces by £1 for every £2 earned over this threshold. By £125,140, the allowance is fully lost, creating an effective 60% tax rate in this range.
• Reducing Taxable Income: Pension contributions, charitable donations, and salary sacrifice can bring income below key thresholds, reducing tax liability.

National Insurance Contributions (NICs) – 2024/25 & 2025/26

Employees (Class 1 NICs)

• 2024/25 & 2025/26:
  • 8% on earnings between £12,570 and £50,270.
  • 2% on earnings above £50,270.

Employers (Class 1 NICs):

• 2024/25:

• • Rate: 13.8% on earnings above £9,100 per year.​

• 2025/26:

• • Rate: Increases to 15% on earnings above £5,000 per year.​

Self-Employed (Class 4 NICs)

• 2024/25 & 2025/26:
  • 6% on profits between £12,570 and £50,270.
  • 2% on profits above £50,270.

Class 2 NICs (Self-Employed Flat Rate Contributions)

• Abolished from April 2025, though voluntary contributions may still be required for state pension eligibility.

Voluntary Contributions (Class 3 NICs) – 2024/25 & 2025/26

• 2024/25 Rate: £17.45 per week (£907.40 per year).
• 2025/26 Rate: To be confirmed.
• Purpose: Allows individuals to fill gaps in their NI record to qualify for the State Pension.
• Self-Employed Impact: With Class 2 NI being abolished from April 2025, self-employed individuals who do not pay Class 1 NICs through employment will need to voluntarily contribute under Class 3 to maintain pension eligibility.

Maximising Income Tax Allowances Before 5 April 2025

Personal Savings Allowance (PSA)

• Basic Rate Taxpayers: £1,000 of savings interest is tax-free.
• Higher Rate Taxpayers: £500 of savings interest is tax-free.
• Additional Rate Taxpayers: No allowance.

Starting Rate for Savings

• If total income is below £17,570, up to £5,000 of interest is tax-free.

Additional Planning Consideration:

• Director’s Loan Account (DLA) Interest: Directors can charge interest on funds loaned to their company. The interest received is taxable as savings income but benefits from the Personal Savings Allowance (£1,000 for basic rate taxpayers, £500 for higher rate taxpayers). This strategy allows directors to extract funds tax-efficiently, especially when the dividend allowance is minimal.

High-Income Child Benefit Charge (HICBC)

• Child Benefit is withdrawn once one parent’s income exceeds £60,000 and fully lost at £80,000.
• Planning Tip: Making pension contributions or salary sacrifices can reduce taxable income to retain Child Benefit.

30 Hours Free Childcare Allowance

• Parents earning over £100,000 lose eligibility.

• Planning Tip: Structuring income between spouses may help retain this benefit.

Dividend Allowance and Tax Rates – 2024/25 & 2025/26

• Dividend Allowance remains at £500 per person for both 2024/25 and 2025/26.
• Dividend Tax Rates (unchanged for 2025/26):
  • Basic Rate Taxpayers: 8.75%
  • Higher Rate Taxpayers: 33.75%
  • Additional Rate Taxpayers: 39.35%

Planning Considerations:

• Using a Spouse’s Allowance: If one partner is in a lower tax bracket, transferring dividend-paying shares may reduce overall tax exposure.
• Optimising Profit Extraction: Business owners should consider whether a mix of salary, dividends, and interest is the most tax-efficient approach.

Corporation Tax Rates – 2024/25 & 2025/26

Corporation tax rates remain unchanged for 2025/26:

• Main Corporation Tax Rate: 25% (for profits over £250,000).
• Small Profits Rate: 19% (for profits up to £50,000).
• Marginal Relief: Applies to profits between £50,001 and £250,000, gradually increasing the effective tax rate.

Optimal Salary vs. Dividend Strategy for Business Owners in 2025/26

For limited company directors, the most tax-efficient way to extract profits is through a combination of salary and dividends. The best approach depends on whether the Employment Allowance can be claimed.

