End of tax year checklist - Seven tips to make sure you make the most of your finances

Making full use of the tax year's allowances and exemptions could help you reap rewards over the longer term. Remember to use this year’s tax reliefs before it’s too late.

Here are the key areas to think about before the tax year ends on 5 April:

1. Income Tax

You can earn up to £12,570 (frozen until 2025/26) from income sources such as your salary or rental income without paying income tax – this is known as your personal allowance.

  • Check you’re on the right tax code to make sure you’re not paying too much tax – you can find this by looking at your last payslip
  • If you’re a business owner, check your balance of salary and dividends to get the most from your personal allowance and lower tax rate on dividends
  • If you are married or in a civil partnership you may be able to save money by structuring your finances as a couple. If one of you pays no tax (or earns less than the Personal Allowance), you can transfer £1,260 of your allowance to the other person.

2. ISA allowance

You can save up to £20,000 into your ISA(s) each tax year without paying income tax and capital gains tax (CGT). Bear in mind it doesn’t carry over between tax years, so once the tax year ends, any unused allowance is lost.

The limits for different ISA types for the 2021/22 tax year are:

   

Cash, Stocks and Shares

£20,000

Junior or Children’s ISA 

£9,000 a year

Help to Buy ISA

£200 a month for existing accounts

Lifetime ISA

£4,000 a year

It’s worth noting you can pay into both your individual ISA and child’s junior ISA as long as you don’t exceed the allowances.

3. Topping up your pension

Saving into your pension pot is one of the best ways to save for retirement especially as you get income tax relief on the money you put in. For most people this is up to £40,000 this tax year, or 100% of your salary, whichever is lower. If you’re a higher earner with an income over £200,000 a year, your annual allowance might gradually reduce to as low as £4,000 in the current tax year, known as the tapered annual allowance.

Topping up your contributions before the end of the tax year could add a significant amount to your total pension pot over the long term.

If you don’t use all your personal allowance this year, you can ‘carry it forward’ for up to three years.

As pension planning can be quite a complex area, it may help to speak to a professional who can help you make the most of retirement savings and the tax reliefs available.

4. Gift wisely

It’s only natural to give your loved ones gifts, but did you know that cash gifts could be counted as part of your estate for inheritance tax purposes?

  • You can give away up to £3,000 each tax year IHT-free
  • A couple can combine their allowance to make £6,000 for the year
  • If you have any unused allowance you can carry it over for a year

Paying into a Junior ISA or a pension for your children or grandchildren are also effective ways of passing on your wealth tax efficiently and reduce your inheritance tax liability.

Any gifts over this amount may be liable to inheritance tax so it’s important to speak to an expert who can recommend ways to mitigate any potential liability.

5. Capital Gains Tax

Capital Gains Tax (CGT) is a tax on the profit when you sell (or ‘dispose of’) something (an ‘asset’) that’s increased in value.

You pay Capital Gains Tax on ‘chargeable assets’ such as:

  • most personal possessions worth £6,000 or more, apart from your car
  • property that’s not your main home
  • your main home if you’ve let it out, used it for business or it’s very large
  • shares that are not in an ISA or PEP
  • business assets

The annual tax-free allowance in the 2021/22 tax year is £12,300. The rate you pay after this depends on the level of income tax you pay (10% for basic-rate taxpayers and 20% for higher-rate payers).

CGT can be a tricky area to understand, and it is important you don’t fall into the trap of paying unnecessarily, or even risk being fined for not paying when you should have. A financial adviser can help you look at ways to reduce your Capital Gains Tax bill.

6. Regain your child benefits

If either you or your partner’s income is over £50,000, you’ll have lost some or all of your child benefit. But by keeping your taxable income below that threshold you could regain some of your allowance – for example, by making personal contributions into your pension.

By taking advantage of the tax-free childcare scheme, you could benefit from up to £500 every 3 months (up to £2,000 a year) for each of your children to help with childcare costs. For every £8 you pay your childcare provider, the government will pay £2 towards these costs.

Your eligibility depends on:

  • if you are working
  • your income (and your partner’s income, if you have one)
  • your child’s age and circumstances
  • your immigration status

To see if you are eligible please visit gov.uk Tax-Free Childcare.

7. Review your finances

Now is the perfect opportunity to take stock of your finances making sure you’ve taken into account the relevant tax year's allowances and exemptions.

While implementing a budget can feel like a daunting task initially, it can be very beneficial to reclaim control over your finances and feel prepared for the year ahead.

Read our top tips to help you take control of your finances this year - How to take control of your finances with a yearly budget | Quilter

More information on annual allowances and exemptions can be found on gov.uk.

If possible, you should seek financial advice to ensure you are making the best possible decisions for your personal circumstances and benefiting from reliefs available to you.