Featured post

Self-assessment taxpayers given more time

Late filing and late payment penalty waived for one month.

On 6 January, HMRC issued a press release stating that, for the second year in a row, it is waiving the late filing and late payment penalties for those who complete self-assessment tax returns, by one month. This is to give, those who file, extra time to complete their 2020/21 tax return and pay any tax due.

HMRC recognises the pressure faced due to the pandemic for taxpayers and their agents, however, is encouraging taxpayers to file and pay on time if they can. Figures show that, of the 12.2 million taxpayers who need to submit their tax return by 31 January 2022, almost 6.5 million have already done so.

The deadline to file and pay remains 31 January 2022. However, the penalty waivers mean that:

  • anyone who cannot file their return by the 31 January deadline will not receive a late filing penalty if they file online by 28 February;
  • anyone who cannot pay the tax owed by the 31 January deadline will not receive a late payment penalty if they pay their tax in full, or set up a Time to Pay arrangement, by 1 April.

Interestingly, that Christmas was a popular time to file with over 31,000 filing over the festive period, but New year proved to be even more popular, with 33,467 tax returns filed on New Year’s Eve and 14,231 tax returns filed on New Year’s Day.

The following is a useful summary of the self-assessment timeline:

  • 31 January – self-assessment deadline (filing and payment);
  • 1 February – interest accrues on any outstanding tax bills;
  • 28 February – last date to file any late online tax returns to avoid a late filing penalty;
  • 1 April – last date to pay any outstanding tax or make a Time to Pay arrangement, to avoid a late payment penalty;
  • 1 April – last date to set up a self-serve Time to Pay arrangement online.
Featured post

Sarah Walker, Financial Planning Week Tip: Putting protection at the forefront of financial planning

The foundation of all financial advice is built on protection. There is little sense in building a great wealth portfolio on shaky ground. The fuel that powers our ability to build up our investments is often reliant on our ability to generate an income. If the fuel runs out, the vehicle stops moving. Therefore, it is logical to ensure (or should that be insure?) that our client’s income continues to flow, even in the event of them being unable to continue working due to ill health, or as the result of an accident.

How well we cement our client’s ‘foundations’ is dependent on what protection is available to them. Appropriate advice obviously relies upon needs and risks being identified and discussed. However, it is also vital that an in-depth conversation about a client’s health is conducted at an early stage. There is no point in discussing a solution with a client, if the product in question would ultimately be unavailable to them, due to their medical history, or even that of their family.

Conducting detailed research before making a recommendation to a client is extremely important. It ensures that expectations are managed, and this can come in many forms:

  • The premium – will a loading be applied, and, if so, what will the final premium look like?
  • Exclusions – will any be applied to the final underwritten offer issued by the insurer? If so, they need to be discussed with the client before an application is made, to avoid any unwelcome surprises once the underwriting has been completed.
  • Declined applications – can lead to awkward conversations with a client. Adverse and unwelcome decisions can often be avoided if the fact finding and research process is thorough at the outset. In other words, by not applying for cover that was always going to be declined.

Protection isn’t complicated, but sometimes it can be. There are a lot of moving parts to stay on top of. Insurance providers regularly update their policies, particularly critical illness and income protection cover.

They also regularly update their underwriting policies – just because a particular insurer previously accepted someone with an above average BMI on standard terms, it doesn’t mean they are going to offer the same terms again.

Unless you advise and arrange protection on a very regular basis, it is easy for knowledge to slip. In our experience, many clients in the ‘wealth management space’ tend to be in their 50’s and 60’s where it’s unusual to find a client with a clean bill of health. We also find that due to their age and the sum assured required, medicals and GP reports are frequently requested. Helping a client navigate safely and efficiently through this process can also take a considerable amount of time and effort.

Broadly, we find that clients are all too ready to insure their lives and maybe even protect themselves against critical illness, but income protection often lags behind as it isn’t deemed to be a priority.

In a year when Swiss Re reported a 10% reduction in income protection policies sold, we all know that the risk of becoming too ill to work is greater than the risk of suffering a critical illness or even dying.

Yet so much is reliant upon income, such as our:

  • Lifestyle
  • Mortgage
  • Bills
  • Mental wellbeing.
  • Pension contributions.
  • Education
  • Bank of Mum and Dad.
  • Payment for health/household insurances.

Often the person who stays at home to raise the family can be completely overlooked. If that person had an accident or was too ill to be able to run the house, raise the children, cook the meals, taxi drive the children, then who would do it? And how would that be financed?

