2020/2021 Year-End Tax Planning: Keeping more of your money to enjoy, invest, save or pass on

Tax never requires a one-size-fits-all approach. Each taxpayer and each year will be different. And with the end of the current 2020/21 tax year approaching on Monday 5 April 2021, now is the time to carry out a tax health check and implement any planning opportunities.

We should all be thinking about tax planning throughout the course of a year, but this year we have been distracted by the impact of the coronavirus (COVID-19) pandemic on our lives. We have listed below a few reminders of the issues you may want to consider as worthy of including in your 2020/21 tax planning to-do list.

Tax planning opportunities

Tax planning might not sound very exciting, but it can have a dramatic effect on your personal finances and long-term wealth. It is important to ensure that, if you have not done so already, you take the time to carry out a review of your tax and financial affairs to identify any tax planning opportunities and take appropriate action before it’s too late.

The best way to pay less tax is to plan ahead. And with the right tax planning advice you’ll keep more of your money to enjoy, invest, save or pass on. Paying no more tax than you should, is something we all strive for.

Here are some key things you might need to action before the tax year end

Personal reliefs: Married couples should utilise each person’s personal reliefs, as well as their starting and basic rate tax bands. Could you make gifts of income-producing assets, which must be outright and unconditional, to distribute income more evenly between you both?

Salary sacrifice: This is an especially tax-efficient way for you to make pension contributions, to save and reduce your Income Tax and National Insurance. Have you considered exchanging part of your salary for payments into an approved share scheme or additional pension contributions?

Pensions annual allowance: Unless you are earning over £240,000 pa (or a threshold income of £200,000 +) or have already flexibly accessed pension benefits then you are entitled to make up to £40,000 of pension contributions per tax year. Have you fully utilised your tax-efficient contributions for this tax year or any unused allowances from the three previous tax years?

Personal & Stakeholder pensions: A personal and stakeholder pension is available to any United Kingdom resident under the age of 75. Children can also make annual net contributions of £2,880 per year, making the gross amount £3,600 regardless of any earnings. There are ways of using these payments to keep below the £50,000 income threshold to retain child benefit. It is also a very beneficial way of giving children or grandchildren a helping hand for the future. Is this an option you or a family member should be utilising?

Large pension funds: The Lifetime Allowance (LTA) is currently £1,073,100. If there are inflationary increases by the end of the current tax year, this could have an impact on your pension funds. Do you have a plan in place to protect your money from this?

Pension drawdown: If you are 55 or over you could access 25% tax-free cash from your Defined Contribution (also known as Money Purchase) pension pots and invest the rest. However, drawing large amounts in one tax year can lead to a larger tax bill than if spread over a longer period. Do you know the implications of taking money out of your pension pots?

Passing on your pension: Given recent pensions freedoms legislation, pensions can now be passed onto spouses and future generations, sometimes tax free after death. It is important your nomination of who will benefit from your pension after death is regularly updated with your pension provider.

Individual Savings Accounts (ISAs): An ISA allows you to save tax-efficiently into a cash savings or investment account. The proceeds are shielded from Income Tax, tax on dividends and Capital Gains Tax. Have you fully utilised the maximum £20,000 annual allowance?

Junior ISAs: This is a long-term tax-efficient savings account set up by a parent or guardian, specifically for the child’s future. Only the child can access the money, and only once they turn 18. Have you invested the maximum £9,000 allowance for your child or children?

Lifetime ISAs (LISAs): You must be aged between 18 and 40 to open a Lifetime ISA. The Government will provide a 25% bonus on the money you invest, up to a maximum of £1,000 per year. You can save up to £4,000 a year and can continue to pay into it until you reach age 50. Could you be taking advantage of this very tax-efficient savings option?

Capital Gains Tax (CGT): There are two different rates of CGT – one for property
and one for other assets. If your assets are owned jointly with another person, you
could use both of your allowances, which can effectively double the amount you can make before CGT is payable. If you are married or in a registered civil partnership, you are free to transfer assets to each other without any CGT being charged. Have you fully used your £12,300 annual exemption?

Inheritance Tax (IHT) relief: IHT must be paid on the value of any estate above £325,000, or £650,000 for married couples (excluding the residence nil-rate band, noted below). However, certain business assets, including shares and farmland, in private trading companies can qualify for 100% relief from IHT. Are you taking advantage of the reliefs available to you?

Residence nil-rate band (RNRB): This allowance was introduced during the 2017/18 tax year and is available when a main residence is passed on death to a direct descendant.
The allowance is currently £175,000. When combined with the nil-rate band of £325,000, this provides a total IHT exemption of £500,000 per person, or £1 million per married couple. If you are planning to give away your home to your children or grandchildren (including adopted, foster and step-children), have you considered the impact on the RNRB?

Charitable and personal gifts: If you leave at least 10% of your net estate to charity a reduced inheritance rate of 36% applies rather than the usual 40%. Other exemptions apply for inter-spousal transfers, transfers of unused annual income, business and agricultural assets, and for various other fixed, small amounts. Are you intending to make gifts before the end of the current tax year?

Trust funds: These help protect your assets and guarantee that your loved ones have financial stability for their future. Crucially, a trust can help to avoid or reduce IHT and ensure that the majority of your money, shares and equity are passed on in the most efficient way. Should you consider setting up a trust?


The 2020/21 tax year is coming to a close, and if appropriate to your particular situation there are some important tax planning issues and opportunities you may wish to consider. No matter what kind of taxpayer you are, you need to plan ahead. Once the tax year has already ended, you’ve lost virtually any flexibility available to you to manage your tax affairs.

To find out more or to discuss your situation, please call us – we look forward to hearing from you.

Who are Vizion Wealth?

Our approach to financial planning is simple, our clients are our number one priority and we ensure all our advice, strategies and services are tailored to the specific individual to best meet their longer term financial goals and aspirations. We understand that everyone is unique. We understand that wealth means different things to different people and each client will require a different strategy to build wealth, use and enjoy it during their lifetimes and to protect it for family and loved ones in the future.

All of us at Vizion Wealth are committed to our client’s financial success and would like to have an opportunity to review your individual wealth goals. To find out more, get in touch with us – we very much look forward to hearing from you.

The information contained in this article is intended solely for information purposes only and does not constitute advice.  While every attempt has been made to ensure that the information contained on this article has been obtained from reliable sources, Vizion Wealth is not responsible for any errors or omissions. In no event will Vizion Wealth be liable to the reader or anyone else for any decision made or action taken in reliance on the information provided in this article.

Posted by James Blackham

James particularly enjoys building close relationships with all clients and helping people identify and fulfil their long term financial goals. A highly qualified Financial Planner working towards Chartered status and is also a Pension Transfer Specialist. James is also a partner of Vizion Wealth LLP.

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