The value of your investments and the income from them may go down as well as up, and you could get back less than you invested.

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Getting financially fit in time for the tax year end

4 min read
Yasmin Wales, Financial Planning Director31 Jan 2023

The start of April is just around the corner, and with it there is the promise of lighter evenings and the Easter holidays… but it also signals the tax year end, which this year falls on 5 April.

Ahead of current tax year end, there are many small, manageable steps you can take to maximise your allowances and boost your financial fitness. This is particularly important given the changes announced in the November 2022 Autumn Statement:

  • A freeze on personal allowances and a reduction in the additional-rate income tax threshold
  • A higher rate of income tax for higher earners in Scotland
  • A drastic cut in the tax-free allowance for Capital Gains Tax (£12,300 down to £6,000 followed by a further cut to £3,000 in 2024
  • A further cut in the dividend allowance (£2,000 down to £1,000 followed by a further cut to £500 in 2024).

Review your cash balances

It is important to hold easily available cash - typically a “rainy day” fund - to cover your living expenses should something unexpected happen. We would typically recommend holding enough to cover three months, but six to 12 months is even better.

This is something to prioritise ahead of investing, as it will allow you to take a longer-term view with your other investments. It also helps to avoid taking on short-term debt should the need arise.

Utilise any available excess cash

Once you feel comfortable with the level of cash held for emergencies, you can then focus on taking advantage of some of the generous tax allowances still available.

Individual Savings Accounts (ISAs)

An ISA allows you to hold cash or investments in a tax-efficient way with an annual allowance of £20,000 per individual. Any investment growth as well as income and withdrawals are all tax-free and can form a useful part of an accumulation strategy, building wealth for the future, or they can add flexibility and tax efficiency to a retirement income strategy. If you’re unsure whether the cash sitting in your savings account would be better leveraged in an ISA, 7IM can help compare based on your personal circumstances.

Capital Gains Tax (CGT)

Managing any capital gains on an annual basis can reduce the amount of tax you are ultimately liable to pay by taking advantage of your annual tax-free allowance. If one spouse has large gains, they might consider transferring assets to the other, enabling you to make use of two exemptions. Keep in mind that if you’ve made a loss and have no gains to offset in the same tax year, you can report that loss to HMRC, making it an ‘allowable loss’ and carrying it forward to a future tax year.

Pension contributions

Pensions are an effective, tax-friendly way to save for the future. Tax relief is given on the way into the pension, and there are national insurance savings too if you use salary sacrifice to contribute into your plan. Making a one-off personal contribution can also help you pay less tax, allowing higher earners to claim part or all of their personal allowance back. If you’ve not made full use of previous years’ allowances, you might also be able to carry forward unused amounts and make a larger contribution.

Most pensions also offer a portion to be paid out free of income tax, and personal pension plans are typically not included in your estate for Inheritance Tax purposes, making them a highly tax-efficient vehicle for your savings.


Gifting out of regular excess income is a great way to gift regular amounts without being subject to inheritance tax. In addition, annual exemption for an individual allows for £3,000 to be gifted away without adding this to the value of your estate on death. This exemption can roll forward once, giving a couple who forgot to use their exemption last tax year the opportunity to gift away £12,000 of capital in the current tax year.

Venture Capital Trusts (VCTs) and Enterprise Investment Schemes (EIS)

VCT and EIS investments can offer investors the opportunity to claim income tax relief and/or CGT relief on amounts invested or future returns. The government offers tax relief on these higher-risk investments to encourage investment into companies and social enterprises not listed on a recognised stock exchange. If you have exhausted all other opportunities to reduce your tax bill and still have excess funds after investing in mainstream investments, your financial planner can advise you whether investing in VCT and EIS might be suitable for you.

If you would like to discuss how you might make best use of the allowances available to you, please get in touch with us at 7IM and we will be happy to help.

Please note that this article is intended for educational purposes only and should not be taken as investment advice. Tax rules are subject to change and taxation will vary depending on individual circumstances. This article does not constitute advice or a recommendation; please consult a financial adviser. You should be aware that the value of investments may go up and down and you may receive back less than you invested originally.
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