Why liquidate hard-earned savings and assets, or be forced to downsize, when they can all be protected by arranging a suitable policy whilst paying an affordable monthly premium?

What matters is your duty of care to your client and that protection is considered at the forefront of financial planning.  

Featured post

Chris Jones, Financial Planning Week tip: Making the most of pensions tax relief ahead of another Budget

As we approach another Budget there will no doubt be the usual speculation that pensions tax relief may come under attack. And with the latest HMRC statistics showing the estimated gross tax cost of pensions tax relief at £41.3bn in 2019/20, this may be too tempting for the Treasury to ignore.

Whilst wholesale changes to pension tax relief are unlikely in the short term, there may be some tinkering with allowances and reliefs. Any further changes are unlikely to make to make pension contributions more favourable. Therefore, where clients have the available funds and allowances, it may be better to make contributions sooner rather than later.

It’s worth a reminder of the limits and mechanics of the tax relief available on pension contributions to ensure clients can maximise the benefits of making any contributions.

Annual allowance

The annual allowance limits the tax benefits on the total contributions paid in a tax year. This will include contributions made by the individual, their employer, or a third party on behalf of the individual. The standard annual allowance is £40,000. High earners may have a lower tapered annual allowance, which can be as low as £4,000 and will depend on their level of earnings. Those who have accessed their pension benefits flexibly may be subject to the £4,000 money purchase annual allowance.

Where an individual exceeds their annual allowance in any tax year they are be able to carry forward any unused allowances from any of the three previous tax years.  

If, after allowing for any carry forward, the contributions exceed the individual’s annual allowance in any tax year, the individual will be subject to an annual allowance charge. The annual allowance charge aims to reclaim the tax relief received on the contribution. The excess over the annual allowance is added to the individual’s other taxable income and charged at their marginal rates of income tax. 

For example, if a higher rate taxpayer exceeds the annual allowance by £10,000 the annual allowance charge would be £4,000 assuming they remained within the higher rate band after adding the £10,000 to their other income.

Tax relief on personal contributions

Tax relievable personal contributions are limited to 100% of the individual’s relevant earnings in the tax year they are paid, which is broadly earnings from their employment or self-employment. Other types of income such as dividends or buy-to-let rental income do not count as relevant earnings. 

It is not possible to carry forward unused earnings from a previous year. If, for example, an individual has unused allowances of £90,000 and earnings of £30,000 the maximum tax relievable personal contribution is limited to £30,000.

Where an individual’s earnings are less than £3,600 they can pay and receive tax relief on contributions of up to £3,600 in any tax year. It is not possible to carry forward this allowance.

Tax relief is available on personal contributions at the individual’s highest marginal rates of tax. How the relief is applied depends on what type of scheme the contributions are paid into, either a “relief at source” scheme or “net pay scheme”. Aside from non-taxpayers (please see below), the tax relief available is the same whichever method is used.

Relief at source

Personal pensions and group personal pensions will operate as relief at source schemes. With these, the contributions are paid net of basic rate tax and the provider adds the tax relief. The provider then reclaims this directly from HMRC. Basic rate relief is added regardless of the tax rate the individual pays, even if they are non-taxpayer. Any higher rate or additional rate tax is reclaimed direct from HMRC by the individual. The relief is claimed by increasing the individual’s basic rate tax band by the gross value of the individual’s contribution.


Paul earns £70,000 a year and wants to make a gross contribution of £10,000 to a relief at source scheme. He pays a contribution of £8,000 to the pension provider who add the 20% tax relief.

Paul’s basic rate tax band is then extended by £10,000. This means that £10,000 more of his income is taxable at 20% rather than 40% and so he benefits from a further £2,000 of tax relief.

Net pay schemes

Most occupational schemes operate on a “net pay” basis. With this type of scheme, the individual’s pension contributions are deducted from their pay before it is subject to tax. This means the full amount of tax relief is applied immediately by reducing the taxable pay. Note though that National Insurance contributions are still applied to the full pay before the deduction of the pension contribution.


Fiona earns £80,000 a year. She pays personal contributions of £5,000 to her occupational pension scheme. The £5,000 is paid gross to the pension provider and her taxable income reduces to £75,000. The net cost to her of the £5,000 pension contribution is £3,000 so she has received 40% tax relief.

