Your end of tax year checklist

April 5th, the tax year end, is not far away. Time is running out to use allowances and exemptions.

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  1. Rob Morgan

Time is running out until the end of the tax year, so now is an opportune time to review your tax planning and ensure you are making the most of the available allowances and reliefs.

Tax years run from 6 April one year to 5 April the next and, in most cases, if you don’t use the various allowances before 5 April, they are lost forever. To help with your planning here is a quick summary of the main considerations.

Using your ISA allowance

ISAs are often the first port of call for investors looking to save tax. They are simple, flexible and tax efficient. As well as being able to invest in a wide range of assets you can easily access your money, so they are suitable for a variety of saving and investing needs.

The ISA allowance is available to any UK resident over 18 and can be split between different types – the main ones being Cash and Stocks & Shares. Charles Stanley Direct offers Stocks and Shares ISAs. These could deliver a higher return than Cash ISAs over the longer term but remember that there is a risk the value of your investments could fall – especially in the short term.

The benefits:

  • Gains realised on the sale of stocks and shares within an ISA are free from capital gains tax (see below)
  • Any dividends or interest income are free of tax
  • In the event of the death of a spouse/civil partner, the surviving spouse/civil partner can inherit the tax benefits.
  • ISAs are portable and can be transferred between providers without losing their tax-free status.

By using your full ISA allowance each year (£20,000 in the current 2019/20 tax year) it’s possible to build up a large pot of money sheltered from tax. This has become even more important since the amount an individual can receive in dividends without paying tax, the ‘dividend allowance’, was cut from £5,000 to £2,000 in 2018.

Remember too that ISA investments don’t need to be declared on a tax return, so they can also simplify your affairs.

If you are investing in a Charles Stanley Direct Stocks & Shares ISA, you don’t have to decide on the investments right away. You have the option of leaving cash in the account until you decide. There are also some ideas on how you might use your ISA allowance here, and for investors looking for socially responsible investment ideas we outline some options here.

Opening or adding to a Junior ISA

Education, a first car, getting married and the need accumulate a deposit for a house are some of the costs faced by the younger generation. A Junior ISA (JISA) could be a way to give your child a head start towards them.

JISAs are a popular way for family and friends to build up tax-efficient savings and investments for a child. Withdrawals are possible from age 18 when it automatically converts to an adult ISA, meaning the pot can be useful to help with the cost of university or a deposit for a house.

A parent or legal guardian of a child under the age of 18 and UK resident can open a JISA. With the Charles Stanley Direct Junior Stocks & Shares ISA this can be done online. Grandparents, relatives or family friends can also contribute to the account.

The parent or guardian is responsible for the management of the JISA and can make investment decisions, but the investments belong to the child. Investors can have either a cash JISA or a stocks and shares JISA, or one of each, subject to the annual investment limit, which this tax year is £4,368 per child. Any interest on a cash JISA is tax free, as is any capital growth or dividends received within a stocks and shares JISA.

Optimising pension contributions

Almost everyone includes a comfortable retirement as one of their financial goals. Pensions are often a highly effective means of achieving this due to the tax relief available on payments into them.

Currently, anyone under 75 with relevant UK earnings can receive tax relief when they make a contribution within the annual allowance to a personal pension such as the Charles Stanley Direct SIPP. 20% is added by HMRC and any further higher or additional rate income tax relief can be reclaimed – potentially a simple way of reducing your income tax bill for the year.

For example, an investor contributes £8,000 into their SIPP and £2,000 is claimed back from HMRC by the pension provider.  A higher rate taxpayer could claim back up to a further 20% via their tax return, reducing the overall cost of the contribution to as little as £6,000. In the same instance, additional rate taxpayers could claim back up to a further 25% making the cost just £5,500 for a £10,000 contribution. Please note that rates of income tax and relief differ in Scotland.

For more information on how much you can contribute to pensions see my article here.

Considering whether you should use your CGT allowance

Capital Gains Tax is the tax you pay when you realise a profitable investment – unless it is in a tax-efficient wrapper such as an ISA or pension.

This 2019/20 tax year you can realise profits on investments of up to £12,000 free from capital gains tax (CGT). The rates payable on Capital Gains Tax are 10% basic rate and 20% higher rate, but on residential property (other than your own home) the rates are 18% and 28% respectively. Your rate of capital gains tax will depend on your taxable income.

It’s not possible to carry the CGT allowance over to the next tax year. Therefore, if you are planning to sell assets that have gone up in value more than your capital gains tax allowance it may make sense to split this over more than one tax year. CGT is not payable when assets are transferred to a spouse or civil partner. 

There may be opportunities to make use of the annual exemption if you hold investments in a general investment account by selling investments and purchasing them back within an ISA or a Pension. This way assets are transferred from a taxable environment to a largely tax free one.

Thinking about Inheritance Tax

Inheritance Tax (IHT) is a tax on the estate (the property, money and possessions) of someone who's died. It is currently payable at a rate of 40% on estates worth over a basic allowance threshold of £325,000.

Married couples and Civil Partners can pass their thresholds between them meaning that there is normally nothing to pay on the first £650,000 of a joint estate. A ‘main residence’ allowance in respect of family homes under £1m in value increases this figure to £950,000 at present, and this will rise to £1m next tax year.

The simplest way to reduce the size of your estate, and a potential IHT bill, is to gift money to others, perhaps children or grandchildren to help them out financially. Gifts exempt from IHT include an annual £3,000 lump sum, which can be given to one person or divided between a number of people, plus £250 a year to as many people as you like.


The Taxation of pensions is based on individual circumstances and may be subject to change in the future.

The information contained within this article is based on our understanding of current UK tax provisions, which is subject to change, and the benefits of which would depend on your personal circumstances.

This website is not personal advice based on your circumstances. No news or research item is a personal recommendation to deal. Investment decisions in fund and other collective investments should only be made after reading the Key Investor Information Document or Key Information Document, Supplementary Information Document and/or Prospectus. If you are unsure of the suitability of your investment please seek professional advice.

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