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2024/25 year end tax planning guide

13th March 2025

As the end of the 2024/25 tax year approaches, it’s important to review your financial position and take advantage of available tax reliefs before new rules take effect. In this guide, Rowleys’ Tax Team share some key areas to consider in our 2024/2025 year end tax planning guide.

Business Asset Disposal Relief and Investors’ Relief

Business Asset Disposal Relief (BADR) and Investors’ Relief (IR) provide valuable opportunities to lower Capital Gains Tax (CGT) when investing in trading businesses.

Broadly, BADR applies to individuals selling their personal business, partnership interests, or shares in their employer’s company. Investors’ Relief is available to individuals disposing of qualifying shares in unlisted trading companies, provided they are not directors or employees. In some cases, trustees may also benefit. Various conditions apply.

Both reliefs reduce the CGT rate on qualifying gains, with a £1 million lifetime limit. From 6 April 2025, the CGT rate where BADR or IR applies will increase from 10% to 14%, and from 6 April 2026, it will rise again to 18%.

If you’re considering selling qualifying assets, careful timing could help you maximise the available relief. Selling before 6 April 2025 could help lock in the current 10% CGT rate.

Furnished holiday lettings

From 6 April 2025, the tax advantages for furnished holiday lettings (FHLs) will be abolished, meaning these properties will be treated like other rental properties. This means:

• No CGT reliefs such as BADR and rollover relief.
• Loss of capital allowances on furniture and equipment.
• No longer exempt from finance cost restriction rules.
• Profits will no longer count as ‘relevant earnings’ for pension purposes.

If you own a FHL, consider:

• Selling before 6 April 2025 to claim BADR at 10% CGT (before rates increase to 14% in 2025 and 18% in 2026).
• Ceasing FHL activity before April 2025 to retain BADR eligibility for three years.
• Using existing FHL losses before they are converted into standard rental losses.

Non-domicile tax regime changes

The current rules for the taxation of non-UK domiciled individuals will end next month. From 6 April 2025, the UK’s non-dom tax rules will be replaced with a new residence-based system. The changes are extensive, impacting income tax, CGT, and inheritance tax (IHT). If you are affected, now is the time to review your tax position and consider restructuring your financial arrangements.

Agricultural Property Relief

The Autumn Budget 2024 confirmed that from 6 April 2025, Agricultural Property Relief (APR) will be extended to cover land managed under an environmental agreement with or on behalf of:

• The UK government
• Devolved governments
• Public bodies
• Local authorities
• Approved responsible bodies

For landowners who have been hesitant to enter environmental schemes due to concerns about losing APR, this extension could provide new opportunities. However, it’s important to note:

• The extension applies only to certain schemes, so not all land used for environmental purposes will qualify.
• Further changes to APR and Business Property Relief (BPR) are set for 6 April 2026, so it’s crucial to stay informed and plan ahead.

Double cab pickups

From April 2025, HMRC will classify most double cab pickups as cars rather than vans for tax purposes, impacting benefit-in-kind (BIK) charges, capital allowances, and leasing costs. Key implications:

• Higher BIK tax for employees using them personally.
• Reduced capital allowances for businesses purchasing them.
• Restrictions on leasing relief for vehicles emitting over 50g/km CO2.

If you are considering purchasing or leasing a double cab pickup, doing so before April 2025 may allow you to retain the current, more favourable tax treatment.

Read our article: Tax changes on double cab pick-ups.

National Insurance Contributions

To qualify for the full State Pension, individuals typically need 35 years of National Insurance Contributions (NIC). If you have gaps in your record, voluntary contributions may help boost your pension entitlement. The deadline to fill gaps from 2006-2018 has been extended to 5 April 2025. Check your National Insurance record and consider making voluntary payments if it will be beneficial.

HMRC late payment interest rates

To encourage prompt payment of tax liabilities, the government has announced an increase in late payment interest charged by HMRC on late tax payments.

Currently, HMRC charges interest at the Bank of England base rate plus 2.5%. However, from April 2025, the interest rate will be increased by 1.5% to the Bank of England base rate plus 4%.

So, assuming no further changes to the base rate (which was reduced to 4.5% in February 2025), the rate of interest payable to HMRC on overdue tax will be 8.5% from 6 April 2025.

With rising interest rates, paying your taxes on time is more crucial than ever to avoid higher interest charges. Timely payments can also help prevent additional penalties.

It’s also worth noting that there will be no equivalent increase in repayment interest rates for tax refunds.

Other things to consider in your year end tax planning for 2024/25

While complex tax planning is important, ensure you also take care of essential tasks before the tax year-end:

• Maximise pension contributions within your annual allowance.
• Use your tax-free ISA allowance before 5 April 2025.
• Review your capital gains position to use the annual exemption before it resets.
• Consider making tax-efficient charitable donations before year-end.

Personalised tax planning advice

With the end of the tax year on the horizon (5 April), it is crucial that you consider your position as soon as possible to make the most of reliefs and allowances.

If you need help understanding your options and how you can improve your tax position, please contact a member of our friendly team who will be happy to help.

Disclaimer

 

This article represents our understanding of the law and HM Revenue & Customs’ practice as at 11 March 2025. It should not be construed as advice or a personalised recommendation. The most suitable solution for you will depend on your own personal circumstances.

 

No action should be taken without seeking further formal advice. Where suggestions relate to investments or pensions, please seek advice from an Independent Financial Adviser.