Note that because contributions simply reduce the level of taxable earnings, any non-taxpayer in a net pay scheme will not receive tax relief. This is an anomaly in the tax system and one the Government has been consulting on to resolve.

Salary sacrifice

With salary sacrifice, the employee reduces their salary in exchange for a pension contribution. Therefore, technically, the pension contribution is an employer contribution. For tax purposes it works in a similar way to a net pay scheme. However, the advantage of salary sacrifice is that it reduces the salary for all purposes, meaning that both the employer and employee also save the National Insurance on the amount sacrificed.

Tax relief on employer contributions

Employer contributions are always paid gross. As long as they are within the individual’s annual allowance there is no tax consequences on the employee. The employer can claim relief against corporation tax on the contributions as long as they meet what are known as the “wholly and exclusively” rules. Essentially this means that in order to benefit from tax relief, any contributions must be a genuine expense in the running of the business. In a normal employer/employee relationship this is unlikely to be an issue as there would usually be a genuine commercial reason for paying employer pension contributions as part of the employee’s reward structure.  

For small owner managed limited companies it can also be an extremely tax efficient way of extracting funds from the company. Again, meeting the “wholly and exclusively” condition in this type of situation is rarely a problem where the owner/director is taking on the business risks (e.g. as a shareholding director) of the company. However, issues can arise where contributions do not represent the fair market reward for a role – if, for example, a large contribution is made for the spouse of a director who has minimal duties (and that spouse is not is taking on the business risks of the company) and a pension contribution of that size would not normally be made for other employees who have similarly minimal duties.

Unlike personal contributions, employer contributions are not limited to the level of the individual’s earnings. So, for example, a director earning £10,000 could also receive an employer pension contribution of £40,000. The company will receive corporation tax relief on the contribution as long as it meets the “wholly and exclusively” rules.

Lifetime allowance

In addition to the limits on pension contributions, the lifetime allowance (LTA) sets a limit on the overall benefits that an individual can receive from all of their pension plans without suffering an additional tax charge. The LTA is currently £1,073,100 and is frozen at this level until 2025/26. Where an individual takes benefits in excess of this, or dies or reaches age 75 without taking their benefits, an LTA charge applies on the excess. The LTA charge is 55% if benefits are taken as a lump sum or 25% if the funds are used to provide an income. Any income is also subject to income tax at the point it is taken.

Where uncrystallised funds or funds in drawdown are subject to an LTA test at age 75 the tax charge on any excess is always at 25%.

With the LTA currently frozen, more and more clients are likely to be impacted by the limit and charges. This limit also needs to be considered for clients considering making further contributions.

Earlier in the year there were rumours that this limit may be reduced further, and this is one to watch out for in the Budget. The only positive news is that whenever the LTA has been reduced in the past, protection has been available to allow clients to protect the LTA at the current levels.

HMRC consults on low income trusts and estates

HMRC is consulting on legislative proposals to remove trusts and death estates with small amounts of income from income tax

Back in 2016, following tax on bank and building society interest no longer being deducted at source, HMRC introduced an arrangement to ensure that new burdens did not arise on those managing trusts and estates whose only income consists of small amounts of savings interest. This reflected the fact that following the introduction of the Personal Savings Allowance from the same date, around 95% of savers were expected to be no longer liable for tax on this interest.

However, trustees of trusts and personal representatives (PRs) of death estates do not have tax allowances in the same way as individuals do. As a result, with the payment of interest gross, even the trustees and PRs of the smallest trusts and estates would have become liable to file a self-assessment return when they hadn’t previously had to do so. HMRC’s arrangement therefore removed trustees and PRs from income tax where the only source of income for the trust or estate is savings interest and the tax liability is below £100. This arrangement was intended to be a temporary arrangement pending a longer-term solution.

The new consultation, which runs until 18 July 2022, seeks views on proposals to formalise and extend that concession.

Under the latest proposals, low-income trusts and estates with income from any source up to a ‘de minimis’ amount (to be decided following this consultation) will not be subject to income tax on that income.

For trusts and estates with income more than the de minimis amount, income tax will be due on the full amount of income rather than only applying to the income above the de minimis amount. This is in the interests of simplification for both taxpayers and HMRC, as the rules required to take the alternative approach would be complicated and require additional administration for all involved.

Tax pools apply to discretionary trusts and keep track of income tax the trustees pay. When trustees make a discretionary payment of income it is treated by the beneficiary as if income tax has already been paid at the trust rate (currently 45%); and the trustees must have paid enough income tax (in the current or previous years) to cover this ‘tax credit’. Under these proposals, even where discretionary trusts would be covered by the de minimis rule, they will still have to pay tax when they pay income out to a beneficiary, to ensure that the tax credit remains funded.

