The modern dilemma: what are the rules and do dates matter?

Stuart Walker

Stuart Walker

Chartered Financial Planner

03 February 2022

If the last two years have shown us anything, it’s that dates matter... and we can be confident that there will be tax planning ‘do’s and don’ts’ in place pre 5 April 2022.

Financial Planning always starts with the basics and making best use of them, so the following tax allowances are a staple of good financial planning.

1. Using your ISA allowance

ISAs provide a tax efficient environment for your savings. The maximum investment that may be made during the 2021/22 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 if you can.

2. Maximise your pension contributions

Contributions to pension plans attract income tax relief. The maximum contribution that may be made for tax year 2021/2022, 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 2022 if tax relief is to be claimed in 2021/2022.

Following the change in tapered annual allowance for high earners, the starting level remains at over £240,000 per annum and the minimum pension amount has been reduced to £4,000. This is dependant on your earnings, so seek professional advice to determine if you are affected by taper relief if you’re unsure if this affects you.

3. Managing 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 investments 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 VCTs are normally only suitable for someone with a high attitude to risk.

4. Capital Gains Tax

For 2021/22, capital gains up to £12,300 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 2022, if appropriate, as any unused balance cannot be carried forward. Be sure to claim any capital losses that you may have realised too!

5. Inheritance Tax

If you are considering making gifts to family and/or friends in the near future, ensure that you have maximised your annual inheritance tax gift allowances and exemptions for this tax year. You may also utilise any unused part of the 2020/21 annual gift exemption, but this will be lost if not used by 5 April 2022. The annual gift exemption is £3,000 and you can read more about this in our dedicated blog

Talk to your adviser

In this blog, we’ve given you 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.

If you would like to discuss this further, please don't hesitate to get in touch with myself or a member of the Johnston Carmichael Wealth team.


Disclaimer: Johnston Carmichael Wealth Limited is authorised and regulated by the Financial Conduct Authority.

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


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.

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