Seven important allowances and exemptions to use before the end of the tax year

Making the most of the tax allowances and exemptions that you are entitled to can help you reduce your liability and retain more of your wealth.

As we move into a new financial year, it can be beneficial to use any allowances and exemptions you are entitled to before 5 April to avoid paying more tax on your savings, investments, or earnings than necessary. You may also be eligible to backdate certain claims to previous tax years, provided they fall within a given time frame.

1. Marriage Allowance

The Marriage Allowance lets one partner in a marriage or civil partnership transfer a portion of their Personal Allowance to the other.

Your Personal Allowance is the threshold at which you start paying Income Tax. In the 2023/24 tax year, the Personal Allowance is £12,570 and is frozen until 2028.

If either you or your spouse earns under the Personal Allowance and the other is a basic-rate taxpayer, the Marriage Allowance lets the lower earner transfer up to £1,260 of their unused Personal Allowance to the higher earner.

The Marriage Allowance can save you up to £252 a year in tax. This can add up to a sizeable sum over the years, so it is well worth claiming it when you are eligible.

If you have previously been eligible for the Marriage Allowance and didn’t make use of it, you can backdate your claim to 5 April 2019. However, the backdate period will move to 5 April 2020 when the 2024/25 tax year begins.

2. ISA Allowance

ISAs allow you to save or invest your money tax-efficiently. The interest or returns you earn on money held in ISAs are free from Income Tax, Capital Gains Tax (CGT), and Dividend Tax. So, using an ISA to save or invest could reduce your tax bill.

Every year there is a limit on how much you can put into ISAs, known as the ISA Allowance. In the 2023/24 tax year, the ISA Allowance is £20,000.

If you don’t use your ISA Allowance in a financial year you will lose it at the start of the new tax year when it resets.

3. Junior ISA Allowance

A Junior ISA (JISA) is a type of ISA held in the name of a child, that allows you to save or invest money tax-efficiently for your children, grandchildren, or a child in your care. The child the account is registered with must be under the age of 18.

When the child turns 16, they gain control of the JISA, and can start making withdrawals when they turn 18. The JISA deposits you make could give them a financial head start in adulthood.

In the 2023/24 tax year, the JISA Allowance is £9,000, and is separate from your ISA Allowance. So, you can use your own ISA Allowance while also saving for your child or grandchild’s future.

If you don’t use the full JISA Allowance before it resets at the start of the new tax year, you’ll lose any remaining amount.

4. Dividend Allowance

The Dividend Allowance is the maximum amount of tax-free dividend income (in addition to the Personal Allowance) that you can earn each year before it is potentially liable for Dividend Tax. This includes dividends generated from investments, as well as any you receive from a company you own or have shares in.

In the 2023/24 tax year, the Dividend Allowance is £1,000. It is set to halve to £500 at the start of the new tax year on 6 April 2024.

Once you exceed the Dividend Allowance, the tax you pay on dividend income is based on your Income Tax band:

  • 8.75% for basic-rate taxpayers
  • 33.75% for higher-rate taxpayers
  • 39.35% for additional-rate taxpayers.

To reduce the impact of Dividend Tax on your wealth, you might consider holding any dividend-paying investments in a Stocks and Shares ISA, if possible, as any dividends within the ISA wrapper are not subject to tax.

5. Capital Gains Tax Annual Exempt Amount

When you sell or dispose of certain assets, such as non-ISA investments, second properties, or personal possessions worth more than £6,000, you may be liable to pay Capital Gains Tax (CGT) on possessions with a gain of more than your Annual Exempt Amount.

In the tax year 2023/2024, the Annual Exempt Amount is £6,000 for individuals and £3,000 for most trustees.

However, from 6 April, the Annual Exempt Amount will halve to £3,000 for individuals and £1,500 for most trustees.

Once you exceed your Annual Exempt Amount, the rate of CGT you pay depends on your Income Tax band:

  • 20% for higher- and additional-rate taxpayers, rising to 28% if the gains are from residential property
  • 10% for basic-rate taxpayers, rising to 18% if the gains are from residential property. 

If you currently have any assets you are planning to dispose of that are likely to exceed the new Annual Exempt Amount, selling them before 5 April could help you pay less in CGT.

Being strategic about when you sell assets could help you mitigate your CGT bill. Additionally, making the most of ISAs – where interest or returns are free from CGT – can help you reduce your tax liability.

6. Pension Annual Allowance

The pension Annual Allowance is the amount you can contribute to your pension in a single tax year without paying additional tax charges.

In the 2023/24 tax year, the pension Annual Allowance for most people is £60,000 or 100% of your earnings, whichever is lower. Your Annual Allowance may be lower if your income exceeds certain thresholds or you have already flexibly accessed your pension.

If you have not yet exceeded your Annual Allowance this tax year, choosing to contribute more to your pension could help boost your retirement fund and mean that more of your income benefits from tax relief.

7. Inheritance Tax Gifting Annual Exemption

Each year, you have a Gifting Annual Exemption that allows you to make gifts that fall outside of your estate for Inheritance Tax (IHT) purposes.

The Gifting Annual Exemption is currently £3,000 each tax year. You can also backdate any unused exemption for a year, meaning you can potentially gift up to £6,000 in a single year.

Your spouse or partner also has their own Annual Exemption, meaning you can pass on up to £6,000 between you, or potentially £12,000 if you both have full unused exemptions from the previous tax year.

Making use of your full Gifting Annual Exemption each year could reduce the size of your estate, ultimately mitigating the IHT that your family may have to pay when you die.

Get in touch

To find out how a financial adviser can help you to use your allowances and exemptions efficiently, get in touch. Email us at for more information.

Please note

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

The Financial Conduct Authority does not regulate estate planning, tax planning or will writing.

This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

Posted in Internal.