3 Weeks to the Budget, 5 Weeks to Tax Year End


Whilst the 31st January online self-assessment deadline may have passed, now is the time to start thinking about how you can maximise your tax efficiency before the close of this financial year.

With a number of changes due to take effect from April, including a reduction in the lifetime allowance, tapered annual relief for high earners and a potential flat rate system, investing wisely over the next 5 weeks could help to maximise any relief or contributions allowances.

Below is an overview of the key areas where Finura Partners can help you maximise your long and short term investment opportunities.


  • Individuals with large pension pots will have their Lifetime Allowance (LTA) further reduced from £1.25 million to £1 million for 2016/17, meaning any funds in excess of the limit will suffer penalty tax charges when you start to take pension benefits.
  • If your pension savings are already over £1.25 million, then you may still be able to benefit from Individual Protection 2014 (IP2014), which is available to apply for until 5 April 2017. Looking ahead to the new £1m limit, if you think your pension will exceed this amount at 6 April 2016, there are two new forms of protection that will be available for UK residents from April 2016 – Fixed Protection 2016 (FP16) and Individual Protection 2016 (IP16).
  • Since the realignment of the tax year on 9th July 2015, the annual allowance for this tax year could be up to £80,000, on the proviso that you used your full £40,000 allowance pre-9th July. Those looking to save further into their pension pots are strongly advised to do so ahead of the new tax year on 5th April 2016.
  • For those earning over £150,000, the new Tapered Annual Allowance will see their allowance reduce at a rate of £1 for every £2, down to a minimum of £10,000.
  • Talk of a new flat rate tax relief system being introduced would see higher rate tax payers losing up to 20% of their government backed pension contributions so it is advisable to make any available contributions this year so as to take advantage of the existing higher rate relief.


  • Income and capital gains from ISAs are tax free and withdrawals from adult ISAs do not affect tax relief. UK residents aged 18+ can invest up to £15,240 each and parents can fund a junior ISA or child trust fund with up to £4,080 per child – making a total of £38,640 for a family of four before 6 April 2016.
  • Since the new Help to Buy ISA opened in December 2015 to assist first time buyers get on the property ladder, if you have adult children who are planning to buy a home, it would make sense to gift funds to them so that they can invest in this new ISA.
  • If you have used all your pension allowance, there are a number of carry back planning options available such as investing in an enterprise investment scheme, venture capital trusts or a seed enterprise investment scheme which can offer up to 50% tax relief. (Please note: such investments are often thought to carry a comparatively high risk and the tax reliefs are intended to offer some compensation for that risk.)
  • It is now possible for a spouse to inherit the tax-advantaged ISA funds of a deceased spouse in addition to their own ISA allowance. Anyone whose spouse has passed away in the last year tax year could benefit from this additional allowance.


  • As it stands, everybody can leave up to £325,000 of their total estate tax free (£650,000 per couple), providing they haven’t used the allowance elsewhere. Anything over this is liable to 40% tax. Under new legislation announced by George Osbourne, an additional ‘main residence nil rate band’ will be phased in over the next five years. From 2017/18, an extra £100,000 per person will in introduced; this will increase by £25,000 every April until 2020, when the maximum sum of £175,000 will be reached. This means that in 2020/2021, a house worth £1m can be passed on tax free. However the estate must be left to children or grandchildren.
  • Reducing the value of the part of your estate that is above the nil rate band (£325,000) will reduce the IHT payable when you die so it is worth consider giving assets to other family members now. Gifts to a spouse or civil partner to use up his or her nil rate band are tax free and gifts to other family members can also be tax-efficient over time. After seven years the nil rate band gets reset, providing no other gifts are given during that time.
  • Having a Will is the best way of securing what happens to your estate when you die, as without one, the law will determine who inherits your assets. For married couples and civil partners, up to twice the nil rate band (currently £325,000) may be available e.g. if on the first death, the whole estate passes to the surviving spouse, then 100% of the deceased’s nil rate band will be available for use on the survivor’s death. When the surviving spouse or civil partner dies, the unused percentage will be applied to the nil rate band applicable at the date of the second death to enhance the nil rate band for the second estate.


  • The effective rate of tax on taxable dividend income (ie from shares not held in an ISA or pension fund) will rise by up to 6% for some taxpayers from 6 April 2016 as the 10% tax dividend credit will be abolished and replaced with a £5,000 dividend allowance, so it could pay to consider dividend payments in 2015/16 before the tax rate rises.
  • If you let a property and have significant equity, you may be able to reduce the tax you will pay on rental profits by releasing equity in the property and increasing the borrowing against it. Up until 6 April 2017, this relief is given by deducting the interest from the letting profit – giving effective tax relief at the owner’s top rate of tax. From 2017/18 onwards, this method of relief will be phased out and from April 2020 relief on the interest will be limited to the basic rate of tax.
  • Individuals with incomes near these thresholds can reduce their tax liabilities by reducing their taxable income below £100,000 or £150,000. This can be achieved by changing income into non-taxable forms, giving income yielding assets to a spouse with lower income, deferring income, making pension contributions or making payments to charity.

For advice on how you can maximise your available allowances in this tax year, please contact your Finura Partners advisor.


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