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Getting your finances in order before the end of the tax year

Updated: Mar 4

As we entered the new year with further lockdowns and history-making world events, the hope of spring hangs in the air, an enticing prospect, this year, more than ever. While we’re waiting for the green shoots of spring to emerge, why not use the time effectively by getting your finances in order before the end of the tax year?



The tax year ends on 5 April 2021, which is Easter Monday this year, so don’t wait until the last minute to double-check you’ve taken advantage of all the tax-efficient allowances available to you. To avoid a last-minute Easter rush, we’re on hand to get you organised with all aspects of your end of tax year planning. Here’s a reminder of some of your main tax planning opportunities:

Pensions

— The current Annual Allowance is £40,000 (for every £2 of adjusted income over £240,000, an individual’s Annual Allowance is reduced by £1. The minimum Annual Allowance is £4,000 — The Lifetime Allowance places a limit on the amount you can hold across all your pension funds without having to pay extra tax when you withdraw money. The limit is currently £1,073,100

Tax-efficient investments

— Individual Savings Accounts (ISAs) – maximum annual contribution of £20,000 per adult (stocks and shares, and cash options available, maximum allowance not to be exceeded) — Junior Individual Savings Allowances (JISAs) – maximum annual contribution of £9,000 per child (stocks and shares, and cash options available, maximum allowance not to be exceeded) — Enterprise Investment Schemes (EISs) – maximum investment of £2,000,000, relief on investments in certain unquoted trading companies, up to £1m per annum (or £2m as long as at least £1m of this is invested in knowledge intensive companies) — Venture Capital Trusts (VCTs) – maximum annual investment of £200,000, relief on investment in certain qualifying companies

Making Inheritance Tax-free gifts

— Each financial year you can make gifts of up to £3,000 (in total, not per recipient) and if you don’t use this in one tax year, you can carry over any leftover allowance to the next year (some other exempted/ small gifts allowable) — To reduce the amount of IHT payable, many families consider giving their assets away during their lifetime. These are called ‘potentially exempt transfers.’ For these gifts not to be counted as part of your estate on death, you must outlive the gift by seven years — If you have enough income to maintain your usual standard of living, you can make gifts from your surplus income. Advice is essential as strict criteria apply

Using Capital Gains Tax allowances

— Annual exemption of £12,300 per person, £6,150 for trusts – currently under review, correct at time of publication.

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.

An ISA is a medium to long-term investment, which aims to increase the value of the money you invest for growth or income or both. The value of your investments and any income from them can fall as well as rise. You may not get back the amount you invested.

Key takeaways

  • We’re on hand to help you get organised

  • The tax year ends on 5 April 2021, which falls on Easter Monday this year

  • Pensions - The current Annual Allowance is £40,000, the Lifetime Allowance is £1,073,100

  • ISA allowance is £20,000

  • JISA allowance is £9,000

  • · EIS maximum investment is £2,000,000, VCT maximum investment is £200,000

  • Inheritance Tax – gifts of up to £3,000 per tax year, consider potentially exempt transfers and gifts from income

  • Capital Gains Tax allowance is £12,300 per person



Past performance is not a reliable indicator of future performance and should not be relied upon.

Due to the high-risk nature of these products (EISs and VCTs) they will not be suitable for everyone.

HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes that cannot be foreseen.