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Six key questions to help you plan your finances well ahead of the next tax year end

Space rocket launching representing planning for next year

It’s the beginning of the new tax year, and the combined effects of fuel cost rises, National Insurance increases, council tax increases and rising inflation mean that we could all be worse off in real terms. With that in mind, it could be a good idea to plan ahead and look at the many tax-saving options that may be available to you. Acting sooner rather than later will ensure that you maximise any advantages, and that there is no last-minute rush at the end of the next tax year.

David Goodfellow, Head of UK Financial Planning, highlights six key questions to ask yourself to help you make your money go further before the next tax year end.  

1. How much can I put into an ISA this tax year? 

As part of your end of year tax planning, it’s worth considering contributing to your ISA.

An ISA offers a simple, tax-efficient way to invest or save. This helps to maximise your funds while still giving you the flexibility to access your money tax free when you need it. If you do not use your allowance before midnight on 5 April 2023, this allowance will be lost forever and cannot be reclaimed.

This tax year you can invest up to £20,000 in ISAs. You can also invest up to £9,000 per child in a Junior ISA. And if the child is turning 18 this year, they get a 'double dip' – this means they can make full use of the allowance in this tax year as well as next year's.

You might have built up some extra cash savings over the last couple of years and be wondering about the best way to invest your money. Our investment managers can help you – you can contact us using the button below:

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Investment involves risk. The value of investments and the income from them can go down as well as up and you may not get back the amount originally invested. Past performance is not a reliable indicator of future performance.

If you do not want to invest surplus cash, you can always look to ‘ISA protect’ any existing investments you hold using these allowances.

2. Could I contribute more to my pension before the next tax year end?

Pensions are an invaluable way to fund your retirement and can be an effective way to leave a legacy for your children and beneficiaries.

To give you an idea of the scale of these benefits, you can currently receive up to 45% tax relief on money going into a pension. Your pension can also pass free of inheritance tax (IHT) to your beneficiaries.

All these benefits come with restrictions on how much money you can put in and there are potential pitfalls, particularly for high earners. As you approach the end of the tax year in 2023, this will be a crucial time to see if you could contribute more.

A key thing is to keep an eye on your earnings over the course of the tax year; if you are self-employed, this could be even more critical. The general rule is that you can contribute as much as you earn to a pension in each tax year – and receive tax relief – subject to the annual pension contribution allowance (£40,000 for most people) and the lifetime allowance (currently £1,073,100).

The extremely high cost of the pandemic has placed a strain on government finances – which means they have begun to recoup money spent by raising taxes. In the context of rising inflation, these tax rises will further reduce your wealth in real terms (i.e. when inflation is factored out).

If your earned income is expected to decline or stop in future tax years, or if you are worried about future tax rule changes, then you might want to consider contributing more to your pension now and using your allowances. Once the money is within the pension it grows free of income tax, capital gains tax and dividend tax.

It is worth bearing in mind that you can currently access your pension from age 55 and usually up to 25% can be taken completely tax-free, but you may have to pay income tax on any withdrawals after that.

The rules around pensions are complex and we would always recommend seeking professional advice to determine what would be best for your individual circumstances. There may be alternative options to boost your retirement savings if you've maximised your pension allowances.

If you would like to review your pension contributions, our independent financial planners are here to help you with a no obligation and no cost introductory meeting.

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Our financial planning specialists will work with you to help ensure your plans, accounts and investments work harmoniously together to achieve your goals.

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The tax treatment of all investments depends upon individual circumstances and the levels and basis of taxation may change in the future. Investors should discuss their financial arrangements with their own tax adviser before investing.

3. How could I make the most of my capital gains tax allowance?

Individuals in the UK can realise £12,300 of gains before 6 April 2023 completely free of capital gains tax (CGT). You cannot carry this allowance forward so where possible it should be used.

Rates of capital gains tax on assets, other than residential property, can be up to 20% on the gain if you’re a higher rate taxpayer – so ‘washing away’ the gain could significantly reduce the tax that is liable when you need to call on your funds.

Here at CGWM we will consider the CGT implications of investment transactions. If you would like to. discuss our approach to investment management in more detail, please contact us here.

4. How can I mitigate inheritance tax (IHT) for my beneficiaries?

Inheritance tax can be charged at 40% on anything above the £325,000 threshold when you die, although there could be exemptions if you qualify for the ‘residence nil rate band’ or decide to leave money to charity.

Planning sooner rather than later in this area is therefore vital if you want to maximise the amount that your beneficiaries receive. A very simple and effective way to start doing this is by using your ‘annual exemption’ of £3,000, which you can gift each tax year without any IHT implications. You can only carry forward any unused exemption for one year so acting on this before the end of the tax year is key. An often-overlooked strategy is to make regular gifts out of your excess income, if you are able to do so.

Be careful though.  You don't want to gift away so much it negatively impacts your own future plans or affects your lifestyle. Lifetime cash flow planning is offered by our independent financial planners and is a good way to test various scenarios to check you will still have enough to meet your own later life needs.

5. Are there VCT tax reliefs available if I have a higher tolerance to investment risk?

For investors who have a higher tolerance to investment risk, there are income tax and capital gains tax reliefs afforded to those who invest in Venture Capital Trusts (VCTs) and income, capital gains and inheritance tax reliefs for investing in Enterprise Investment Schemes (EISs), provided the underlying managers keep to certain rules.

However, shares in these small and start-up businesses are highly illiquid and can be hard to sell. They are only suitable for UK resident taxpayers with a time horizon of greater than five years.

Timing these investments against the tax you pay is prudent and there are limits to how much you can invest in a tax year. Our financial planners are able to provide specific advice in this area if you would like to learn more.

Investments in VCTs and EISs should be regarded as high risk as they invest in small companies with shares that are highly illiquid and can be hard to sell. They are only suitable for UK resident taxpayers who can tolerate higher risk and have a time horizon of greater than five years. They attract tax reliefs provided the underlying managers keep to certain rules.

 6. How could a financial planner help me plan well ahead of the next tax year end?

A financial planner is in a unique position to ensure that you are well placed to achieve your life goals and put a tailored financial plan in place. Where appropriate they can look to use your valuable allowances before the end of the tax year in 2023 and could also open the door for you to tax efficient options such as VCTs and EISs. What is more, your initial review is completely free of charge and we will only suggest advice if we think you will benefit financially.

To speak to an independent wealth planner ahead of the next tax year end, request a complimentary consultation now.

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Our independent wealth planners can help manage all aspects of your finances and investments and ensure they are structured, to meet your financial goals now and in later life.

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Our financial planning service is independent and fee based. Our wealth planners are free to consider any provider and all available options to ensure you have the best structure in place to meet your financial objectives.

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The information provided is not to be treated as specific advice. It has no regard for the specific investment objectives, financial situation or needs of any specific person or entity.

The information contained herein is based on materials and sources deemed to be reliable; however, Canaccord Genuity Wealth Management makes no representation or warranty, either express or implied, to the accuracy, completeness or reliability of this information. All stated opinions and estimates in this document are subject to change without notice and Canaccord Genuity Wealth Management is under no obligation to update the information.

Photo of David Goodfellow

David Goodfellow

Head of UK Financial Planning

David specialises in financial planning and tax driven investment planning. He has over 15 years' experience in advising on and investing in VCTs, EISs and tax driven property structures, and is part of the CGWM Advice and Solutions Committee. He is a member of the Personal Finance Society and The Chartered Insurance Institute.

44 (0)20 7523 4738

Investment involves risk and you may not get back what you invest. It’s not suitable for everyone.

Investment involves risk and is not suitable for everyone.