As we approach the 5th of April it is worth checking that you have used all of the appropriate allowances for the current tax year. Rather than provide an exhaustive list of the various tax year relevant allowances, I have focused on four areas that are often relevant to clients I meet.

Individual Savings Allowance (ISA) and Lifetime Individual Savings Allowance (LISA)

ISAs have proved a very popular tax-advantaged savings vehicle, and the allowance is now £20,000 per annum. This allowance, which can be invested in cash, stocks and shares, or even Innovative Finance ISAs, means that most people should find something appropriate.

If you’re between 18 and 40 LISAs can be attractive particularly for those high earners who are constrained by how much they can contribute to pensions.

Inheritance Tax Allowances

The Australians have a great saying: “It is better to give with a warm hand than a cold one”, and many of our clients like to make use of their annual gifting allowances. Each individual can give £3,000 away per tax year, and if they have not used the allowance in the previous tax year can use that allowance as well. In addition they can give £250 each to as many people as they like. Although, not to anyone who has already received a gift of your whole £3,000 annual exemption.

Capital Gains Tax – Gains and Losses

The Capital Gains Tax allowance is one of the use-it-or-lose-it allowances. It makes sense to try to use it each year, as the first £11,700 gains fall within the annual allowance. Even for those of us who are holding assets for the longer term, it is prudent to consider realising gains to rebase the purchase price which should mean a lower tax bill later. Based on the highest current capital gains tax rate for non-residential property (20%) this could mean an unused £11,700 allowance this year could cost you £2,340 additional tax in a future year.



The tax relief on pension contributions make obvious sense to many. The level of relief can vary depending on the level of income tax you pay, so 20%, 40%, 45%, and for those earning between £100,000 and £123,700 per annum potentially 60%, if they are caught by the Personal Allowance trap.

If someone has used their full allowance this tax year they can carry forward unused relief from the previous three tax years. This tax year is significant, as it marks the last year that one can use unused reliefs from the 2015/16 tax year which was the time that a rule change meant that some people have a higher than £40,000 annual allowance.

For those with taxable income over £150,000 per annum, they will face a tapered annual allowance on a two-for-one basis, which means that when earnings exceed £210,000 per annum the annual allowance for that tax year is reduced to the minimum £10,000 per annum. It is therefore equally important to make sure if you are a high earner and making contributions that you are not exceeding the annual allowance, as the penalty for exceeding it is a tax charge of the relief you have received but were not eligible for of 45% – ouch!

At the other end of the scale if you have no earnings you can still make pension contributions each tax year and receive tax relief. This is limited to a £3,600 per annum contribution which will cost you £2,880 net of 20% tax relief.

Drawing benefits

Make sure you are using your income tax allowances efficiently. Some of my clients have the occasional year when their income is below the personal allowance or perhaps they are not using up all the 20% income tax band , if so a one-off withdrawal from their drawdown pension or offshore bond can help them use their full income tax allowances which otherwise may be lost or mean that when they eventually draw those benefits they may do so at a higher income tax rate.

The tax treatment of the above will depend on an individual’s circumstances and may be subject to change.

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