Tax planning ahead of the spring Budget

You may want to step-up your year end tax planning in anticipation of the third Budget in the space of 12 months.

Year-end tax planning is normally best completed before Budget day and in 2016, this principle means acting before 16 March. Not only is there a risk of anti-forestalling measures, but the Easter holiday falls between the Budget and tax year end. The 2015/16 tax year end checklist is dominated by pensions, but there are other areas – both familiar and new – to consider:


In his post-election July 2015 Budget the Chancellor announced a review of pensions tax relief. Mr Osborne had been expected to reveal the outcome alongside the Autumn Statement, but instead decided to await the spring Budget. Any change is expected to reduce  or possibly remove completely  tax relief on pension contributions for higher and additional rate taxpayers.

Even if the Chancellor makes no change to pension tax relief, starting on 6 April 2016 there will be reductions in the lifetime allowance and, for high earners, the annual allowance. It is also the date from which it will no longer be possible to carry forward unused annual allowance of up to £50,000 from 2012/13.


In spite of the 2016/17 savings and dividend tax changes, maximising your ISA contributions will stay important if you are a higher or additional rate taxpayer:


  • All income within ISAs is free of personal UK tax and does not count towards your new dividend or personal savings allowances.
  • A surviving spouse or civil partner can effectively inherit an ISA and its accompanying tax benefits.
  • Gains made within ISAs are free of capital gains tax (CGT).
  • There is nothing to enter on your tax return.


CGT annual exemption

If you have investment profits that have accumulated over past years it is worth considering whether you should realise some gains rather than let your £11,100 annual CGT exemption for 2015/16 go to waste. Using your exemption could provide you with the resources to make a pension contribution before any changes take place.

Inheritance tax (IHT)

The nil rate band of £325,000 has been frozen since 6 April 2009 and will remain so until April 2021, making it all the more important that you use your annual inheritance tax exemptions, including any unused £3,000 annual gift exemption from 2014/15.

The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax advice. The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

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