HMRC’s impact assessment points out that this measure is expected to have an impact on an estimated 28,000 individuals overall. It is expected to simplify the administration of tax in the majority of cases by avoiding the need for people to claim refunds; but some people are expected to have to return and pay the tax due, where previously that would have been done by the trustees.

We will update you on any developments.


Note that non-taxable trusts are required to register on the TRS. All trusts which are not “excluded trusts” have to be registered by 1 September 2022 or within 90 days from the trust’s creation, whichever is later. Any new registrable trusts set up from 1 September 2022 will have to be registered within 90 days. So, even if a trust does not need to register as a taxable trust, it may still need to be registered as a non-taxable trust (unless it is an excluded trust).

Retirement planning in 2022/23

As we welcome in a new tax year, here’s a look at pension planning for 2022/23.

Now that all the last-minute end of tax year pension planning is complete it is time to turn to 2022/23 and consider any changes that apply when advising on pension funding or taking benefits.

Although the pension tax regime has remained relatively stable over the last few years a new tax year always brings a few changes along with a fresh set of allowances to make the most of.

The main impact on pension funding is an indirect one – the increase in the National Insurance Contribution (NIC) rates and the accompanying increases in the dividend rates. Both these changes can make the advantages of pensions even greater in two key areas of pension planning:

Salary sacrifice and pensions

Employees can sacrifice part of their salary and/or bonus in return for their employer paying the amount sacrificed as an employer pension contribution on their behalf. Unlike salary/bonus, an employer pension contribution doesn’t attract NIC.

The 1.25% increases in employer and employee NICs makes salary sacrifice even more attractive. As well as the usual income tax relief, the additional benefit of salary sacrifice is the NICs savings for both employer and employee, made by reducing salary. Employers make their own decisions of how much of the NIC saving they pass onto their employees, with some passing all and some nothing at all. However, even if none, the employee will still benefit from their employee NICs savings.  

The benefits of salary sacrifice from 2022/23 onwards will be even greater. For employees, they will save an additional 1.25% on any of their earnings they choose to give up. Employers will save the same and may be willing to pass some or all of this onto the employee. This may lead to an increase in contributions via salary sacrifice and more employers wanting to set up salary sacrifice arrangements.   

The Government largely withdrew the income tax and NICs advantages where benefits in kind are provided through salary sacrifice arrangements (described in the legislation as ‘optional remuneration arrangements’) from 6 April 2017. However, pension contributions were exempted from that change.

The significant advantage may cause the Government to take another look at salary sacrifice arrangements, particular from next year where the tax becomes a separate charge, i.e. The Health and Social Levy. However, we are yet to see any signs of this, so it is unlikely that anything will change for this tax year at least.

Profit extraction from owner-managed limited companies           

For those in control of how they distribute funds from their company there are broadly there three main ways to extract the funds – either as salary, dividends or by making employer pension contributions. The increase in the NIC rates and dividend tax rates both make the extraction of profits via pension contributions more attractive. 

To provide a shareholding director with their immediate income needs, the company accountant will often suggest paying a minimal salary, perhaps up to the personal allowance (or in previous years the employer NICs secondary earnings limit) and the rest in dividends. As the rate payable on both the employer and employee NICs will have increased by 1.25%, this is unlikely to change, despite the increase in dividend tax rates. Therefore, advisers will usually be comparing paying further dividends with employer pension contributions at the director’s marginal rate of tax. 

Any further dividend payments will effectively result in additional corporation tax (because dividends are paid out of after tax profits) and the recipient will suffer higher dividend tax rates (assuming the tax free dividend allowance has already been used up) of 8.75%, 33.75% and 39.35%.

In contrast, a pension contribution can be made gross, and, providing it meets the usual “wholly and exclusively” rules, will be treated as a business expense. There will, of course, be tax when the pension is paid, but 25% of this is normally paid free of tax and the rest subject to income tax at the recipient’s marginal rates of income tax at the time.

Maximising allowances

Elsewhere, the main rates of tax relief on contributions, as well as the annual allowances, remain unchanged. For those unaffected by tapering or unrestricted by the money purchase annual allowance this is generally good news, with the £40,000 allowance providing adequate scope for most to make reasonable pension provision.

