Year-End Tax Planning: 5 things to do before 5 April

The tax year-end is fast-approaching and there are valuable allowances that you can use before 5 April to ensure that you’re making the most of your current tax allowances and reliefs and help to secure your long-term financial goals.

1. Maximise your ISA

The maximum you can pay into ISAs each year is £20,000.  ISAs can be a great way of making your money work harder for you, as any money you put into them is free of any further liability to Income Tax or Capital Gains Tax.

If you don’t contribute the full £20,000 by 5 April, you can’t carry it forwards – so use it or lose it!

2. Top up your pension

Are you getting the most from tax-efficient savings with your pension? Known as the Annual Allowance, most people get tax relief on pension contributions made up to 100% of their earnings, capped at £40,000 each tax year. Lower limits apply to high earners or to those who may have already drawn down income from their pension.

It’s worth thinking about topping up your pension as much as you can before the 5 April 2021 to make use of any unused allowances from previous tax years, as it’s possible the government might change the tax allowances available to you – so use them whilst you can.

3. Use your gifting allowances to avoid unnecessary IHT

If you want to reduce any Inheritance Tax (IHT) that you pay, you can gift up to £3,000 per year IHT-free. IHT is due on part of your estate when you die at 40%.

There are several steps you can take to reduce your beneficiaries’ Inheritance Tax liabilities – so act before 5 April to take advantage of these.

4. Save for your children

The Junior ISA has the same benefits as an adult ISA in terms of tax efficient savings and you can contribute currently up to £9,000 per year.

You can pay into a Junior ISA until your child reaches the age of 18 and it’s a great way to put money away for their future.

5. Take Dividends

The dividend allowance is currently £2,000 – you don’t have to pay tax on any dividend income within this threshold. If you’re a director or owner of a limited company and you’ve made a profit during this tax year, you may be able to use dividend payments to reduce your tax bill.

 As the 5 April deadline approaches, you may want to consider using these five valuable tax-saving and investment opportunities before they are lost.

The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and the value may fall as well as rise. You may get back less than the amount invested.

The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.