5. Utilise any capital losses
If capital gains and losses are realised in the same tax year, the losses are offset against the gains before the capital gains tax exempt amount is deducted. The exempt amount for 2021-22 is £12,300.
"Capital losses will be wasted if gains would otherwise be covered by your exempt amount," says Thomas. "You could consider postponing a sale that will generate a loss until the following tax year, or alternatively realising more gains in the current year."
6. Maximise pension contributions
The annual allowance for pension contributions before a tax charge is incurred is currently £40,000.
It is possible to carry forward unused allowances from the previous three tax years, as long as the amount does not exceed 100 per cent of the taxpayer's earnings.
But savers need to be aware of the money purchase annual allowance, which takes effect if they have started to take money out of their pension plan. This is currently £4,000, after being reduced from £10,000 in 2017.
The annual allowance is also reduced for taxpayers who have 'adjusted income' over £240,000 a year, when it reduces by £1 for every £2 earned over that threshold.
7. Pay pension contributions to save NI contributions
Thomas explains: “If you pay pension contributions out of your salary, both you and your employer must pay NICs on that salary. When your employer pays a contribution directly into your pension scheme, the employer receives tax relief for the contribution and there are no NICs to pay – a saving for both you and your employer."
The process is called salary sacrifice and sees the employee forego part of their salary or bonus to make a bigger pension contribution.
However, reducing earnings via salary sacrifice can impact entitlement to income-related employer and government benefits and so may not be appropriate for everyone, warns Thomas.
8. Make a will and review it
When dying without a will, a person's assets are divided between their relatives according to the intestacy rules.
The surviving spouse or registered civil partner may only receive a portion of the estate, and inheritance tax will be due at 40 per cent on anything above £325,000, or up to £500,000 if the residence nil rate band is available.
9. Consider leaving some of your estate to charity
If a person leaves at least 10 per cent of their net estate to charity, the IHT on the remainder is charged at 36 per cent instead of 40 per cent.
But Thomas cautions: “Wills and estate planning can be very complex areas, and you should ensure you speak to a certified wealth planner to ensure you receive professional advice to understand what’s right for you and your situation."
10. Make use of IHT-free gifting and exemptions
Under the IHT marriage exemption parents can each gift £5,000 to their children in consideration of the marriage, free of IHT. Grandparents can also make an IHT-free gift of £2,500 for a grandchild’s wedding and registered civil partnerships attract the same exemptions.
