1. Top up your ISA

One of the most tax-efficient ways to invest is through an individual savings
account (ISA). The 2021/22 personal ISA allowance is £20,000.

There’s no income tax, tax on dividends or capital gains tax (CGT) to pay on
any gains from investments held in an ISA. An ISA can hold a wide range of
investments, including cash, funds, shares, gilts and bonds.

If you do not use your allowance, you can’t carry it over to a new tax year.
So, if you’ve got savings lying around in your current accounts, it may be
worthwhile putting as much savings as you can in a tax efficient ISA.

2. Contribute to your Retirement

It may be worthwhile considering topping up your pension to increase your
savings for retirement. If you’re employed and contribute to a company
pension, check how much you’ve paid in. Many employers will match
contributions up to a particular cap, so it’s worth taking advantage of this.

The more income tax you pay, the greater the tax relief on pension
contributions. If you’re a basic rate taxpayer, for every £80 you pay in, the
taxman will top it up to £100. If you’re a higher or additional rate taxpayer you
can claim back up to an additional 20%, or 25% on top of the 20% basic rate
tax relief, through your tax return.

The annual allowance for 2021/22 for pension contributions is £40,000 (This
may be lower if you earn over £200,000). It’s also worth noting that you can
bring forward unused allowances from previous three tax years, as long as
you were a member of the pension scheme within those years.

3. Save for your Children

If you have children, you can set up a Junior ISA. Children who are not yet 18
can open a Junior ISA (JISA) in their name with a parent as a guardian.

As with an adult ISA, there’s no income tax, tax on dividends or capital gains
tax (CGT) to pay on any gains from investments held in an ISA. The annual
allowance for a JISA in 2021/22 is £9,000.

4. Use your Capital Gains Tax Allowance

Everybody has an annual capital gains tax allowance of £12,000 in the
2021/22 tax year. This means that if you dispose or sell any assets such as
property, stocks and shares, you won’t be taxed on the profits if they’re below

You cannot carry over any unused capital gains tax allowance to the next
tax year, so if you are planning to sell your assets, it may be worth considering
staggering them over two tax years to take advantage of your allowance.

5. Reduce your Inheritance Tax

Use your annual exemption allowance of £3,000. This allows you to gift that
amount without being liable for inheritance tax in the future.

You can carry over your gifting allowance from a previous tax year if unused,
making the maximum amount £6,000. There are other exemptions too, such
as no tax on wedding or civil partnership gifts up to £5,000 to your children
and £2,500 to your grandchildren.

You can also gift to Charity. You can receive full tax relief on your
contributions through Gift Aid. Higher-rate or additional-rate taxpayers can
claim back the difference between the rate they pay, and the basic rate on
their donations.

For example, you donate £100 to a charity, which is boosted to £125 by using
Gift Aid. You pay 40 per cent tax, so you can personally claim back £25 (£125
x 20 per cent) via self-assessment, or by asking HM Revenue & Customs to
amend your tax code.

It is also possible to donate from your wages or pension via Payroll Giving.
The value of units can go down as well as up, you may get back less than
you invested. Tax rates and reliefs are subject to change. This does not
constitute personalised advice.