With the recent ending of the 2021/22 tax year now is the time to start planning for how you will make the most of your available personal tax allowances and reliefs in the coming year, particularly if you have not maximised your opportunities in the past.
Key areas to consider are; fully utilising your personal allowance, maximising your pension contributions, utilising your capital gains tax exemption allowance and making use of your annual inheritance tax exemption.
Let’s look at a few of the opportunities in more detail:
Utilising ISA allowances
Those over the age of 18 have an annual allowance of £20,000 per year, that can be invested in an ISA. This allowance can be split across the whole range of ISA’s currently available, see previous post, (https://www.woodlandsfinancialplanning.com/post/do-you-know-your-onions-i-mean-isas) from savings accounts to stocks and shares, all enjoying tax free status on interest, growth and income produced.
It’s also possible to invest in a Junior ISA for your children with a current allowance of £9,000 available to enable you or wider family and friends to contribute towards an investment for their future.
Pension contributions
UK taxpayers can claim tax relief on pension contributions on up to 100% of their taxable
earnings or £40,000, whichever is the lower. If you are already a member of a pension scheme you can potentially carry forward unused allowances from the previous 3 years.
For anyone with “adjusted” income of over £240,000 the £40,000 annual allowance tapers down to a minimum allowance of £4,000 per year.
Use you Capital Gains Tax allowance
The current CGT allowance is £12,300 per year. This is the amount of profit you can make from an asset before any tax is payable.
If your assets are owned jointly with another person, you can use both of your allowances, which can effectively double the amount you can make before any CGT is due. Those who are married or in a civil partnership, can transfer assets to each other without any CGT being charged.
Inheritance Tax annual gift allowance
You have a £3,000 ‘gift allowance’ a year, this means you can give away assets or cash up
to a total of £3,000 in a tax year without it being added to the value of your estate for Inheritance Tax purposes.
Any part of the annual exemption which isn’t used in the current tax year can be carried forward to the following tax year.
If you’d like a review and analysis of your financial strategy, please get in touch for a FREE initial consultation so we can build a plan together for your financial future.
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