Year-end Tax Planning

It is time to start thinking about 5 April and your year-end tax planning. After two Budgets in 2021, there should be no spring Budget this year. However, the Chancellor is expected to make a statement to parliament on 23 March alongside the publication of the latest economic forecasts from the Office for Budget Responsibility. 

Arguably, tax planning for the 2021/22 year-end matters more than in previous years because in 2022/23:

• The personal allowance and income tax bands (other than in Scotland) will be frozen, despite inflation expected by the Bank of England to be running at 6% by April 2022. 

• The increases to National Insurance contributions (NICs) and dividend tax announced last September take effect.

The to-review list

Tax year end checklists change subtly each year, as tax rules change. For 2021/22 the main items are:


5 April 2022 is the final date for taking advantage of any unused pension annual allowance (of up to £40,000) from 2018/19. The calculations involved can be complex, so it important to start this element of planning early. There is the potential to go back up to three previous years of underpaid contributions, but you do need advice.


With widespread income tax freezes and an increase of 1.25 percentage points in the tax rates on dividends, the value of the tax shelter provided by ISAs has grown. That probably explains why the Chancellor left the maximum contribution for 2022/23 at £20,000, the same level that has applied since 2017/18. 

All types of ISA offer four valuable tax benefits:

• Interest earned on cash or fixed interest securities is free of UK income tax.

• Dividends are also free of UK income tax.

• Capital gains are free of UK capital gains tax (CGT).

• ISA income and gains do not have to be reported on your tax return. 

As well as considering fresh ISA investment, you should review your existing ISAs. 


The year-end CGT exercise is considering whether and how to use any remaining CGT

annual exemption (£12,300, again frozen to 5 April 2026). In many instances, it will make sense to take maximum advantage of the exemption as it cannot be carried forward to next tax year so use it or lose it. 

Inheritance tax (IHT)

You should consider using the three main IHT annual exemptions:

1. The Annual Exemption. Each tax year you can give away £3,000 free of IHT. If you did not use all the exemption in 2020/21, you can carry forward the unused element to this year. 

2. The Small Gifts Exemption. You can give up to £250 outright per tax year free of IHT to as many people as you wish, so long as they do not receive any part of the £3,000 exemption. 

3. The Normal Expenditure Exemption. The normal expenditure exemption is potentially the most valuable of the yearly IHT exemptions and one which the OTS wanted to replace. Under the exemption, any gift – regardless of size – escapes IHT provided that: 

a. you make it regularly; 

b. it is made from your income (including ISA income, but excluding investment bond and other capital withdrawals); and 

c. the sum gifted does not reduce your standard of living. 

Venture capital trusts (VCTs) and enterprise investment schemes (EISs)

The lifetime and annual allowance constraints that apply to pensions have encouraged growing interest in VCTs and EISs as an alternative way to invest with tax relief. Subject to generous limits, both offer: 

o income tax relief at 30% on fresh investment, regardless of your personal tax rate; and 

o freedom from CGT on any profits. 

VCT and EIS schemes are designed to attract investment in younger companies and are therefore classed as high risk.

If you would like more information, or would like to discuss your own position, then please do not hesitate to contact me or my colleagues, David Hughes and Denise Graham. Peter Rutherford is a director at Rutherford Hughes Ltd. He can be contacted on 0191 229 9600 or 

Tax advice is not regulated by the FCA and legislation is subject to change. Capital at risk. Rutherford Hughes Ltd. is authorised and regulated by the Financial Conduct Authority. Rutherford Hughes Ltd company registration no: 10431722. Country of registration: England. Office & Registered Office address: Collingwood Buildings, 38 Collingwood Street, Newcastle upon Tyne, NE1 1JF. 


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