Whatever Your Financial Goals, Don’t Miss This Year’s Use-By Date for Your Tax Allowances
With the end of the 2021/22 tax year fast approaching, now is a great time to review your tax planning and ensure you are making the most of the available allowances and reliefs. Your annual tax allowances reset at the start of each tax year on 6 April, allowing you to save in a tax-efficient way.
Choosing how you want to distribute your savings across your allowances depends on your personal goals and the life events you need to plan for. You might want to consider how and when you want to access your savings, how much you will need for your retirement and even estate planning for your beneficiaries.
We have outlined this year’s pension and investment tax allowances, together with the latest tax rates below:
Have you made the most of your ISA (Individual Savings Account) allowance?
An ISA is a tax-efficient way to save for life’s big milestones and is usually easy-to-access.
The annual ISA allowance is currently £20,000 a year – this does not carry over between tax years, so any allowance you do not use by 5 April will be lost forever. Therefore, it makes sense to use as much of your ISA allowance as you can afford to each tax year.
Have you used your annual allowance for pension contributions?
Pensions come with great tax benefits. Firstly, pension contributions up to your annual allowance will also receive a 20% top-up – for example, if you are a basic rate taxpayer and invest £80 in your pension, HMRC will add an additional £20. You could reclaim an additional 20% if you pay higher-rate tax, and 25% for additional-rate taxpayers.
Your pension also benefits from favourable tax treatment whilst invested, including no tax on interest or capital gains, helping it grow faster than some less tax-efficient investments.
Have you considered the Junior ISA allowance?
If you have a child who is under 18, a Junior ISA (JISA) is a tax-efficient way to save for your child’s future as it is not subject to income or capital gains tax.
Junior ISAs have an annual tax allowance of ÂŁ9,000 but it is worth noting that withdrawals cannot be made from a Junior ISA until the child turns 18. When the child reaches 18 the Junior ISA will be converted to an adult ISA under their control.
Are you making the most of your Inheritance Tax allowances?
Each tax year you can make a range of gifts that are exempt from assessment for inheritance tax. Making financial gifts to your family and friends can be an effective way to reduce the value of your estate for Inheritance Tax and will benefit your family immediately.
Estate Planning is a complex area of financial planning, and common mistakes can be costly (for example, gifting to an unmarried partner or making non-cash gifts such as property).
The annual gift allowance is ÂŁ3,000. This can be carried over one year for a total of ÂŁ6,000. There are several additional tax-free allowances that can also be considered, however, if inheritance tax is a bigger concern you may benefit from specialist estate planning advice.
Specialist Tax Planning
If you are a higher-rate or additional-rate taxpayer who can tolerate a higher level of investment risk, you could also consider more complex tax-efficient investments such as Venture Capital Trusts (VCTs) or Enterprise Investment Schemes (EISs).
These offer generous tax benefits to offset the higher risk involved in investing in smaller, unquoted companies and usually require specialist advice.
Other tax and benefit allowances
There are a range of other tax and benefit allowances available that may be worth factoring into your financial planning, such as:
- Personal Savings Allowances
- Annual Dividend Allowances
- Marriage Allowance
- Financial Gifts
How can we help with tax planning?
Our financial advisers have an in-depth understanding of UK tax regulations and allowances and are experienced in helping our clients make the most of their allowances, ensuring they do not pay more tax than is necessary.
Whatever your tax position, our financial advisers will consider your overall situation, ensure you are making the most of your available allowances, assess where your potential tax liabilities are and the effect they may have on your life goals. With this understanding, we will develop an appropriate strategy to ensure you are making the most of any available tax planning opportunities.
Contact us today to arrange an initial consultation with one of our financial advisers to discuss your tax planning requirements.
The value of your investments can go down as well as up, and you can get back less than you originally invested.
