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Did you know you could earn up to £12,570 tax-free in the 2024/25 tax year? This is called your “personal allowance.” But here’s the catch—if you don’t use it before 6 April 2025, you lose it forever! Time is running short, and you need to act fast.
What’s So Special About the Personal Allowance?
Your personal allowance is like free money from the government—it’s the amount you can earn each year without paying a single penny in income tax. For 2024/25, that’s exactly £12,570. But it resets to zero after 5 April 2025. Any unused amount disappears, never to be returned.
Ready to make the most of your allowance? Let’s dive into some simple but powerful ways you can use it before it’s too late.
Quick Tip: Pay Yourself a Salary or Bonus!
Do you run a personal or family business? You can use part of your allowance to pay yourself a salary or bonus from your company. Aim to pay yourself £12,570, which is the full amount of your allowance. If you haven’t done this for the 2024/25 year yet, now is a good time. This decision will give you extra cash without any extra taxes!
Bring Forward Your Income, Delay Your Expenses
Here’s a clever trick: If you’re self-employed or run a small business, you can control when you earn money and when you pay bills. For example, sending invoices earlier than usual brings more income into this tax year, and waiting until the next tax year to pay certain bills delays those expenses.
This strategy boosts your income right now, making the most of your £12,570 allowance. If your income for this year is below that amount, accelerating your earnings could help you use your allowance fully and save you taxes.
Over 55? Unlock Your Pension Tax-Free!
If you’re aged 55 or older and have already started accessing your pension—perhaps by taking your 25% tax-free lump sum—you can take additional money from your pension now to fully use your personal allowance.
Why does this matter? By carefully withdrawing amounts within your £12,570 allowance, you effectively pay no tax on this money. This strategy turns your personal allowance into immediate tax-free income!
High Earners Beware—Your Allowance Could Disappear!
Do you earn more than £100,000? Be careful! Your personal allowance shrinks by £1 for every £2 you earn above £100,000, completely disappearing when you reach £125,140.
Don’t panic! There are ways to protect your allowance. You can:
- Delay income: Push bonuses or dividends into the next tax year.
- Reduce your income: Consider making pension contributions or charitable donations to lower your income and keep more of your allowance.
These steps can save you thousands of pounds, preserve your personal allowance, and significantly cut your tax bill.
Married? Claim Your Marriage Allowance!
Are you married or in a civil partnership? Here’s an interesting fact: If you haven’t used all of your £12,570 personal allowance, you can transfer part of it (£1,260) to your spouse or civil partner, as long as they pay tax at the basic rate. This simple step could lower their tax bill by up to £252. It’s like discovering extra money you didn’t know you had!
Don’t Lose Out—Act Now!
Time is ticking down rapidly to the end of the tax year. If you don’t use your personal allowance by 5 April 2025, you’ll miss out forever.
Make sure you:
- Pay yourself or a family member a salary or bonus up to £12,570.
- Consider bringing income forward and delaying expenses.
- Withdraw pension funds strategically.
- Protect your allowance by reducing your taxable income if you’re a higher earner.
- Transfer unused allowance to your spouse or civil partner using the marriage allowance.
These simple yet powerful strategies ensure you’re not leaving money on the table. Remember, once midnight strikes on 5 April 2025, your chance to save with the £12,570 personal allowance disappears for good.
Act now—your wallet will thank you later!