5 Tips to Get the Best Tax Deal in 2021/2022

Back to News & Views

As the Covid restrictions are gradually lifted, normality is starting to appear on the horizon.

Throughout 2020 it was difficult to make plans for next week, let alone the rest of your life. But the new tax year, and the prevailing optimism, mean it is a great time to start planning and catch up on missed opportunities.

There are a number of ways that you can make your financial plan more tax efficient. The earlier you start planning, the more you can benefit.

So once you have celebrated and hugged your loved ones, why not make some plans to get the 2021/2022 tax year off to a good start.

Structure Your Income Efficiently

Everyone has a tax-free personal allowance of £12,570 per year, although this is reduced for anyone earning over £100,000. But there are several ways to make the most of your tax-free income, or even increase it. For example:

·        Marriage Allowance – a lower-earning spouse can transfer up to £1,260 of their tax-free personal allowance to their higher-earning partner (providing the partner is a basic-rate taxpayer), reducing the household tax bill by up to £252.

·        Personal Savings Allowance – you can receive tax-free interest on your savings. The amount is £1,000 for basic rate taxpayers and £500 for higher rate taxpayers. This allowance is not available to additional rate taxpayers.

·        Starting Rate for Savings – interest of up to £5,000 may be paid free of tax, providing this forms part of your total income, up to a maximum of £17,570.

·        Dividend Allowance – you can earn dividends of up to £2,000 per year from your own company or investments without tax liability. 


Use Your ISA Allowance

You can contribute up to £20,000 per year to an ISA. All income and growth is free of tax, and you can withdraw your money at any time without tax or penalty (LISA accounts vary). Depending on your circumstances, you may wish to contribute to a Cash ISA, Stocks and Shares ISA or even a Lifetime ISA.

If you don’t use your ISA allowance in a given tax year, you can’t carry it forward to the next year.

Regular, monthly contributions are the best way to use your ISA allowance, for the following reasons:

·        Your savings form part of your budget and take priority over discretionary spending. It’s likely that you’ll save more than if you wait until the end of the tax year to decide.

·        You can benefit from ‘pound cost averaging.’ Rather than trying to time the market, you are investing throughout the year. Even if the market falls, this can work to your advantage as your monthly contribution will buy more shares at a cheaper price.

·        It avoids leaving your contributions until the last minute.


Make Pension Contributions

Pensions are one of the most tax-efficient ways to save for the future, but many investors are not fully aware of the tax treatment. Early planning not only helps you take advantage of the benefits, it also ensures that you don’t fall into certain tax traps.

Here are some ways in which you can make the most of your pension:

·        Opt into your employer’s pension scheme. The reduction in monthly net income will be relatively small compared with the boost received to your pension.

·        Higher and additional rate taxpayers should check that they are receiving full tax relief on their contributions. If your contributions are paid by salary sacrifice, this will happen automatically. If you pay personally, you will need to reclaim the tax relief, either via your tax return or by contacting HMRC. If you pay via the ‘net pay’ method you do not need to claim tax relief

·        Making pension contributions can result in a lower income, and therefore a lower tax band. This is attractive for higher rate taxpayers, particularly so for those earning £100,000 - £125,140, as it can save tax at an effective rate of up to 60%.

·        You may be able to carry forward your pension contribution allowance from previous tax years. Contribution allowances are complex, particularly for high earners, so it is always best to seek advice if you are planning substantial contributions.

·        You can contribute up to £3,600 gross (£2,880 net) for a non-earning spouse or child. They will still receive 20% tax relief despite having no taxable income.

·        Take financial advice before taking benefits from your pension. This can help to reduce or avoid tax penalties, as well as making sure your income is set up in the most efficient way.


Use Your Capital Gains Exemption

If you sell any investments, other than those held within an ISA or pension, capital gains tax may be due on any profits. While this may be unavoidable, there are a few ways to minimise your liability:

·        Use your £12,300 exemption each year. This can be done by changing funds, rebalancing your portfolio, or transferring money from taxable investments into your ISA. By doing this, you avoid large gains rolling up and becoming taxable when you need to withdraw money.

·        You can transfer assets to a spouse, by way of a genuine gift without a capital gains tax liability. You then have two annual exemptions (£24,600) to set against gains.

