Tax year end checklist
- Pay into your pension – pensions offer a tax efficient way to invest for your retirement. A pension fund grows tax-free and any contributions you make into the plan also receive income tax relief at your highest marginal rate. But you can not access your pension fund until you are 55. You receive tax relief on any contributions up to 100% of your earnings (capped at the current Annual Allowance of £40,000) or £3,600, whichever is greater. Making pension contributions can lower your income tax bill, restore lost personal allowances or help you avoid the new child benefit tax charge.
- Carry forward pension contributions - unused pension contribution Annual Allowances can be carried forward, and used, from the previous 3 years.
- Pay into your spouse’s pension – even non-earners such as housewives can get tax relief on pension contributions. A non-earner can pay £2,880 each tax year into a pension and receive an additional £720 from HMRC.
- Boost your state pension - by topping up any shortfall in your National Insurance contributions. Normally you have to do this within six years of the end of the tax year for which the contributions are being paid. Full details of time limits, rates and exemptions can be found here on the HMRC website.
- Use your annual ISA allowance - You can shelter up to £15,000 this tax year in a Stock and Shares ISA (also called an investment ISA - here is a roundup of the best investment ISAs) or in a cash ISA, where all income, interest or a capital gains are tax-free! Here is a roundup of the best cash ISA rates available at the moment.
- Utilise your Capital Gains Tax (CGT) allowance – If the value of your investments has increased enough during the current tax year to exceed the capital gains tax allowance of £11,000, you may want to consider selling enough of your units or shares to use that allowance. Or even consider ‘bed and spousing’ or ‘’bed and ISA-ing’. Also read my post How to realise capital gains without paying tax. How to realise capital gains without paying tax.
- Pay money into your child’s Junior ISA - up to the maximum of £4,000 in any tax year. Unused allowances are lost and can’t be carried over to the new tax year.
- Consider tax incentivised investments - certain legitimate investments, such as Venture Capital Trusts (VCT’s), attract generous tax reliefs which are tax year sensitive. However, these investments are only suitable for sophisticated investors. But never make an investment just for tax reasons and always seek independent financial advice.
Consider disposing of any capital losses to offset against capital gains made elsewhere which may be liable to capital gains tax. You can also carry forward excess capital losses but you must declare them on your tax return within four years.
Use your spouse’s tax allowances - if your spouse has unused tax allowances then you may be able to use them by moving assets into their name. Read my article 'How do I use my spouse's unused tax allowances'.
Be generous and reduce your Inheritance Tax (IHT) bill – there are a number of annual IHT allowances which are tax year sensitive. By using them you can reduce any potential IHT bill payable on your death. IHT is charged at 40% on estates over £325,000. Each tax year you can give away :
- £3,000 and if you don’t make full use of your exemption in one year you can carry it forward to the next year, for one year only.
- up to £250 a person (but not in conjunction with any other inheritance tax allowance).
- £5,000 to a child who is getting married.
- regular gifts from income which are IHT free. Size is irrelevant as long you can maintain your normal lifestyle after making them. But grandparents could use these to fund a pension for a grandchild which is obviously tax year sensitive.
- For other ways that to reduce your tax bill see my 15 ways to cut your Inheritance tax bill.