Five rules of tax year end planning


Stuart Walker

Stuart Walker

Chartered Financial Planner, Associate Director


Christmas may be fast approaching, but another important date is also looming on the horizon – the end of the tax year (5 April 2020).

Looking ahead, here are five planning tips to put into action before the deadline to potentially help you reduce your tax burden.

1. Use your ISA allowance

ISAs provide a tax efficient environment for your savings. The maximum investment that may be made during the 2019/20 tax year is £20,000, however be aware that any unused investment limit cannot be rolled forward into next year – so make use of your saving limit before April.

2. Manage your investments

Investing in qualifying Venture Capital Trusts (VCT) will attract 30% income tax relief (maximum investment of £200,000) providing the investment is held for five years. Dividends are tax free and no Capital Gains Tax is paid on disposal. Whilst such investment may reduce your income tax liability, you should be aware that the value of your investment may go down as well as up and you may not get back the full amount invested. You should seek appropriate professional advice before making an investment as this type of investment is normally only suitable for someone with a high attitude to risk.

3. Maximise your pension contributions

Contributions to your personal pension plan attract income tax relief. The maximum contribution that may be made for 2019/2020 without incurring an income tax charge is £40,000. You may be able to make additional contributions if you have not used your allowances for the previous three tax years. Contributions must be made before 5 April 2020 if tax relief is to be claimed in 2019/2020. Be aware that taper relief applies higher earners (over £150,000 per annum) that may limit the amount you are able to pay in 2019/20 to a minimum of £10,000 dependant on your earnings, so seek professional advice to determine if you are affected by taper relief.

4. Capital Gains Tax

For 2019/20, capital gains up to £12,000 per person will not give rise to a capital gains tax liability. So make sure you use your annual capital gain tax exemption before 5 April 2020, if appropriate, as any unused balance cannot be carried forward.

5. Inheritance Tax

If you are considering making gifts to family and friends in the near future, ensure that you have maximised your annual inheritance tax gift exemptions for this tax year. You may also utilise any unused part of the 2018/2019 exemption, but this will be lost if not used by 5 April 2020.  The annual gift exemption is £3,000.

Talk to your adviser

The above is a brief overview of some of the actions that you can take to reduce your tax liability, however there are other options available that you may want to consider for your own personal situation. As always, we recommend that professional advice is sought with your financial adviser before taking action. Get in touch with the Johnston Carmichael Wealth team. Get in touch with the Johnston Carmichael Wealth team.

Tax reliefs and allowances are those that apply at 5 December 2019 and are subject to change in the future. The benefit of these to an individual are dependent upon your personal circumstances.

This article if for information purposes only and should not be construed as an individual recommendation.

Disclaimer: While all possible care is taken in the completion of this blog, no responsibility for loss occasioned by any person acting or refraining from action as a result of the information contained herein can be accepted by this firm.