Tax year countdown
It's the tax year countdown and higher inflation and the freezing of allowances should be on your radar. There was little to grab the headlines in the personal financial planning arena last year, as there were no
major changes announced to Income Tax, Inheritance Tax, pensions or Capital Gains Tax. However, other factors, such as higher inflation and the freezing of allowances, shouldn’t be overlooked:
Official figures from HM Revenue and Customs (HMRC) for April to September 2021 show that IHT
receipts totalled £3.1bn, £0.7bn higher than the same period in 2020. With the nil rate band and residence nil rate band frozen until April 2026 at £325,000 and £175,000, respectively, effective estate planning is vital.
Individual Savings Accounts (ISAs)
The ISA limit has now been frozen at £20,000 for five years. JISAs celebrated their tenth birthday in
November – the allowance remains at £9,000.
The Lifetime Allowance remains at £1,073,100 and the Annual Allowance remains at £40,000. As
these allowances won’t be increasing with inflation, it effectively means you can save less in real terms each year if your pension savings are large enough to be affected.
Dividend Tax is set to increase by 1.25 percentage points from 6 April 2022 to help fund health and social care. This means investors will have to pay more on any income from shares held outside ISAs and above the £2,000 dividend allowance.
Talk to us
As we head towards the tax year countdown, there are many variables that affect your finances – inflation, interest rates, taxation and frozen allowances – all of which will affect each individual differently.
Talk to us to get personalised advice.