How to make sure you don’t pay more tax than you need to

How to make sure you don’t pay more tax than you need to

Andy Cowan
Published: 16 Mar 2018 Updated: 13 Jun 2022

Use your £20,000 ISA allowance

Each tax year you get an ISA allowance, but you need to use it before 6 April or you will lose it forever. This year you can invest up to £20,000 in your ISA. Your investments will be tax-free and you don’t have to declare ISAs on your tax return.

You could still take advantage of your ISA allowance if you don’t have any new money to invest. If you hold investments in other accounts, you could transfer them into your ISA and you won’t pay tax on any future growth or income.

Make pension contributions

You get tax relief on anything you pay into your pension up to your annual allowance (£40,000 or less). The Government tops up your contributions by 20% automatically, and higher or additional-rate taxpayers can claim back another 20% or 25% through their tax return.

You can also make extra pension contributions through pension carry forward. This involves carrying over unused annual allowance from the past three tax years. Find out more in our guide to pension carry forward. However, you need to be careful not to exceed the pension lifetime allowance or you could face a surprise tax bill in the future.

Speak to an expert about using your tax allowances

Book a no-obligation initial consultation to find out how we could help you.

Capital Gains Tax

Capital Gains Tax is a tax on the profit you make when you sell an asset. The allowance is currently £11,300 and it doesn’t roll over between years. If you are worried about a future tax charge you could consider selling some of your assets this year to use your allowance before you lose it.

Do you receive dividends?

You can currently receive £5,000 of dividend income without paying Income Tax. However, the Dividend Allowance is reducing to £2,000 at the beginning of the 2018/19 tax year. If you rely on dividend-paying shares for a regular income, you could move these shares into an ISA where the payments will be tax-free.

Personal Savings Allowance

You can earn up to £1,000 interest (or £500 if you are a higher-rate taxpayer) from your cash savings accounts without paying Income Tax. The allowance isn’t available for additional-rate taxpayers.

Speak to an expert about using your tax allowances

Our financial planners can help you to structure your finances and make the most of the available tax allowances. To find out more about the service and what we could do for you, please book a no-obligation initial consultation by clicking the link below or calling us on 020 7189 2400. We can speak to you over the phone or meet you at your home, workplace or nearest Tilney office.

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This article was previously published on Tilney prior to the launch of Evelyn Partners.