This article first appeared in the Spring 2022 edition of Scottish Land & Estates LandBusiness magazine.

Some things are so unexpected that no one is prepared for them – previous years have definitely proved that point. However, the one constant we can rely on is the Tax Year End on 5 April. By planning in advance, you can maximise the valuable tax allowances available each tax year.

Below are the five important things to remember when planning for the Tax Year End on 5 April: 

1. Use your ISA allowance

ISAs provide a tax efficient environment for your savings. The maximum investment that may be made during the 2022/23 tax year is £20,000. However, you should 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, they are only suitable for clients with a high tolerance to risk who can afford to bear loss of capital, so seek appropriate professional advice before making an investment.

3. Maximise your pension contributions

Contributions to your personal pension plan attract income tax relief. The maximum contribution that may be made for 2022/2023 without incurring an income tax charge is £40,000. You may be able to make additional contributions if you have not fully used your annual allowance in the previous three tax years. Contributions must be made before 5 April 2023 if tax relief is to be claimed in tax year 2022/2023.

Please note high earners continue to be impacted by the reduced annual allowance for those earning over £240,000. With the minimum pension amount for those high earners being reduced from £10,000 to £4,000 dependent on your earnings seek professional advice to determine if you are affected by the tapered annual allowance.

4. Capital Gains Tax

For 2022/23, capital gains up to £12,300 per person will not give rise to a capital gains tax liability. So, where possible think about using your annual capital gains tax exemption before 5 April 2023as any unused balance cannot be carried forward.

This point is particularly important this year as from 5th April 2023 we will see the Capital Gains Allowance reduce from £12,300 to £6,000 with a further reduction to £3,000 planned in 2024.

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 2021/2022 exemption, but this will be lost if not used by 5 April 2023.  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 planner before taking action. Get in touch with the Johnston Carmichael Wealth team to find out more.

Disclaimer: Tax reliefs and allowances are those that apply as at February 2022 and are subject to change in the future. The benefit of these to an individual are dependent upon your personal circumstances.

All statements concerning the tax treatment of products and their benefits are based upon our understanding of current tax law and HMRC practices.  Legislation and the levels and basis of reliefs from taxation are subject to change and are dependent on your individual circumstances.

The Financial Conduct Authority does not regulate tax and estate planning.

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

While all possible care is taken in the completion of this article, 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.