Tax year end countdown

Investment & Wealth Advice

Clare Munro, Senior Tax Adviser

As we approach the end of another tax year, it’s time to check that you’ve done all you can to use the tax breaks and allowances available. Here’s a checklist of eight financial planning opportunities that you should consider before 5 April – or risk losing them as most expire at the end of the tax year.

1. Use the annual ISA allowance

Every year adults can invest £20,000 in an Individual Savings Account (ISA). The funds can be split between a cash ISA and a stocks and shares ISA, or you can choose to put everything into one type. ISA funds are protected from income tax, tax on dividends and capital gains tax (CGT) – for ever. What’s more, you don’t even have to disclose them on your tax return. But if you don’t use the 2020/21 allowance, it expires on 5 April, so if you haven’t already topped up your ISA, now is the time to do so.

2. Use a LISA if you can

Lifetime ISAs or LISAs have been around since 2017 and are part of the government’s programme to encourage retirement saving and first-time buyers. If you are under 40, you could open a LISA, or if you are over 40 and under 50 and already have a LISA, continue to contribute to one. The incentive comes in the form of a 25% bonus that the state will add in each month when you save. Like general ISAs, LISAs can be either cash or stocks and shares, but the annual investment limit is a good deal lower at £4,000.

3. Open a Junior ISA for children

Adults can open a Junior ISA or JISA to save or invest £9,000 for a child tax free. The account is in the child’s name and they gain access to it at age 18.

4. Make a pension contribution

The annual allowance of £40,000 caps what you can add to your pension with tax relief on the contribution. You need to have earned income (employed or self-employed) to cover at least the level of your contribution, but relief will be at your highest marginal income tax rate, making pensions a particularly effective form of saving for higher-rate taxpayers. If you have sufficient earnings and have had a pension plan set up throughout, it’s also possible to carry forward any unused allowance from the previous three tax years. The carry forward opportunity expires after three years, so if you have any unused allowance from 2017/18 this is your last chance to use it.

Higher earners will find that their annual allowance is restricted. If your ‘threshold income’ is above £200,000 and ‘adjusted income’ is above £240,000, you lose £1 of relief for every £2 of earnings. The result is that the annual allowance can taper down to £4,000 for those with earnings over £312,000.
As if the annual allowance system wasn’t complicated enough, there is also a lifetime allowance on pensions, which currently stands at £1.073m and, following the recent Budget, will stay at that level until 2026. If your pot breaches that limit, you will incur penalty tax charges on the excess.  This limit is on the total pot, including investment returns, rather than just on contributions. That makes it difficult to predict whether you will exceed the limit. Opportunities to ‘protect’ your existing pot at a higher limit of £1.25m are still available in some circumstances, so if you are in any doubt, speak to one of our Financial Planners about the best course of action.

5. Set up a pension for a child

Looking to the long term you can also contribute to a pension pot for a child. You can put up to £2,880 into the pension, and basic rate tax relief, claimed by the pension scheme, will increase that to £3,600. The fund can’t be accessed until the child turns 55 (and of course, that age may well have risen by the time they come to access it).

Similarly, it’s possible to make net contributions of £2,880 for any other individual who doesn’t earn an income, so, for a non-earning spouse, for example.

6. Plan gifts to charity

You can get tax relief for gifts made during the tax year under the Gift Aid scheme, but it’s worth knowing that you can also carry back donations made after 5 April and before the 31 January 2021 filing deadline. The charity recovers basic rate tax on top of your gift, so if you donate £80, the charity can claim a further £20 from the Government, making a total gift of £100. Additionally, if you’re a higher or additional rate taxpayer, you can recover the difference between the basic rate tax and the rate of tax you actually pay. This means that someone paying the top tax rate of 45% would recover £25, reducing the cost of the £80 gift to £55. However, your generosity can backfire if you have not paid enough income tax or CGT to cover the Gift Aid as you have to repay the basic rate tax recovered by the charity, so check your tax position before signing the Gift Aid declaration.

7. Use your CGT allowance

CGT is payable on profits made on the sale of assets like property or shares. The annual allowance is currently £12,300, above which CGT is charged at 10% for basic rate taxpayers (18% on property) or 20% for higher and additional rate payers (28% on property). Most people never use their allowance; one way to do so would be to sell investments that are standing at a gain and held outside a tax-efficient wrapper. The proceeds can’t immediately be reinvested in the same stock (a ‘bed & breakfast’ transaction) as a repurchase within 30 days nullifies the first sale. However, it is possible to reinvest via an ISA, for example (this is sometimes known as ‘bed & ISA’).

8. Start planning for the next generation

Inheritance tax (IHT) is possibly the most unpopular tax, but there are multiple allowances available every year that can help with estate planning. To start with, you can make as many individual gifts as you like with a value of up to £250 per person. Wedding gifts of up to £5,000 for a child and £2,500 for a grandchild or great-grandchild are exempt from IHT, as are wedding gifts of £1,000 for anyone else. Alongside this, every individual has a £3,000 annual IHT gift exemption. This can be carried over for one year only. This means that, if you did not use last year’s £3,000, then you could give away £6,000 before the end of the current tax year. These gift exemptions are, admittedly, small in the context of many people’s estates, but if used every year could cumulatively provide a healthy IHT saving.

How Weatherbys can help

With ultra-low savings rates it may seem that there’s little that can be done to improve returns, but making use of tax-efficient wrappers can eliminate tax leakage and help you and your family build wealth over a period of time. Weatherbys’ Financial Planning team is here to help so please get in touch if you’d like some help through the tax planning maze.


Important information

Tax laws are subject to change and taxation will vary depending on individual circumstances. The value of an investment and its income can both increase and decrease and you may not get back the full amount originally invested.


No two families are the same and conversations around wealth transfer are often emotionally complex. Therefore a strong succession and Inheritance Tax plan is necessary to help navigate family dynamics and lay the foundations for generations to come.
Download our latest in-depth report to discover 10 ways to reduce your inheritance tax bill.

Cash Flow Planning


When it comes to planning for the future, most people tend to focus on one thing: building as much wealth as they can. This is vital, of course. If you want to meet your financial goals, then saving and investing wisely is absolutely fundamental.

The Weatherbys Investment & Wealth Advice service will help you build a cash flow plan to ensure sufficient income for life.



At Weatherbys, we take a personal approach to lending, creating tailored, flexible mortgages and bespoke lending solutions to meet your needs


At Weatherbys, we take a reassuringly conservative approach to managing our balance sheet going above and beyond industry standards to ensure your money is safe and secure.


We go above and beyond to help you achieve the very best financial future.