The past year has been incredibly unpredictable, but one thing that’s guaranteed is taxes. We know that the emotional strain of ‘Covid fatigue’ has only exacerbated financial worries but financial planning leads to peace of mind. Believe us, that’s what we do.

With tax year end just around the corner, one way to relieve any unnecessary anxiety is to get any tax year planning in order. February is a good time to check whether you’re making the most of your tax reliefs and allowances to save for the future. Following an incredibly stressful year financially as well as emotionally, some financial housekeeping is a wise investment of time and effort.

Our advisers have created a checklist of our top 10 Tax Year End (TYE) planning opportunities to explore, together with the key information you may need to make these a reality. However, we always recommend you take professional independent financial advice when tackling complex financial issues such as tax planning.

This checklist has been compiled with reference to Standard Life: –

  1. Pension saving: maximise tax relief

  • Additional and higher rate taxpayers may wish to contribute an amount to maximise tax relief at 40%, 45% or even 60% (where personal allowance is reinstated) while they have the opportunity.
  • Those with sufficient earnings can use carry forward to make contributions in excess of the current annual allowance. Remember this is the last chance to benefit from the potential double annual allowance for 2017/18, before it drops off the carry forward radar: it’s a case of “use it don’t lose it” before tax year end.
  • And it’s not just about individuals. Couples may consider maximising tax relief at higher rates for both, before paying contributions that will only secure basic rate relief. Many clients won’t know they can top-up pensions for their partners – and not just by £3,600, but up to their partner’s earnings. Their partner can get tax relief on top of this.

Key information

  • Total taxable income.
  • Relevant UK Earnings – e.g. earnings from employment or trade only.
  • Pension annual allowance available from current year and previous 3 years (especially 2017/18).
  1. High earners: making a pension contribution before the TYE could increase their annual allowance

  • Some high-income clients have suffered significant reductions in their tax-efficient pension saving in recent tax years. The standard £40,000 Annual Allowance (AA) has previously been reduced by £1 for every £2 of ‘income’ clients have had over £150,000 in a tax year, until their allowance dropped to £10,000.
  • However, from 2020/21 tax year onwards, that ‘high income’ level has increased from £150,000 to £240,000 so fewer clients will be affected. This means those with earnings of between £150,000 and £240,000 particularly, could benefit from a higher contribution level than last year as only people with ‘adjusted income’ over £240,000 will have their annual allowance reduced for that tax year.
  • The definition of ‘adjusted income’ is basically total taxable income including all pension contributions (which means that it isn’t possible to sacrifice salary for employer pension contributions to reduce income below £240,000). The way that tapering works is that for every £2 of income that exceeds £240,000, £1 of annual allowance will be lost. The maximum taper is £36,000 to give a minimum annual allowance of £4,000 (which is reached at an adjusted income level of £312,000 plus). This is lower than the earlier minimum of £10,000 so whereas some clients will now be able to contribute more, some will have a lower allowance.
  • But it is possible that some of these clients may be able to reinstate their full £40,000 allowance by making use of carry forward. A large personal contribution using unused allowance from the previous 3 tax years can bring income below threshold levels and restore the full £40,000 allowance for 2020/21. And some of it may attract circa 60% tax relief too.
  • Remember that when working out how much carry forward is available, high earners may also have had a reduced annual allowance from each of the last three tax years.
  • This area is complex, and we recommend you speak to one of our advisers for further clarity.

Key information

  • Adjusted Income for this year (broadly total income plus employer contributions).
  • Threshold Income for this year (broadly total income, less individual contributions).
  • Any unused annual allowance available from current year and previous 3 years.
  1. Clients approaching retirement: boost pension saving now before triggering the MPAA

Anyone looking to take advantage of income flexibility for the first time may want to consider boosting their pension pot before April, potentially sweeping up the full £40,000 AA from this year, plus any unused allowance carried forward from the last three years.

Triggering the Money Purchase Annual Allowance (MPAA) will mean the opportunity to continue funding into Defined Contribution (DC) pensions will be restricted to just £4,000 a year – with no carry forward.

Because of this, it might be worth considering other ways of meeting income needs that don’t restrict future pension saving. For instance, ‘could other non-pension savings be used?’ And remember, clients who need money from their pension can avoid the MPAA and retain the full £40,000 allowance if they only take their tax-free cash.

Key information

  • ‘Earnings’ required.
  • Non-pensions savings that could support ‘income’ required.
  1. Employees: sacrifice bonus for an employer pension contribution

We’re approaching ‘bonus season’ for many companies. ‘Exchanging’ a bonus for an employer pension contribution before the tax year end can bring several benefits.

The employer and employee NI savings made could be used to boost pension funding, giving more in the pension pot for every £1 lost from take-home pay.

Key information

  • Size of bonus.
  • Pension annual allowance available from current year and previous 3 years.
  • Does employer allow bonus sacrifice?
  • Employer willingness to share NI savings.
  1. Business owners: take profits as pension contributions

  • For many directors, taking significant profits as pension contributions could be the most efficient way of paying themselves and cutting their overall tax bill.
  • Of course, if the director is over 55 years, they now have full unrestricted access to their pension savings (although this might come at the price of a lower annual allowance going forward – see 3 above).
  • There’s no NI payable on either dividends or pension contributions. Dividends are paid from profits after corporation tax and will also be taxable in the director’s hands. By making an employer pension contribution, tax and NI savings can boost a director’s pension fund.