The personal allowance and the basic rate tax band remain unchanged at £12,570 and £37,700 so, for those in the decumulation phase, unfortunately, there is no scope to increase tax efficient income payments within these bands where they are already being fully utilised. However, for clients in the decumulation phase, the start of the tax year is a good time to review the most tax efficient way of taking money from their pension pots.

With the freezing of the tax bands and relatively high inflation it is likely that many more clients will fall into the “60% band” where income between £100,000 and £125,140 is subject to this very high marginal rate of tax. Pension contributions remain a very attractive option to reinstate the personal allowance and reclaim this tax. For someone earning £125,140 a pension contribution of £25,140 can be made at a net cost of just £10,056.

In terms of carry forward, the relevant carry forward years are now from 2019/20 and anything from previous tax years is no longer available. However, you can’t completely ignore prior years as they may be needed to offset any excesses in the three previous tax years. Remember, for the purposes of carry forward, the income in the previous tax years is only relevant where tapering applies. It is not possible to carry forward earnings.

In relation to tapering, we enter the third tax year with the higher Threshold and Adjusted Income limits of £200,000 and £240,000 respectively. Whilst this should mean far fewer clients are impacted, remember the lower limits of £110,000 and £150,000 still apply when calculating the availability of carry forward for tax year 2019/20 and any of the three earlier tax years where relevant.

Unfortunately, the Lifetime Allowance (LTA), which is frozen at £1,073,100 until the end of tax year 2025/26, remains one of the biggest challenges to retirement planning for affluent clients. For clients approaching or exceeding the LTA the benefits of continuing to fund are far less clear. The LTA can also prompt clients to take funds earlier from their pensions than they would otherwise. This is a particularly complex area of pensions planning and each client’s situation must be considered based on their specific circumstances. There are, though, many cases where funding in excess of the LTA can still provide an overall benefit and accepting the LTA can be a “least worst case” outcome.

The good news is that all the other benefits of pension planning remain in place and, importantly, there’s usually no need to wait until the end of the tax year. Now is a great time to start, or increase, a monthly pension contribution or make a one off lump sum to use up any remaining allowances.

Tax year end planning checklist for individuals – 2021/22 tax year

A handy checklist of suggested planning considerations for individuals for the end of the tax year.


As well as considering tax planning for the current tax year, it’s important to put in place strategies to minimise tax throughout the next tax year. The majority of planning strategies have greatest effect if implemented before a tax year begins.

This tax year end planning checklist covers the main planning opportunities available to UK resident individuals and will hopefully help to inspire action to reduce tax for the 2021/22 tax year and to plan ahead for 2022/23. 

However, while tax planning is an important part of financial planning, it is not the only part. It is essential that any tax planning strategy that is being considered also makes commercial sense.

Suggested planning points for consideration

Income tax 

  • Reduce taxable income below £150,000 to avoid 45% tax. Pension contributions are one of the few ways to reduce taxable income.
  • For married couples / civil partners, ensure each has sufficient income to use their personal allowance: £12,570 in 2021/22. This will remain at that level until 5 April 2026. 
  • The personal allowance is gradually withdrawn for individuals with adjusted net income above £100,000. If income is above £100,000, then individual pension contributions before 6 April 2022 can reduce income to £100,000 to restore all or part of a 2021/22 personal allowance which would otherwise be lost.
  • Reinvest in tax free investments, such as ISAs, to replace taxable income and gains with tax free income and gains, or investment bonds that can deliver valuable tax deferment.
  • Investments delivering tax free, or potentially tax free, and/or tax deferred, income, can be beneficial for an individual in contrast to an income producing investment which might otherwise result in an erosion of personal allowances. Note that once an investment bond gain is triggered, for example, by encashment, it is included in an individual’s income without top slicing when assessing entitlement to the personal allowance.
  • Redistribute investment capital between spouses / civil partners to potentially reduce the rate of tax suffered on income and gains. No capital gains tax or income tax liability will arise on transfers between married couples or civil partners living together or where the asset to be transferred is an investment bond.

    Any transfer must be done on a ‘no-strings-attached’ basis to ensure that the correct tax treatment applies. This means investments must be fully transferred with no entitlement retained by the transferor.

