It’s well worth factoring some time into your busy schedule now to make sure you have your financial affairs in order before the end of the tax year.

1. Pensions

You can contribute as much as you like into your pension, but you are limited to tax relief on £40,000, which is the current Annual Allowance. You can also carry forward unused allowances from the past three years, provided you were a pension scheme member during those years. You also need to consider the Lifetime Allowance which places a limit on the amount you can hold across all your pension funds without having to pay extra tax when you withdraw money. This limit is currently £1,073,100. Don’t forget that you can invest into a pension for a non-working or non-tax paying spouse or civil partner, as well as for children under 18. The maximum annual contribution you can currently make is £2,880 which, along with tax relief, amounts to £3,600 a year.

2. Investments

Don’t overlook your Individual Savings Account (ISA) allowance, which is £20,000 for 2021-22 and set to remain at this level for 2022-23. As you can’t carry over your ISA allowance into the next tax year, you need to use it or lose it! You can put all the £20,000 into a Cash ISA, or invest the whole amount into a Stocks and Shares ISA or Innovative Finance ISA. There is no Income Tax or Capital Gains Tax (CGT) payable on ISA proceeds.

Junior ISAs are a tax-efficient way to build up savings for children (and grandchildren) and can be opened for any child under 18 living in the UK – the maximum investment is £9,000 per child.

Both Venture Capital Trusts (VCTs) and Enterprise Investment Schemes (EISs) remain an attractive proposition for experienced investors looking to maximise tax-efficiency and diversify their portfolios. The maximum investment into VCTs is £200,000 and £1m for EISs – both are only suitable for investors who are comfortable holding high-risk investments.

3. Inheritance Tax (IHT)

Many people overlook the relatively small sums you can gift for IHT purposes, but you should use these exemptions where possible to gradually reduce your overall estate. You can make gifts worth up to £3,000 in each tax year which will be exempt from IHT on your death. Any unused part of the £3,000 exemption can be carried forward to the following year and then expires. Certain gifts don’t use up this annual exemption but there is still no IHT due on them – for example, wedding gifts of up to £5,000 for a child, £2,500 for a grandchild (or great grandchild) and £1,000 to anyone else. Individual gifts worth up to £250 are also IHT free.

4. Capital Gains Tax (CGT)

Every individual is entitled to a CGT annual exemption which is currently £12,300 (£6,150 for trusts). You can’t carry forward this relief, so you may want to consider crystallising any gains or offsetting any losses before 5 April. Your family can help out too – spouses and civil partners can take advantage of the rules allowing assets to be gifted with no CGT implication until the asset is subsequently disposed of.

5. Dividend allowance

For the current tax year, investors can earn up to £2,000 in dividend income tax-free. How much tax you pay on dividends above the Dividend Allowance depends on your Income Tax band; this is 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers. Tax on dividends will increase by 1.25 percentage points in April to fund the new Health and Social Care Levy, taking the rate of tax payable to 33.75% for higher rate taxpayers and 39.35% for additional rate taxpayers.

Act now – don’t delay

There are significant opportunities to take advantage of before the end of the tax year, so don’t delay. We have produced a 2021-22 end of tax year guide specifically for barristers and members of the judiciary which can be downloaded here

Fleet Street Wealth is a trading style of Fleet Street Financial which is authorised and regulated by the Financial Conduct Authority. Fleet Street Wealth is a Chartered, independent, fee-based financial advisory and wealth management practice based in Temple. We provide advice on areas such as mortgages, life assurances, pensions, ISAs, onshore and offshore investments, VCTs, EIS and private medical cover.

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