What happens if… I haven’t reviewed my investments and pensions ahead of 5th April

Lamont Pridmore - Accountants

As the end of the tax year quickly approaches many taxpayers may be unsure of how they can reduce their liabilities and make more of the money they earn.

Two very simple areas that are often overlooked, particularly with the lower rates of interest currently available, is investments and pensions.

To encourage more people to save and invest their money the Government has over the years provided a number of tax reliefs in both these areas which could help taxpayers to significantly reduce their tax bill, while still benefiting from a more secure financial future.

The tax benefits of a pension

Pensions are a tax-efficient way to save for your future and could help you reduce your overall bill before the tax-year end on 5 April.

If you’re a higher or additional-rate taxpayer it could make sense to make the most of the 40 or 45% tax relief you can get on your pension contributions.

You can contribute as much income as you deem fit each year into your pensions, up to the annual allowance of £40,000 without being taxed.

If your income is more than £150,000, your allowance tapers off and reaches £10,000 by the time you earn £210,000 or more a year.

If you haven’t used any annual allowance in the last three tax years you could pay more into your pension by ‘carrying forward’ any unused allowance.

Personal Allowance

Your tax-free Personal Allowance is the amount of income you don’t have to pay tax on. When your taxable income reaches £100,000, you will start to lose your £11,850 tax-free Personal Allowance. It will be reduced for by £1 for every £2 of your income up to a limit of £123,000.

With this in mind making pension contributions can reduce your taxable income, allowing you to reclaim some or all of your Personal Allowance.

As a higher-rate taxpayer, you would still benefit from the 40 per cent tax relief on what you pay in, while keeping your tax-free allowance to be used against other investments.

Making use of ISAs

You can save up to £20,000 per year in an ISA tax-free, which can be split between a Cash ISA, Lifetime ISA and Stocks and Shares ISA.

While the interest earned on most ISAs at the moment is relatively small saving into one can be a convenient way of transferring personal income into a tax-free investment.

Parents could also reduce the tax on their own income by placing money into their child’s Junior ISA, which benefits from the same rules up to a limit of £4,260.

Just remember that any unused allowance in one year cannot be carried over into another so it is important that the money is deposited before 5 April.


Both the SEIS and EIS schemes are designed to help small businesses to raise finance, by offering a range of attractive tax reliefs as an incentive for investors to purchase new company shares.

Any entrepreneur seeking investment through an EIS or SEIS hands over equity in exchange for capital funding. It is not a scheme that provides peer-to-peer lending or debt finance.

SEIS Income Tax Relief can be claimed at 50% of the sum invested during the year that the investment was made, up to a maximum of £100,000 – which is equal to up to £50,000 of Income Tax relief per year

EIS Income Tax relief can be claimed at 30% of the sum invested during the year that the investment was made, up to a maximum of £1 million – which is equal to up to £300,000 of Income Tax relief per year

Any gain from the disposal of EIS or SEIS shares, providing they have been held for the required period and the investor has received Income Tax relief, will receive any gain free of Capital Gains Tax.

Any losses, in excess of Income Tax relief, can be offset against income in the year that the shares are disposed of rather than against capital gains.

Venture capital trusts

VCTs are designed to provide private funding for small expanding companies. They can often carry a fairly high risk but enjoy a number of tax perks, including a rule that allows any dividends from VCT shares to be entirely tax-free.

VCTs can also be an effective way of making a large return on a smaller investment, as investors often receive significant earnings through dividends when the company is purchased or listed on the stock market.

VCTs also attract no Capital Gains Tax on their growth, and a 30% income tax credit is available when you buy shares in a new VCT offer.

You should also review your Life Wealth Plan to ensure you have a balanced, well developed strategy which remains on target to maximise your total wealth and income in retirement.

If you are unsure of how to best make use of the allowances and reliefs linked to pension and investments before 5 April 2019, please speak to our team today.