Last month’s Budget saw a raft of announcements affecting people and businesses alike, but it was what the Chancellor didn’t do rather than what he did do which is likely to have the biggest impact on individuals.
Other than an increase in personal allowance for this current tax year 2021/22 to £12,570, most other personal tax rates and thresholds remain the same and will be frozen until 2026.
This means that when inflation is factored in, in real terms income will reduce. And as wages rise – even in line with inflation – more people will become higher rate taxpayers.
The threshold at which inheritance tax (IHT) applies was due to rise in line with inflation but has instead been frozen, as has Capital Gains Tax. The Pension Lifetime Allowance will also remain unchanged until 2026.
So, what can you do to minimise your tax burden? One way is to make use of the tax-free allowances available, particularly the annual pension allowance for higher rate tax payers. Other allowances available include the annual ISA and gift allowances. Despite the freezing of IHT, there are still a number of estate planning opportunities that can be utilised to help keep more of your estate in the hands of your loved ones.
There remains a bonus ISA allowance for anyone aged 16 or 17. These teenagers have the best of both worlds, as they can use their £9,000 annual Junior ISA allowance and they can also open an adult cash ISA (£20,000 limit). Food for thought, when considering how generous to be to your children and grandchildren!
See a previous relevant article of ours here: https://cirenscene.com/2021/02/02/proposito-february-21-end-of-year-planning-could-help-you-save-tax/
For more help and advice on making the most of savings opportunities, and reducing your tax bill, contact Proposito Financial Planning. Visit https://proposito.co.uk/, email email@example.com or call the Cirencester office on 01285 708444.