Scenario 1: One Director on Payroll (No Employment Allowance Available)

• Optimal Salary: £12,570 per year (equal to the personal allowance).
• Why? No Income Tax or employee NICs are payable at this level.
• Employers’ NICs: Due at 15% on the portion of salary above £5,000:
  • £12,570 – £5,000 = £7,570 subject to NICs
  • Employer’s NICs: £7,570 x 15% = £1,135.50
• Corporation Tax (CT) Relief: Additional salary and employer’s NICs reduce taxable profits, leading to:
  • Tax relief on additional salary (£7,570) + employer’s NICs (£1,135.50) at 25% = £2,176.37
• Total Corporation Tax Saving: £3,426.37 (full salary deduction plus employer’s NICs offset against CT).
• Net Tax Saving on Salary: £2,290.87 (CT saving less NIC payable)
• Dividends: Any additional income should be taken as dividends up to the basic rate threshold (£50,270 total income) to benefit from the lower 8.75% tax rate.

Scenario 2: Two Directors on Payroll (Employment Allowance Available)

• Optimal Salary: £12,570 per year (equal to the personal allowance).
• Why? No Income Tax or employee NICs are payable, and the Employment Allowance (£10,500) offsets the Employer NICs due.
• Total Corporation Tax Saving: £3,142.50
• Dividends: Additional income should be taken as dividends up to £50,270 total income, ensuring most income is taxed at 8.75% rather than higher-rate tax.

Key Takeaways:

• Single Director:£12,570 salary remains optimal due to Corporation Tax relief exceeding Employers’ NICs cost.
• Multiple Directors:£12,570 salary is fully tax-efficient due to Employment Allowance offsetting NICs.
• Dividends remain the most tax-efficient way to extract profits beyond salary.
• While running a salary of £12,570 is optimal for single director, it will require increased admin due to monthly NI payments to HMRC, with the tax benefits only being realised at year-end in the company accounts.

Property Taxes: Key Considerations for Landlords and Investors

Property taxation has undergone significant changes in recent years, affecting landlords, investors, and second-home buyers. With buy-to-let mortgage interest relief restrictions, higher Stamp Duty Land Tax (SDLT) for additional properties, and allowances for rental income deductions, property owners must carefully consider their tax position before 5 April 2025.

Stamp Duty Land Tax (SDLT) for Residential Properties

2024/25 SDLT Rates

• Up to £250,000 – 0%

• £250,001 to £925,000 – 5%

• £925,001 to £1.5 million – 10%

• Over £1.5 million – 12%

Changes for 2025/26 (Effective from 1 April 2025)

• Up to £125,000 – 0%

• £125,001 to £250,000 – 2%

• £250,001 to £925,000 – 5%

• £925,001 to £1.5 million – 10%

• Over £1.5 million – 12%

Additional Property Surcharge

• 2024/25: 3% surcharge applies for second homes and buy-to-let properties.

• 2025/26: Surcharge increased to 5% from 31 October 2024, making property purchases more expensive for landlords.

First-Time Buyer Relief

• 2024/25: No SDLT on properties up to £425,000

• 2025/26: Threshold reduces to £300,000

Planning Consideration

• If purchasing a second home, explore whether transferring property ownership between spouses can optimise tax efficiency.

Capital Gains Tax (CGT) rates on residential property

Rates in the UK have been adjusted:​

• Basic Rate Taxpayers:Remains at 18%.​

• Higher and Additional Rate Taxpayers:Reduced from 28% to 24%.​

This reduction aims to incentivize property transactions by lowering the tax burden on higher-rate taxpayers disposing of residential properties.

It’s important to note that these changes apply to gains exceeding the individual’s tax-free allowance, which is £3,000 for the 2024/25 tax year.

For gains on other chargeable assets, the CGT rates remain at 10% for basic rate taxpayers and 20% for higher and additional rate taxpayers.