·        Certain investments allow you to defer tax on gains realised from other investments, or avoid CGT altogether if you hold the investment for a certain period. These investments are very high risk, and should only be considered after taking advice.


Other Tax Savings

There are a few other options for saving on tax, either directly or indirectly, which many people are not aware of.

For example:

·        Tax-free childcare. This replaces the former Childcare Vouchers scheme. You can pay up to £8,000 per year into an account with HMRC. This will then be topped up to £10,000 providing you spend it on registered childcare.

·        Claim business mileage. You can claim 45p for every mile travelled (up to 10,000 miles) free of tax.

·        If you have to wear a uniform for work, you can reclaim the cost of cleaning and repairing it.

·        Your employer may offer an incentivised share scheme. Always check the scheme rules carefully, and only invest what you can afford.


By combining different strategies for saving tax, you could save thousands each year without any major changes to your lifestyle.

Please don’t hesitate to contact a member of the team if you would like to find out more about your options for saving tax.

Book your FREE, no obligation discussion today. Schedule Appointment

Sign Up to our mailing list - Receive regular news, tips and financial commentary from the Gemini Team.

Latest News

  • After the excitement and excess of the festive season, January is a good time to make plans for the coming year. You still have three months left until the end of the tax year, which is plenty of time to make the most of your tax allowances. By doing some planning now, you can save tax and avoid the last minute rush in April. [...]

  • Creating your own financial plan is fairly easy and accessible. The internet offers budgeting spreadsheets, investment calculators, and trading platforms. Everything you need to plan your future and build a financially independent lifestyle is literally at your fingertips. [...]

  • Two of the most important financial goals are getting onto the property ladder and securing a comfortable retirement. Sometimes these goals are in conflict with each other, as the more you save towards a deposit, the less you have available to top up your pension. [...]

  • A secure pension income for life is no longer a reality for most people. While some retirees are fortunate enough to have built up a substantial defined benefit pension, the majority will need to manage their retirement carefully, drawing an income from a number of different sources. [...]

  • Insurance is an often neglected aspect of financial planning, especially when it comes to thinking about your estate. There are several options available for reducing Inheritance Tax (IHT), for example, making gifts, placing money in trust, or investing in business assets. [...]

  • We all want our children grow into successful and responsible adults. Passing exams and starting a career can help to get them on this path, but they don’t nurture many of the life skills we take for granted. [...]

  • If you read the financial press, you will see a lot of speculation about what you can, or should, invest in. Social media is no different, with stock tips and investment forums building up a significant online following. [...]

  • Many couples keep their finances separate, which makes sense in some situations. If both parties are financially independent and contribute equally, it can be a fair and sensible way of managing household finances. [...]

  • Remortgaging can be a useful way of improving your deal, raising additional funds, or restructuring your financial arrangements. [...]

  • As the Covid restrictions are gradually lifted, normality is starting to appear on the horizon. Throughout 2020 it was difficult to make plans for next week, let alone the rest of your life. But the new tax year, and the prevailing optimism, mean it is a great time to start planning and catch up on missed opportunities. [...]

  • The pandemic has caused financial hardship for many people, with multiple industries still facing uncertainty. But for those fortunate enough to stay in work, or be covered under the furlough scheme, there have been fewer opportunities to spend money. Long, sociable lunches, after work drinks and foreign holidays have been off the menu for over a year. While many of us might have splashed out on new tech, home improvements and leisurewear, the savings still add up. [...]

  • As you work towards financial independence, protection is an important part of the plan. Having the right insurance can mean that your financial plan stays on track, even if the unexpected happens. [...]

Gemini Wealth Management Ltd is Authorised and regulated by The Financial Conduct Authority Registered in England & Wales No. 5919877 Registered Office: Gemini House, 71 Park Road, Sutton Coldfield, West Midlands B73 6BT The Financial Conduct Authority does not regulate tax and trust advice, will writing and some forms of buy to let mortgages. The guidance and/or advice contained in this website is subject to regulatory regime and is therefore restricted to those based in the UK.

Website by Mellow Marsh Software
© Gemini Wealth Management Ltd
Privacy Notice | Cookie Policy