End of Tax Year Planning: Are You Making the Most of Your ISA and Pension Allowances?

The 5th of April comes around quickly, and when it does, this year's tax-free savings allowances are gone for good. There is no way to reclaim what you didn't use. If you haven't yet reviewed your ISA or pension contributions this tax year, now is a good time to do so.

Your ISA allowance: use it or lose it

Every tax year, you get a fresh allowance to save up to £20,000 across your ISAs, completely free from income tax and capital gains tax. If you're not on track to use your full allowance, even topping up by a smaller amount is worth doing. You can split your money between a cash ISA and a stocks and shares ISA, or focus on just one. 

Pension allowances and the power of carry forward

Most people can contribute up to £60,000 into their pension this tax year, or the equivalent of their total earnings if those are less. What's less well known is that you don't always have to stick to this year's limit. 

If you didn't use your full pension allowance in any of the previous three tax years, you may be able to carry that unused amount forward and pay in more than £60,000 this year. It's a useful option if you've had a stronger income year than usual, sold a property, or received a lump sum you want to make the most of. You do need to have been a member of a registered pension scheme during those earlier years for the rule to apply.

Our introduction to pensions is a good starting point if you'd like to get to grips with the basics first.

Why limited company owners have even more reason to act now

If you run your business through a limited company, the end of the tax year deserves close attention. Your company can pay into your pension directly as an employer contribution, and in most cases this counts as a business expense, reducing the amount of corporation tax you pay.

Unlike personal contributions, employer contributions aren't tied to your salary. That matters if you pay yourself a low salary and take the rest as dividends, which is a common setup for limited company directors. Combined with carry forward, you may be able to contribute more than the standard annual limit before the 5th of April.

Timing is also worth considering. Your company's financial year and the tax year don't always align, and looking at your ISA and pension contributions together often reveals options that are easy to miss when you consider them separately.

Plan before the deadline

Clearwater Financial Planning has been helping clients across Devon and Cornwall since 2006, with offices in Plymouth, Launceston, and Kingsbridge. If you'd like to review your ISA and pension allowances before the tax year ends, get in touch with our team today.

For ISA’s Investors do not pay any personal tax on income or gains but ISAs do pay unrecoverable tax on income from stocks and shares received by the ISA manager . Tax treatment varies according to individual circumstances and is subject to change.