Five essential actions for year-end tax planning

Investec planning tax
Picture of James Jamieson By James Jamieson, Financial Planning Director, Investec Wealth and Investment

16 February 2017

Have you maximised your various allowances this tax year? The end of the 2016/17 tax year – April 5 2017 – may seem a long way off but it will come round all too quickly. 

As such it is worth reviewing now some key elements of your finances and financial planning to better understand any opportunities. It is also worth noting some of the new rules for 2017/2018.

1. Introduction of a Lifetime ISA (LISA)

The 2017/18 tax year will also see the introduction of a Lifetime ISA (LISA) allowing those aged 18 to 40 at outset to save up to £4,000 each year to use towards buying a first home, or alternatively it can be withdrawn after age 60.  The government will add a 25% bonus so a personal contribution of £4,000 will receive an additional bonus of £1,000, making a total of £5,000.

Any UK resident from age 18 can have an ISA invested in cash or shares up to a limit of £15,240 for the tax year 2016/17, increasing to £20,000 for 2017/18.  As such, if you have not yet allocated to £15,240 for this year, now is the time to do so.  ISA allowances are also available to the under 18’s.

2. Pensions

The annual contribution allowance has reduced significantly in recent years and is currently £40,000 gross but this is now restricted for those with total taxable income in excess of £150,000.  The rules for determining income are complex and need careful calculation.  

For instance, any unused annual allowance from the previous three years may be carried forward though one requires enough earned income in the year of payment to cover the total contribution paid.  The unused allowance figures are £50,000 (2013/14), £40,000 (2014/15) and £40,000 (2015/16).

The Lifetime Allowance – how big your pension fund can grow to without any penalty on drawing benefits – has reduced to £1 million.  While you can apply for Fixed Protection 2016, in order to retain the previous Lifetime Allowance of £1.25 million, no pension contributions can be made from the 6 April 2016 onwards.

3. Earnings in excess of £100,000

Are your earnings likely to exceed £100,000?  If so, you currently lose £1 of personal allowance for every £2 which exceeds £100,000.  So your personal allowance is nil when your income is £122,000 in the current tax year, which is an equivalent of a 60% rate of tax on this £22,000 of earnings. The same effect happens if you currently claim child benefit and your income exceeds £50,000.

Is it possible to make a pension contribution to bring your earnings below these thresholds?

4. Changes to Dividend Income Taxation

This tax year is the first under the new rules which saw the dividend tax credit replaced by a new zero tax rated dividend allowance. This means that you won’t pay tax on the first £5,000 of your dividend income, with dividends over this amount being taxed at 7.5% if you are a basic rate tax payer, 32.5% for a higher rate tax payer and 38.1% for an additional rate tax payer.  In light of these rules planning may be advisable around who receives dividend income and how much is paid.

5. Factor in tax changes and new tax rules

There are other considerations – such as Capital Gains Tax, Transferable Tax Allowances for Married Couples, Personal Savings Allowance, Venture Capital Schemes, and Inheritance Tax.  For instance, with regards to Inheritance Tax, a new Residence Nil Rate Band starts to be introduced from 6th April 2017 and will provide a valuable tax saving for those who qualify.

Given the range and depth of the allowances for 2016/17 and the changes taking place in 2017/18, it has become more important than ever to keep on top of financial planning. Otherwise, you may simply miss out on some of the benefits.


Want to find out more about financial planning in 2017?

Visit Investec Wealth & Investment


About the author

James is responsible for advising Investec Wealth & Investment clients on all aspects of Financial Planning, with a particular emphasis on retirement and inheritance tax planning.


The contents of this article do not constitute a formal recommendation or personal advice and no action should be taken, or not taken, on account of the information provided.  All statements concerning tax treatment are based upon our understanding of current tax law and HMRC practice and can be subject to change.


This blog is one of a series of articles from our commercial partners.
The views expressed are those of the author and not necessarily those of ICAS.

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