Capital gains tax

The term “capital gains tax planning”, in this context, means the taking of action ahead of, or at the time of, the disposal of an asset to eliminate or reduce a current or future liability to capital gains tax. This may involve one or more of the following:

  • timing of the transaction, e.g. bringing the transaction forward or delaying it;
  • ensuring that full advantage is taken of all available exemptions and reliefs;
  • depending on the personal objectives of the taxpayer, prior transactions such as a transfer to a spouse / civil partner or the use of a trust;
  • using the annual exempt amount; and
  • making full use of any available losses.

Capital gains tax planning:

  • Maximise use of this year’s annual exemption (currently £12,300). Any amount unused cannot be carried forward – “use it or lose it”.
  • To defer the payment of tax for a year, make a disposal after 5 April 2022.
  • To use two annual exemptions in quick succession, make one disposal before 6 April 2022, and another after 5 April 2022. 
  • Try to ensure each spouse / civil partner uses their annual exemption. Assets can be transferred tax efficiently between spouses / civil partners to facilitate this.

Any such transfer must be outright and unconditional. In transactions which involve the transfer of an asset showing a loss to a spouse / civil partner who owns other assets showing a gain, care should be taken not to fall foul of anti-avoidance rules that apply (money or assets must not return to the original owner of the asset showing the loss). 

It should also be borne in mind that a return in respect of the disposal of a residential property (e.g. a buy-to-let property) has to be delivered to HMRC within 30 days following the completion of the disposal, and a payment on account has to be made at the same time, if the completion date was between 6 April 2020 and 26 October 2021; 60 days for disposals completed on or after 27 October – please see HMRC’s guidance. 

In July 2020, the Chancellor asked the Office of Tax Simplification (OTS), to carry out a review of capital gains tax, to ‘identify opportunities relating to administrative and technical issues as well as areas where the present rules can distort behaviour or do not meet their policy intent’. Based on the first report published by the OTS on 11 November 2020, it was thought that the Government might look to introduce proposals, such as taxing capital gains at the same rates as income and reducing the annual exempt amount. However, no such announcements were made in the March 2021 Budget. Instead, the Government announced that the annual capital gains tax exemption would be frozen at £12,300 until 5 April 2026. And, on 30 November 2021, the Treasury issued the Government’s formal final response to the OTS reports, as part of the publication of its ‘Tax administration and maintenance’ package. It did not accept any of the tax changes suggested by the OTS in its first report, saying: “…these reforms would involve a number of wider policy trade-offs and so careful thought must be given to the impact that they would have on taxpayers, as well as any additional administrative burden on HMRC”. It added that “The Government will continue to keep the tax system under constant review to ensure it is simple and efficient”. The Treasury has, however, accepted five of the 14 OTS recommendations in the second OTS report, which deal with practical and administrative issues.

So, after nearly four years of uncertainty, the work of the OTS on capital gains tax can now mostly be forgotten, at least until after the next election.

Inheritance tax

  • Everybody has an annual exemption of £3,000 to use each tax year. Any unused annual exemption can be carried forward for one year only. So, use any available annual exemption carried forward from last year before 6 April 2022.
  • The annual £250 per donee exemption cannot be carried forward. A person can make as many outright gifts of up to £250 per individual per tax year as they wish free of inheritance tax, provided that the recipient does not also receive any part of the donor’s £3,000 annual exemption.
  • For those who have income that is surplus to their needs, it may also be appropriate to establish arrangements whereby regular gifts can be made out of income in order to utilise the normal expenditure out of income exemption. An ideal way of achieving this is to pay premiums into a whole of life policy in trust to provide for any inheritance tax liability.

The OTS recently produced two reports on the simplification of inheritance tax. While the first OTS report looked at administration, the OTS’s second report was focused on the structure of inheritance tax, including suggestions to revamp annual exemptions and review the interaction of the capital gains tax uplift and inheritance tax business relief on death.

No such changes were announced in the March 2021 Budget. Instead, the Treasury accepted the OTS proposal to relax reporting regulations for non-taxpaying estates. And the Government issued a further response as part of the ‘Tax administration and maintenance’ package published on 30 November, in which it said: “…the  Government has  decided not  to  proceed  with  any  changes  at the  moment,  but  will bear  your very valuable  work  in mind  if  the  Government  considers  reform of  IHT  in the  future”. So, the work of the OTS on inheritance tax can now also mostly be forgotten.

However, the Government did announce that the inheritance tax nil rate band and residence nil rate band would be frozen at £325,000 and £175,000 until 5 April 2026, and the residence nil rate band taper will continue to start at £2 million. Therefore, as wealth continues to rise, planning to mitigate inheritance tax should be started as early as possible.

