Preparing for your year-end financial planning


As 5 April 2022 creeps ever closer, if you haven’t already, it is always good to try and get ahead with your year-end financial planning.

In the last year’s Budget, the Chancellor froze a number of key allowances, including the income tax personal allowances, the capital gains tax annual exempt amount, the Pension Lifetime Allowance (LTA), and the Inheritance Tax (IHT) thresholds, until the 5th April 2026. 

In the latest Autumn Statement, this also subsequently confirmed that previously mooted changes, by some commentators and observers, in respect of Pension and IHT related allowances, didn’t happen.

With all that backdrop in mind, your year-end financial planning checklist would be well advised to include the following:


Tax relief is continually coming under increasing scrutiny. A flat rate of tax relief for all pension contributions has long been argued over which, if adopted, would affect those in the higher tax band and above. Now may therefore be a good time to review and make use of any unused allowances. Carry forward allows you to make use of any annual allowance that you might not have used during the three previous tax years, provided that you were a member of a registered pension scheme during the relevant time period. Check if you have any unused pension annual allowance from 2018/19, when the maximum annual allowance (before tapering) was £40,000. You have until the end of the current tax year to mop up this past allowance or lose it completely.  Remember, you must use up this year’s allowance first and then use any unused annual allowance from the earliest year first and can only use it once.

Unsurprisingly, the calculations can quickly become complex, so getting advice is crucial if maximisingtoday’s” pension tax relief is important to you. Find out how we can help with your pensions and retirement planning.

Income Planning 

There are many areas that could be considered here, however, if your income is above £50,000 and you have or live with someone with children, you could be subject to the High Income Child Benefit Charge. Bringing your taxable income down – by making a pension contribution or charitable gift for example – could reduce or even eliminate that charge. There are similar opportunities above the £100,000 threshold when the phasing out of the personal allowance begins and also at the additional tax threshold for those earning £150,000 and over.  

Capital Gains Tax

Capital Gains Tax (CGT) is another area that could be subject to some future changes. In July 2020 the Chancellor asked the Office of Tax Simplification (OTS) to undertake a broad review of CGT. The first report emerged in November, however, rather than make specific recommendations, the OTS offered several alternative suggestions, leaving it up to the Government to decide which of these best meets its priorities moving forward.

One OTS proposal put to the Chancellor back then was a potential reversion to the regime which existed until 2008. Back then, CGT was levied at full income tax rates, which, if reintroduced, would now mean rates of up to 45% rather than the current maximum of 20% (28% for non-exempt residential property and carried interest). The OTS report suggested the CGT annual exempt amount should also be significantly reduced from the current £12,300.

Obviously, it currently remains unknown what changes, if any, the Chancellor will make in his next Budget. All we do know for certain is that these matters continue to be under consideration.

Inheritance Tax

A separate OTS simplification review has been considering the area of IHT. The £175,000 family home allowance — which is on top of the £325,000 threshold to give protection to those bequeathing properties to a direct descendant — will stay frozen until at least 2026. Some reliefs and exemptions could be under threat, such as those that apply to business assets and large regular gifts out of income. Currently, you have a £3,000 annual gift exemption, individual gifts of up to £250 and regular gifts out of disposable income as well as the ability to make any larger lifetime gifts.

The rules though around IHT can be complex, and the amount of tax, and even the overall rate that will be paid, will depend on how your finances are structured during your lifetime, how you dispose of your assets and to whom you leave them. Seeking independent tax and financial advice can help you pass your assets to the people you want to benefit and potentially mitigate some or all of the IHT liability.

Armstrong Watson has both Financial Planning and Tax Consultancy expertise in place. This allows us to provide a bespoke and joined up service for our clients when and where specific needs arise. We always ensure we have a full understanding of your circumstances and objectives before providing any advice. Both Financial and Tax planning is subject to individual circumstances and all the options and allowances mentioned are not suitable for everyone.

Please note, some of the areas such as making pension contributions are provided by our Financial Planning Consultants, whereas, other areas such as capital gains tax advice are services offered by our Tax Consultants within this article. Advice on IHT issues could be provided by a mixture of the two services.

To find out how our financial planning and tax teams can help please get in touch.

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