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Tax Update: ISAs and Pensions – 1 Month to Utilise Allowances

April 5, the end of the 2020/21 tax year is swiftly approaching. With just about one month left, now is the time to ensure you’re taking advantage of the annual relief schemes and exploring all possible avenues to help you save on tax.


This does not constitute advice and advice should be sought in all instances before acting on it. The Financial Conduct Authority does not regulate tax advice. 


Making the most of your allowances means focusing on two things: ISAs and pensions.


ISA Allowance

Your personal ISA allowance for the 2020/21 tax year is £20,000, which hasn’t changed from the previous tax year. Using your full allowance means that you can put up to £20,000 of your money into ISAs, and it’s all tax free. No need to pay any tax on any interest or profits earned from your savings and investments.

Your ISA allowance doesn’t carry over though; it resets annually at the beginning of the new tax year on 6 April. You can spread your contributions across the different ISA types — Cash ISA, Stocks and Shares ISA, Innovative Finance ISA, or Lifetime ISA (maximum of £4,000/year) but you can only have one account for each type, so plan your investments wisely.


Don’t forget about Junior ISAs (long-term savings accounts for under 18s) — the 2020/21 allowance is £4,368 per child and these contributions do not count toward your individual allowance. At 16, your child is eligible to contribute themselves and at 18, if they want, they can choose to withdraw their savings.


Keep an eye on your contributions. To avoid an unexpected tax bill, you must not exceed your annual allowance. If you’re not sure how you should split your money, an adviser can help explain the benefits of each type of ISA and recommend a plan for allocating funds.


Pension Contributions

Your annual maximum pension contribution is £40,000 (£40,000 or 100% of your income, whichever is less).

The last few years, with the tapered annual allowance, many high-earning doctors and dentists were among the group of high-earners that faced a reduced allowance.


Tapered allowance rules have recently changed — the threshold income level and the adjusted income level for the tapered annual allowance are now £200,000 and £240,000, respectively.


Unlike ISA allowances, with pension contribution allowances, you can carry them forward, going back to three years previously (as long as you had a pension plan).

Again, you need to be mindful of both your and your employer’s contributions. You can avoid an unexpected tax bill for exceeding your limit by keeping track of exactly how much is going into your accounts each month.

Sometimes pension situations are quite complicated. As such, we always advise working with a financial expert to ensure maximum savings.



Seek out professional assistance

As the tax year draws to a close, saving money and tax is sure to be on everyone’s minds. Working with a financial adviser can help you make the most of all your allowances this year and get ahead on planning for the next tax year.

Don’t hesitate to reach out to us so we can help you save the most money possible before the tax deadline.


Want help with financial planning?
Investments | Financial Planning | Retirement | Save Tax | Protection |

Dental & Medical Financial Services have been helping doctors and dentists to build and protect their wealth, whilst saving tax for over 25 years.
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