Tax year end: sometimes simple is best

12 February 2020

As the tax year comes to an end, it’s time to check in with clients and review the financial plans put in place with them, making sure allowances are used and savings are maximised in the most tax efficient manner. Below are a few points we should consider for our clients both now and in to the new tax year.

1. Utilising tax allowances and tax planning opportunities

Income tax

  • Gifting income producing assets to a spouse/registered civil partner who pays income tax at a lower rate, could increase the joint household after tax income.

  • Regain some or all of the personal allowance (lost on income over £100,000 on a 2 for 1 basis) or child benefit (lost when individual’s income is above £50,000) by contributing to a pension (depending on salary and any carry forward) or applying gift aid to extend the basic rate band. This is also key if salary pushes income in to higher rate tax.

  • Using starting rate for savings income (0% for the first £5,000), and the personal savings allowance (£1,000 for basic rate, £500 for higher rate taxpayers) to take gains from investment bonds. Calculations will need to be completed to see what is suitable for each client individually but it could be useful to use these allowances if the client has a requirement for capital or the policyholder has the ability to assign to a lower rate tax payer.

  • Income from ISAs is tax free and so are any gains made, making them an important part of a client’s financial plan because of their tax efficiency and are normally a client’s first port of call.

Capital gains tax (CGT)

  • Passing assets between spouses and registered civil partners is exempt from CGT, meaning the annual CGT exemption for both of the couple could be used (if available) and more could be withdrawn tax free. Additionally, depending on the rates of income tax, could potentially push up the joint income if one is a lower rate tax payer.

  • Using the CGT exemptions regularly pushes up the average price of that asset, meaning more could be taken out in future years without paying tax. An investment manager working with you could help you ensure the CGT management of your client’s accounts while fully funding ISAs if suitable for them.

  • Clients with losses on their investments, must register these with HMRC within four years of the end of the tax year in which they arose so they can be carried forward indefinitely.

  • Certain clients may also be able to take advantage of entrepreneurs’ relief, subject to certain conditions being met and before rule changes come in tax year 20/21. Professional tax advice should be sought for clarification on this matter.

  • Clients who currently claim private residence relief, if they haven’t done so already will need to take action about their letting properties before rules are introduced in tax year 20/21.

 Inheritance Tax

  • The annual exempt gift(s) should be made (£3,000 each) before the end of the tax year. This could be as much as £12,000 for a couple if they have not used both the current and tax previous year’s exemption. Other exempt gifts could also help reduce the estate liable to IHT. These should be explored with clients to see if more IHT savings can be made.

  • ISAs invested in AIM shares can be used by clients to help with their potential IHT liability, so long as they are held for a minimum of two years. Clients will need to accept a high level of investment risk.

  • Utilising trusts with life assurance and whole of life policies is a simple way to help reduce IHT. Gifting investment bonds in to trusts could also help reduce potential IHT liability. The type of trust chosen will need to be suitable for the client and discussion around access to capital and income will be vital as most trusts are irrevocable.

  • Consider taking income from other sources or assets leaving pension funds to pass down through generations IHT efficiently.

2. Making pension contributions and ISA subscriptions. 

  • Pensions are free from income, capital gains and in most cases inheritance tax, making them one of the most tax efficient vehicles we can use, and since pensions freedoms were introduced in 2015, are more pivotal for planning a tax effective retirement strategy.

  • The annual allowance of £40,000, (plus any carry forward), along with the lifetime allowance (£1.055m tax year 19/20) should be a consideration when looking at pensions funding. Some clients may wish to wait until the new tax year when the lifetime allowance is expected to be £1.073m before they take benefits. Some clients may also be restricted by their salary or the tapered annual allowance when determining the amount of tax relievable contributions they can pay to their pension.

  • Clients who are in the NHS pension schemes may have some relief from the tapered annual allowance charges where effectively the government will pay the tax charges due. One of the Conservative’s manifesto pledges during their campaign for office in December was to set an urgent review on the tapered annual allowance and this is something we should look out for in the upcoming Budget.

  • Tax relief is a key benefit for pension schemes. If clients are higher or additional rate taxpayers, additional tax relief on their contributions can be sought via their self-assessment.

  • 5 April 2020 is the deadline for pension schemes having an obligation to provide a valuation of pension savings as at 5 April 2016 for individuals wishing to apply for Individual Protection 2016 (IP16). After this deadline schemes can provide values but they do not have to do so. If you and your clients are considering applying for IP16, any request for values should be on the tax year end to do list.

  • It goes without saying that, where possible, subscriptions to maximise the ISA allowance should paid by the end of the tax year and if not done the opportunity will disappear.

  • Additionally, if your client has taken money out of their flexible ISA this tax year, they can reinvest this amount back in to their flexible ISA by 5 April 2020 without affecting their ISA allowance.



While there are many planning opportunities with different clients, ensuring the basics are done well is key to a successful financial planning strategy.
At Sanlam we have a range of different investment products and services which can help your clients, plan for their retirement, school planning fees, manage different pots of money for specific goals and help with inheritance planning.

This note is to be used by Financial Advisers only. It is not intended for onward transmission to a private customer and should not be relied upon by any other person. Sanlam accepts no liability for any action taken or not taken by an individual or firm as a result of the contents of this material. The tax treatments and information contained in this document is based on current tax law and HMRC practice as at February 2020 and may be subject to change in the future. Whilst we have made every effort to ensure the accuracy of this material, we cannot accept responsibility for any consequence (financial or otherwise) arising from relying on it. This document is for information purposes only and should not be treated as advice and independent taxation advice should be always sought.

Please navigate to a service or product page and add the document to your brochure to continue.

Name your brochure
Your details
Thank you!

Your brochure is on its way.

Brochure Confirmation - your brochure is on its way.

We hope you find this useful.

The value of investments and any income from them can fall and you may get back less than you invested.