And clients that can afford to make substantial gifts out of income may like to get that planning up and running sooner rather than later in case any rule change occurs in future – in the hope that if a rule change does occur, existing arrangements will be protected.

Savings and investments 

Savings income and dividends 

  • For married couples / civil partners ensure each has sufficient savings income to use their £500 or £1,000 personal savings allowances, and sufficient dividends to use their £2,000 dividend allowances.
  • Those able to control the amount of dividend income they receive, such as shareholding directors of private companies, could consider paying themselves up to £2,000 in dividends in tax year 2021/22.
  • The 0% starting rate band for savings income of £5,000 is available on top of the dividend allowance and personal savings allowance. It reduces £1 for £1 by all non-savings income over the personal allowance, so in 2021/22 people are not able to take advantage of this starting rate band where earnings and/or pension income exceeds £17,570. However, if a person does qualify, ensure they have the right type of investment income (e.g. interest) to pay 0% tax.
  • Where interest is due just after 5 April 2022, closing an account just before the tax year end can bring that interest forward to the 2021/22 tax year, which, for example, may help in making better use of any surplus personal savings allowance or nil rate starting (savings) band for the current tax year.

ISAs and JISAs 

  • Annual subscriptions (£20,000 and £9,000 respectively) should be maximised before 6 April 2022 as any unused subscription amount cannot be carried forward. The annual ISA and JISA subscription limits remain at £20,000 and £9,000 for 2022/23.


  • For subscriptions to be relieved in tax year 2021/22 they must be made before 6 April 2022:
    • EISs – Up to £1 million can be invested; £2 million where any amount above £1 million is invested in knowledge-intensive companies. Maximum income tax relief is 30%. Unlimited capital gains tax deferral relief – provided some of the EIS investment potentially qualifies for income tax relief. To carry back an EIS subscription for tax relief in 2020/21 it must be paid before 6 April 2022.
    • VCTs – Up to £200,000 can be invested. Maximum income tax relief is 30%. No ability to defer capital gains tax, but dividends and capital gains generated on amounts invested within the annual subscription limit are tax free.

It is essential that would-be investors are aware of the likely greater investment risk and lower liquidity that will have to be accepted in return for the attractive tax reliefs offered by EISs and VCTs.

 Investment bonds 

  • Investment bonds can deliver valuable tax deferment. To minimise taxation on encashment, consider deferring the encashment until later tax years, if other taxable income is likely to be lower, or nil, or the investor is a basic rate taxpayer. In the meantime, if cash is required, the investor can use the 5% tax-deferred annual withdrawal facility.

    (Alternatively consider assigning, transferring, the bond, outright, to an adult basic rate or non-taxpaying relative before encashment.)
  • Or, it may be worth triggering a chargeable event gain before the end of this tax year, by full encashment/surrender, so that the liability to tax falls in 2021/22, if the taxpayer anticipates that their top tax rate in 2022/23 will be greater than this year’s.

    (Note that the timing of the chargeable event depends on the way in which the chargeable event gain is triggered. Chargeable event gains in respect of partial withdrawals are triggered at the end of the policy year, whereas chargeable event gains on full policy encashments/surrenders are triggered on the actual date of the event.)


  • The carry forward rules allow unused annual allowances to be carried forward for a maximum of three tax years. This means that 5 April 2022 is the last opportunity to use any unused allowance of up to £40,000 from 2018/19.
  • In 2020/21, the Chancellor added £90,000 to the two income thresholds that govern the tapering of the annual allowance. So, in 2021/22, the threshold income level and the adjusted income level for the tapered annual allowance are £200,000 and £240,000 respectively. These levels should mean that fewer pension members will be impacted by the tapered annual allowance from 2020/21 onwards, than in earlier years. This means more pension savings and the possibility of avoiding a tax charge.

    For high earners, however, it’s still important to check if they are likely to be subject to the tapered annual allowance and whether there is anything, they can do about it. If the client has sufficient carry forward and their threshold income is only just above £200,000 for 2021/22, making additional individual pension contributions could reinstate their whole 2021/22 annual allowance.

    Note that the minimum the taper can take the annual allowance down to is £4,000 from 2020/21 onwards, a reduction from the previous £10,000. This will not have an impact on earlier tax years, and it will not affect the amounts of unused annual allowance available for carry forward from tax years prior to 2020/21.

