The end of the tax year is drawing near. You may be thinking about what financial planning tips you should be following in the next few weeks. Here are some simple tips to help…
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Make use of your ISA allowance.
ISAs are a great way to keep your savings growing free from tax. With the 2021/22 tax year ending on 5th April, now is the perfect time to review any savings you might have set aside and make sure they are working as hard as possible for you.
A cash ISA provides an interest rate, which is usually low. A Stocks & Shares ISA allows investments into various asset classes, with the potential for more significant long-term gains.
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Pension contributions
In the UK, you can contribute up to 100% of your earnings or £40,000 into a pension scheme, whichever is lower. Pension contributions attract generous tax relief. Some people may be able to contribute more using carry-forward.
Basic rate taxpayers receive 20% tax relief while higher rate and additional rate taxpayers can claim even more. For those earning over £240,000, your annual pension allowance starts reducing.
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Junior ISA contributions
Suppose you are a parent or grandparent, and you have a child under 18. In that case, a Junior ISA could be a valuable way for your child to build up a nest egg for their future.
There is an annual allowance of £9,000 for a Junior ISA, so now is the time if you haven’t used it yet.
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Using your dividend allowance
Investors can earn up to £2,000 in dividend income-tax-free for the current tax year. From April 2022, the Dividend Tax will increase due to the Health and Social Care Levy. How much tax you pay on dividends above the Dividend Allowance depends on your Income Tax band:
- Basic rate 7.5%
- Higher rate 32.5%
- Additional rate 38.1%
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Gifting for Inheritance Tax (IHT) purposes
Although relatively small, you can gift up to £3,000 each tax year free from inheritance tax. You can also carry forward any unused allowance for one tax year. You can also gift £250 to as many people as you like, inheritance tax-free.
Read our other tips on IHT reduction here
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Using your Capital Gains Tax (CGT) allowance
UK individuals have an annual CGT allowance of £12,300. Realised gains up to this allowance attract no capital gains tax. Above this allowance, Capital Gains will be charged. Your capital gains tax rate will depend on your personal tax rate and the type of asset.
With less than a month to the end of the tax year, you may be tempted to push any financial planning until the next tax year. But don’t let procrastination get the better of you—you can still plan for the future and reduce your overall tax payments.
Head over to our Knowledge Hub to download our handy guides on all things pensions, ISAs, and tax planning.
To discuss any of these tips, including maximising your pension and ISA allowances get in touch with our team today.
01273 076587
*This blog is for information purposes only and should not be relied upon for advice. Always seek regulated advice before proceeding*