Mortgage Interest Relief for Landlords

Buy-to-let landlords can no longer deduct mortgage interest as an expense. Instead, they receive a 20% basic rate tax credit on interest payments. This change particularly impacts higher and additional rate taxpayers, who used to benefit from full interest deductions at 40% or 45% tax rates.

Planning Considerations:

• Landlords operating through a limited company can still claim full mortgage interest deductions as a business expense.

• Those with multiple properties may consider restructuring their portfolio for tax efficiency.

Furnished Holiday Lets (FHLs) – Abolition from April 2025

The FHL tax regime will be abolished from 6 April 2025, removing key tax benefits for landlords. Currently, qualifying FHLs benefit from full mortgage interest deduction and Business Asset Disposal Relief (BADR), allowing a 10% CGT rate on sale. From April 2025, mortgage interest relief will be restricted, and standard CGT rates of 18%/24% will apply.

Allowable Property Expenses for Landlords

Expenses that can be deducted from rental income include:

• Repairs and maintenance (not capital improvements).

• Letting agent fees.

• Insurance and council tax (if paid by the landlord).

• Ground rent and service charges.

• Legal and professional fees related to the rental business.

Planning Consideration:

• Replacing items (e.g., furniture or appliances) qualifies for the Replacement of Domestic Items Relief, but capital improvements do not.

Private Residence Relief (PRR):

• If the property was your main home at some point, PRR may reduce CGT liability when selling.

Lettings Relief:

• No longer widely available unless the owner shared occupancy with a tenant.

Planning Considerations:

• Spouses can transfer properties between each other tax-free to maximise CGT allowances.

• Timing disposals across tax years may help reduce tax liabilities.

Capital Gains Tax (CGT) Planning: Managing Liabilities and Timing Disposals

Capital Gains Tax (CGT) applies when individuals sell or dispose of assets such as shares, property, or other investments at a profit. Recent reductions in the CGT annual exemption and changes to tax rates make careful planning essential to minimise liabilities before the 5 April 2025 deadline.

Annual CGT Exemption and Strategic Use

CGT Annual Exemption

• 2024/25: £3,000 per person (reduced from £6,000 in 2023/24).

• 2025/26: Remains at £3,000 per person.

• Exemption Cannot Be Carried Forward: If unused, the allowance is lost.

Planning Considerations

• Utilise Both Spouses’ Allowances: Assets can be transferred tax-free between spouses or civil partners before disposal to take advantage of both exemptions (£6,000 total).

• Crystallising Gains Over Multiple Years: Spreading disposals across tax years can help maximise allowances and reduce tax exposure.

Capital Gains Tax Rates

CGT Rates on Most Assets:

• 2024/25 (Updated 31^st Oct 24 to the 2025/26 rates):

  • Basic Rate Taxpayers: 10%

  • Higher/Additional Rate Taxpayers: 20%

• 2025/26:

  • Basic Rate Taxpayers: 18%

  • Higher/Additional Rate Taxpayers: 24%

CGT Rates on Residential Property Sales:

• 2024/25:

  • Basic Rate Taxpayers: 18%

  • Higher/Additional Rate Taxpayers: 24% (reduced from 28% in 2023/24).

• 2025/26: (unchanged)

  • Basic Rate Taxpayers: 18%

  • Higher/Additional Rate Taxpayers: 24%

By strategically managing disposals and allowances, individuals can reduce their CGT liability and optimise tax efficiency.

Using Capital Losses to Offset Gains

Losses on Other Assets Can Be Used to Reduce CGT Liabilities. Unused Losses Can Be Carried Forward Indefinitely, provided they are reported to HMRC.

Planning Considerations:

• Selling assets at a loss to offset gains (known as tax-loss harvesting) can reduce tax liabilities.

• If repurchasing the asset, ensure compliance with the 30-day rule, which prevents immediate reacquisition of sold assets from qualifying for loss relief.