  • The personal allowance reduces by £1 for every £2 for those with adjusted net income in excess of £100,000. This means that, for 2021/22, there will be no personal allowance available once adjusted net income exceeds £125,140. Making extra pension contributions not only increases pension provision, but for those who may be subject to a reduced personal allowance a personal pension contribution could claw back some of this allowance giving an effective tax saving of around 60%, more with salary sacrifice.
  • In addition to helping high earners gain back their personal allowance, pension contributions can also help families get back their child benefit, which is progressively cut back if one parent or partner in the household has income of more than £50,000. Benefit is totally lost when income reaches £60,000.
  • The changes to the death benefit rules on pensions from 6 April 2015 should have prompted a review of the pension scheme and/or the expressions of wish regarding the recipients of pension death benefits. If this has not been done, now is the time. In theory a person’s pension plan could provide income for future generations, as beneficiaries will be able to pass the remaining fund to their children and so on down the line.
  • Individuals should consider making a net pension contribution of up to £2,880 (£3,600 gross) each year for members of their family, including children and grandchildren, who do not have relevant UK earnings. The £720 basic rate tax relief added by the Government each year is a significant benefit and the earlier that pension contributions are started the more they benefit from compounded tax-free returns.
  • In the March 2021 Budget, the Government announced that the lifetime allowance will be frozen at £1,073,100 until 5 April 2026. Individuals who have funds close to or exceeding the lifetime allowance may need to review any previous decisions in respect of continuing to fund their pensions and or deferring crystallising their benefits based on the expectation of inflationary increases.

The potential role of Investment Bonds in tax effective decumulation

How “long held” investment bonds can deliver a powerful addition to a tax effective decumulation strategy.

Through Techlink Professional and Techlink Communicator we enable you to:

• Be better informed

• Reduce risk.

• Do more business.

• Communicate better and smarter.

• Save time.

To access your free trial; go to www.techlink.co.uk/freetrial and request which trial option you require from the options shown. You will then be given 4 weeks free access to Techlink Professional and/or Techlink Communicator and an example of the Communicator content.

Investment Bonds in Wealth Accumulation

The tax efficiencies of investment bonds in wealth accumulation.

Through Techlink Professional and Techlink Communicator we enable you to:

• Be better informed

• Reduce risk.

• Do more business.

• Communicate better and smarter.

• Save time.

To access your free trial; go to www.techlink.co.uk/freetrial and request which trial option you require from the options shown. You will then be given 4 weeks free access to Techlink Professional and/or Techlink Communicator and an example of the Communicator content.

Reminding you of the potential tax efficiency of investment bonds

Investment bonds for tax efficiency beyond the tax “no brainers”.

Through Techlink Professional and Techlink Communicator we enable you to:

• Be better informed

• Reduce risk.

• Do more business.

• Communicate better and smarter.

• Save time.

To access your free trial; go to www.techlink.co.uk/freetrial and request which trial option you require from the options shown. You will then be given 4 weeks free access to Techlink Professional and/or Techlink Communicator and an example of the Communicator content.

Minimising tax to maximise investment return

Smart wrapper choice incorporating and beyond the “tax no brainers”.

Through Techlink Professional and Techlink Communicator we enable you to:

• Be better informed

• Reduce risk.

• Do more business.

• Communicate better and smarter.

• Save time.

To access your free trial; go to www.techlink.co.uk/freetrial and request which trial option you require from the options shown. You will then be given 4 weeks free access to Techlink Professional and/or Techlink Communicator and an example of the Communicator content.

Saw this and thought of you

The importance of regular, focussed, personal communication in building and developing relationships and “referability”.

Through Techlink Professional and Techlink Communicator we enable you to:

• Be better informed

• Reduce risk.

• Do more business.

• Communicate better and smarter.

• Save time.

To access your free trial; go to www.techlink.co.uk/freetrial and request which trial option you require from the options shown. You will then be given 4 weeks free access to Techlink Professional and/or Techlink Communicator and an example of the Communicator content.

Treasury responses to the OTS reports on CGT and IHT

A period of stability in store for CGT and IHT : No material changes emerging from the OTS reports.

Through Techlink Professional and Techlink Communicator we enable you to:

• Be better informed

• Reduce risk.

• Do more business.

• Communicate better and smarter.

• Save time.

To access your free trial; go to www.techlink.co.uk/freetrial and request which trial option you require from the options shown. You will then be given 4 weeks free access to Techlink Professional and/or Techlink Communicator and an example of the Communicator content.