Key information

  • Company accounting period.
  • Company pre-tax profit.
  • Pension annual allowance available from current year and previous 3 years.
  1. Use ISA allowances

ISAs offer savers valuable protection from income tax and CGT and, for those who hold all their savings in this wrapper, it’s possible to avoid the chore of completing self-assessment returns.

The ISA allowance is given on a use it or lose it basis, and the period leading to the tax year end, often referred to as ‘ISA season’, is the last chance to top up. Savings delayed until after 6 April 2021 will count against next year’s allowance.

Key information

  • Remaining annual ISA allowance.
  1. Recover personal allowances and child benefit

  • Pension contributions reduce an individual’s taxable income. In turn, this can have a positive effect on both the personal allowance and child benefit for higher earners resulting in a lower tax bill.
  • An individual pension contribution that that reduces income to below £100,000 will restore your full tax-free personal allowance. The effective rate of tax relief on the contribution could be as much as 60%.
  • Child Benefit is clawed back by a tax charge if the highest earning individual in the household has income of more than £50,000 and is cancelled altogether once their income exceeds £60,000. A pension contribution will reduce income and reverse the tax charge, wiping it out altogether once income falls below £50,000.

Key information

  • Adjusted net income (broadly total income less individual pension contributions).
  • Relevant UK earnings.
  • Pension annual allowance available from current year and previous 3 years.
  1. Investments: take profits using CGT annual allowances
  • Clients looking to supplement their income tax-efficiently could withdraw funds from an investment portfolio and keep the gains within their annual exemption.
  • Even if cash isn’t needed, taking profits within the £12,300 CGT allowance and re-investing the proceeds means there will be less tax to pay when clients ultimately, need to access these funds to meet spending plans.
  • Proceeds cannot be re-invested in the same mutual funds for at least 30 days, otherwise the expected ‘gain’ will not materialise. But they could be re-invested in a similar fund or through their pension or ISA. Alternatively the proceeds could be immediately re-invested in the same investments, but in the name of the client’s partner.
  • If there is tax to pay on gains at the higher 20% rate, a pension contribution could be enough to reduce this rate to the basic rate of 10%.
  • Key information
  • Sale proceeds and cost pool for mutual funds/shares.
  • Gains/losses on other assets sold – e.g. second homes.
  • Losses carried forward from previous years.

         9. Bonds: cash in bonds to use up personal allowance (PA)/starting rate band/personal savings allowance (PSA) and basic rate band

If you have any unused allowances that can be used against savings income, such as personal allowance, starting rate band or the personal savings allowance, now could be an ideal opportunity to cash in offshore bonds, as gains can be offset against all of these.

  • If not needed, proceeds can be re-invested into another investment, effectively re-basing the ‘cost’ and reducing future taxable gains.
  • For those that have no other income at all in a tax year, gains of up to £18,500 can be taken tax free.
  • If you do not have any of these allowances available, but your partner (or even an adult child) does, then bonds or bond segments can be assigned to them so that they can benefit from tax free gains. Remember, the assignment of a bond in this way is not a taxable event.

Key information

  • Details of all non-savings and savings income.
  • Investment gains on each policy segment.
  1. No bonus? No problem: recycle savings into a more efficient tax wrapper

  • As mentioned in 8 and 9 above, using tax allowances is a great way to harvest profits tax free. By re-investing this ‘tax free’ growth, there will be less tax to pay on final encashment than might otherwise have been the case. That is to say, when you actually need to spend your savings, tax will be less of burden.
  • But there may be a better option to re-investing these interim capital withdrawals in the same tax wrapper. For example, they could be used to fund their pension where further tax relief can be claimed, investments can continue to grow tax free and funds can be protected from IHT.
  • Similarly, capital taken could be used as part of this year’s ISA subscription. Although ISAs don’t attract the tax relief or IHT advantage a pension does, fund growth will still be protected from tax.
  • Which leads nicely on to one final consideration; for clients over (or approaching) 55 – should ISA savings be recycled into their pension to benefit from tax relief and IHT protection?

Key information

  • Unused personal allowances for extracting investment profits.
  • Remaining annual ISA allowance.
  • Pension annual allowance available from current year and previous 3 years and relevant UK earnings.


Effective tax planning is a year-round job. It’s only at the end of the tax year that you have all the pieces to complete the planning jigsaw, but there are steps you can take now to get ahead of the game and give yourself time to put plans in place.

If you feel you could improve your end of year tax planning or would like some advice on any area of financial planning then please contact us for a free, no obligation meeting.

If you would like to know more about how we as Financial Advisers can help you set, plan and achieve your financial goals then financial planning section of  our website: Financial Planning or send us email at: [email protected]

The information contained in our website is for guidance only and does not constitute advice which should be sought before taking any action. The information is based on our understanding of legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases and reliefs from taxation may be subject to change. Accordingly, no responsibility can be assumed by Fiducia Wealth Management Limited, or any associated companies or persons, its officers or its employees, for any loss occurred in connection with the content hereof and any such action. Professional financial advice is recommended for every case.

Fiducia is a multi award-winning firm of Financial Advisers based in Dedham near Colchester situated in the heart of Constable Country on the Essex Suffolk border.

Fiducia Wealth Management Ltd. Dedham Hall Business Centre, Brook Street, Dedham, Colchester, Essex, CO7 6AD.

Fiducia Wealth Management Ltd. is authorised and regulated by the Financial Conduct Authority. FCA No. 408210