Investors’ Relief and Business Asset Disposal Relief (BADR)

Investors’ Relief:

• CGT rate of 10% on gains from qualifying investments, up to a £1m lifetime limit.

Business Asset Disposal Relief (BADR) (formerly Entrepreneurs’ Relief):

• Available on the sale of a trading business or shares in a trading company.

• CGT rate of 10% on qualifying gains, up to a £1m lifetime limit.

• Increases to 14% from 6^th April 25.

• Increased to 18% from 6^th April 26.

Planning Considerations:

• Ensure that qualifying conditions for BADR are met before selling a business.

• Investors’ Relief is beneficial for individuals who do not qualify for BADR but have invested in private companies.

Inheritance Tax (IHT) Planning: Structuring Estates Efficiently

Inheritance Tax (IHT) remains a key concern for individuals looking to pass on wealth tax-efficiently. Without proper planning, estates above the tax-free thresholds could face a 40% tax charge, significantly reducing the value passed to beneficiaries. By making use of available allowances, reliefs, and exemptions, individuals can ensure their estate is structured efficiently before 5 April 2025.

Current IHT Thresholds and Tax Rates (2024/25 & 2025/26)

• Nil-Rate Band (NRB): £325,000 (Frozen until 2030) – No IHT is due on estates below this threshold.
• Residence Nil-Rate Band (RNRB): £175,000 (Frozen until 2030) – Additional relief when passing a main home to direct descendants.
• IHT Rate: 40% on the portion of the estate above £325,000.
  • Reduced IHT Rate: If 10% or more of the estate is left to charity, the IHT rate is reduced to 36%.
• Married Couples and Civil Partners:
  • Unused nil-rate bands can be transferred to a surviving spouse, potentially increasing the tax-free threshold to £1 million (£325,000 + £175,000 x 2).

These thresholds and rates are set to remain unchanged through the 2025/26 tax year. ​

It’s important to note that while the NRB and RNRB are frozen, rising property values and inflation may result in more estates becoming liable for IHT over time.​

Annual IHT-Free Gifting Allowances

Annual Gift Exemption: Individuals can gift up to £3,000 per year without it being included in their estate.

Small Gift Allowance: Gifts of up to £250 per recipient per year are tax-free.

Wedding Gifts:

• £5,000 from a parent to a child.
• £2,500 from a grandparent to a grandchild.
• £1,000 from any other person.

Regular Gifts from Surplus Income:

• If gifts are made regularly from surplus income (not capital), they are immediately exempt from IHT, provided they do not impact the donor’s standard of living.

Planning Considerations:

• Making use of annual exemptions and structured gifting can reduce the taxable value of an estate over time.
• Documenting gifts carefully ensures they qualify for IHT exemptions.

Potential IHT on Gifts – The 7-Year Rule

Potentially Exempt Transfers (PETs):

• Gifts above the £3,000 annual exemption may still be tax-free if the donor survives seven years.
• If the donor dies within seven years, the gift becomes taxable.

Taper Relief on Gifts (for amounts exceeding the nil-rate band):

• If the donor dies within seven years, the tax payable reduces on a sliding scale:

Planning Considerations:

• Early gifting allows the 7-year clock to start sooner, reducing IHT exposure.
• Life insurance policies can help cover potential IHT liabilities on gifts.

Business Relief and Agricultural Relief: Reducing Inheritance Tax on Business and Farming Assets

For individuals with business interests or agricultural property, Inheritance Tax (IHT) reliefs can significantly reduce or eliminate tax liabilities when passing assets to the next generation. Business Relief (BR) and Agricultural Property Relief (APR) allow qualifying assets to be passed on at a reduced or zero tax rate, making them valuable tools for estate planning.

Business Relief (BR) for Inheritance Tax

What is Business Relief?

• BR allows certain business assets to be passed on with 100% relief from IHT or at a reduced rate of 50%.

