Don’t wait until March to make the most of your 2021/22 tax allowances: Take charge now

Avoid unnecessary stress and financial cost by not leaving the review of your tax allowances until the last minute. Regular contact with your financial adviser throughout the year is key – even if the right course is to change nothing.


  • It’s tempting to wait until the end of the tax year to check if you’re using your various allowances, but this should be resisted.
  • Last-minute panic and missed opportunities can be avoided by reviewing your tax allowances during the tax year, not just at the deadline.
  • Rumours around changes to tax allowances – especially pensions – rarely prove accurate. Make plans based on what you know and consult a financial adviser.

Are you familiar with the feelings of anxiety and stress, followed by intense relief, after leaving it as late as possible to meet your deadline? While the worry before you (hopefully) complete your task on time isn’t fun, the adrenaline rush that follows explains why this is often a favoured approach to getting things done.

But while this can easily become a habit, it also comes at a cost – especially when it comes to financial deadlines.

It does make sense to use 5th April as a deadline for sorting out finances and getting your taxes in order, but it can also be a mistake that leads to missed opportunities.

A different approach

As anyone who has left their deadline until the clock is ticking can attest, this method often results in a rushed job with opportunities that have been missed.

“The deadline is there for the allowances to be used, but it’s just a deadline – you have a whole year to use them,” says Tony Clark, Senior Propositions Manager at St. James’s Place. “If you do it during the tax year, you can take your time and assess the actions you need to take.”

Obviously, the best way to beat this is to plan much further ahead. Pick a date in advance of the deadline to check your tax allowances or do it regularly throughout the year – this not only ensures you beat the deadline, but also makes the best financial sense.

“If you leave things too late, you run the risk of missing the deadline,” says Clark. “You can do a proper review and assessment of the allowances you’ve used and, where possible, bring forward unused allowances from the previous year. If you don’t do that until the end of the year, you might miss that opportunity.”

Time allowances

If you’re doing investment-based tax planning, for example, thinking about your finances before the deadline allows you the opportunity to benefit fully from your money being invested tax-efficiently and using all your allowance.

And if you’re self-employed and planning for retirement, too, it’s easy to run out of time to put a lump sum into your pension before the end of the tax year with everything else that needs taking care of.

If you’re able to pay in more than the current annual pension allowance (frozen at £40,000 in recent years), for example, you can carry forward any unused allowance from the previous three years – an important detail not to be overlooked.

Getting ahead can be especially beneficial to business owners, according to Clark.

“There’s a whole raft of allowances to consider, and you’ve got two lots of tax planning to think about: your personal allowances, as well as those that apply to your business, and it can be a lot to go through if you’re short on time.”

Face value

Rumours around tax allowance changes, especially when it comes to pensions, are commonplace. There aren’t any clear indications of changes that might be introduced with the next tax year, however, says Clark.

“If anything, the government could possibly freeze some of the reliefs and allowances that we often see increased.”

Acting before anything is officially announced is to be cautioned against, though.

Clark continues:

“The best thing you can do is base your tax planning on the existing rules and do it regularly. Regular contact with your adviser is the key, even if the right course is to change nothing. As soon as you become aware of any potential changes, speak to your adviser to work out any actions you might need to take.”

Rules and allowances for the 2021/22 tax year

Income tax 

  • The first £12,570 of your earnings are tax-free.
  • You pay 20% tax on everything between that and the higher-rate threshold of £50,270.
  • Everything between £50,271 and £150,000 is taxed at the higher rate, which is 40%.
  • Everything above £150,000 is taxed at the additional rate of 45%.

Individual Savings Account (ISAs) 

  • Your annual ISA allowance is £20,000. You can save up to this amount in either a Stocks & Shares ISA or a Cash ISA (or a combination of the two) during this tax year, without paying any tax on the interest or profits.
  • The limit is per person, so you and your spouse or partner can have one each.
  • If there are any children in your life, you can also save up to £9,000 per year in a Junior ISA on their behalf. 

Personal Savings Allowance 

  • You can earn interest of up to £1,000 this tax year if you pay Income Tax at the basic rate.
  • If you pay higher-rate Income Tax, the limit is £500. There’s no allowance for additional-rate Income Taxpayers.


  • The first £2,000 you earn in dividends is tax-free.
  • You then pay 7.5% on anything above that if you pay Income Tax at the basic rate or no Income Tax at all.
  • If you pay Income Tax at the higher rate, it’s 32.5%, while at the additional rate it’s 30.1%.
  • If your stocks and shares are held in an ISA or pension, any dividends you earn from them are tax-free.

Capital Gains Tax (CGT) 

  • The first £12,300 of any capital gains you make is tax-free.
  • Basic-rate Income Taxpayers are liable to pay 10% on anything above that threshold, while if you pay the higher rate Income Tax, it’s 20%.
  • Profits from property (if it’s not your main residence) are charged at 18% (basic rate) and 28% (higher rate).

Corporation Tax 

  • Corporation Tax is currently charged at 19% on profits for all businesses.
  • In April 2023, this will rise to 23% for businesses with profits of £250,000 and above.
  • For businesses with profits of £50,000 and less, the rate will remain unchanged at 19%.
  • For those in between, the tax rate will be tapered.

Inheritance Tax 

  • Anything you pass on to your spouse or civil partner when you die is usually tax-free.
  • The first £325,000 of your estate is tax-free, but anything above is charged at 40%.
  • If your home is included in your estate, the tax-free threshold increases up to £500,000 (if you’re passing the home to a child or grandchild and your total estate is worth less than £2 million).
  • Your tax-free allowance can be passed to a spouse or civil partner – so when they die, the allowances can be combined.
  • Read more about Inheritance Tax planning here.

The value of an investment with Wellesley Wealth Advisory will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested. 

An investment into a Stocks and Shares ISA will not provide the same security of capital as associated with a Cash ISA. 

The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.

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