100% Business Relief Applies To:

• A sole trader business or an interest in a partnership.

• Shares in an unlisted company (including AIM-listed shares).

50% Business Relief Applies To:

• Shares in a company where the deceased had control of more than 50%.

• Land, buildings, or plant and machinery used in a business but owned personally.

Changes from April 2026:

• A £1 million cap will be introduced for full 100% Business Relief—amounts above this threshold will receive only 50% relief.

• AIM-listed shares will only qualify for 50% relief, instead of 100%, making investment structuring an important consideration.

Conditions for Business Relief Eligibility

• The asset must have been owned for at least two years before death.

• BR is not available for businesses mainly dealing in investments (e.g., property rental companies).

Planning Considerations:

• Review business structure to ensure assets qualify for BR under the new rules.

• Holding AIM-listed shares may be less tax-efficient from April 2026 due to the reduced relief.

• Gifting business assets before death can still qualify for BR, provided the recipient continues running the business.

These upcoming changes make it even more important for business owners and investors to review their estate plans and tax positions in advance of April 2026.

Agricultural Relief (AR) for Inheritance Tax

Agricultural Relief (AR) allows qualifying farmland, buildings, and farmhouses to be passed on with either 100% or 50% relief from Inheritance Tax (IHT), helping farming families reduce tax liabilities when passing assets to the next generation.

What is Agricultural Relief?

• 100% relief applies to certain owner-occupied or tenanted farmland.

• 50% relief applies to some short-term rented farmland.

100% Agricultural Relief Applies To:

• Owner-occupied farmland that has been actively farmed for at least two years.

• Tenanted farmland let on agreements lasting at least seven years.

50% Agricultural Relief Applies To:

• Land rented under short-term tenancies (less than seven years).

Changes from April 2026:

• A £1 million cap will be introduced for 100% relief—amounts exceeding this will receive only 50% relief.

• Non-UK land will no longer qualify for AR, limiting relief to agricultural property in the UK.

Conditions for Agricultural Relief Eligibility

• The land must be used for genuine agricultural purposes.

• Farmhouses must be occupied by a working farmer to qualify.

Planning Considerations:

• Ensure land remains actively farmed and complies with AR rules.

• Avoid non-agricultural use (e.g., development or commercial letting), as this can disqualify relief.

• Review ownership structures to maximise tax efficiency before the April 2026 changes take effect.

These upcoming changes could significantly impact larger agricultural estates, making early estate planning essential.

Final Summary: Key Takeaways for Tax Efficiency Before 5 April

As the tax year comes to an end, taking proactive steps now can help maximise tax efficiency and reduce unnecessary liabilities. Whether you are an individual, investor, or business owner, the strategies outlined in this guide will help you optimise your financial position before allowances reset on 6 April 2025.

Key Actions to Take Before the Deadline

Review Your Tax Position – Ensure you have used your Capital Gains Tax (CGT) exemption, ISA allowance, and pension contributions to avoid losing valuable reliefs.

Optimise Income Tax & Dividends – Structure your income efficiently to minimise tax liabilities, especially if you are close to key tax thresholds.

Plan for Business & Property Taxes – If you own a limited company, rental property, or Furnished Holiday Let (FHL), consider how upcoming tax changes will impact your profits and adjust accordingly.

Maximise Tax-Efficient Investments – Explore EIS, SEIS, and VCTs to benefit from income tax relief, CGT exemptions, and inheritance tax planning.

Consider Inheritance Tax Planning – Use annual gift exemptions and plan ahead for Business and Agricultural Relief changes set to take effect in April 2026.

Act Now to Secure Tax Savings – Many allowances do not roll over into the next tax year, so delaying action could mean missing out on valuable reliefs.

By reviewing your position and making informed decisions now, you can maximise savings, improve cash flow, and ensure long-term financial security.

If you need further guidance, COPA Accounting is here to help—ensuring you stay ahead of tax changes and make the most of every opportunity.