March 2020 will no doubt be looked back on as one of the most volatile in history. The coronavirus pandemic has affected our lives more than any other crisis in recent history, and its effects are likely to be felt for a long time yet.

With the markets being rocked, the government providing an unprecedented financial stimulus and shops and businesses closing, how will this influence our investments and pensions in the months and years to come?

Well, we just don’t know. This is an ever-changing situation that will need to be analysed and adapted to as it develops.

However, good financial planning still involves making use of the various allowances available.

2020/21 tax year allowances

These opportunities include, but are not limited to, four important areas of tax planning that should be considered.

These include:

  • Taking your ISA contributions to the max
  • Making the most of your pension tax reliefs
  • Tackle the ongoing issue of inheritance tax
  • Plan to reduce a capital gains tax bill


We’ve gone into more details about each of these items on our blog which you can view here.

Taking your ISA contributions to the max

The term ‘ISA’ stands for ‘Individual Savings Account’, which allows you to save tax-efficiently into a cash savings or investment account.

With a Cash ISA or a Stocks & Shares ISA (or a combination of the two), you can save or invest up to £20,000 a year tax-efficiently. Your ISA allowance doesn’t roll over into a subsequent tax year, so if you don’t use it, you’ll lose out forever.

If you are in a position to, it may make sense for you and your spouse to take advantage of each other’s ISA allowance, particularly if one of you has more financial resources than the other. That way, you can save (in the case of Cash ISAs) or invest (in the case of Stocks & Shares ISAs) up to £40,000 tax-efficiently in the current tax year.

Also, 16 and 17-year-olds actually have two ISA allowances, as they’re able to open a Junior ISA (once they have transferred their Child Trust Fund [CTF] to their Junior ISA and closed the CTF), which for 2020/21 has an increased limit of £9,000, as well as an adult Cash ISA. This means that you could put away up to £29,000 in your child’s name tax-efficiently this tax year.

People aged 18–39 can open a Lifetime ISA, which entitles them to save up to £4,000 tax-efficiently a year until they’re 50. The Government will top up the savings by 25%, up to a maximum of £1,000 a year.

Viewing your and your spouse’s allowances as one will allow you to make the most of these tax advantages.

Making the most of your pension tax reliefs

Now is also the time to check you are taking full advantage of your pension tax reliefs and allowances. Normally, between you and your employer, you can contribute a maximum of £40,000 into your pension in a tax year (this is called your ‘annual allowance’).

If you earn less than £40,000 a year, tax relief will only be available on contributions with a gross equivalent equal to your income. However, for high earners with a taxable income of more than £150,000 per year, this may be tapered downwards.

Tackle the ongoing issue of inheritance tax

Inheritance Tax (IHT) is usually payable at 40% on the portion of an estate that exceeds the £325,000 nil-rate band (NRB).

Like the NRB, the unused percentage of the residence nil-rate band (RNRB) can be transferred between spouses and registered civil partners.

The RNRB is on top of the NRB, allowing individuals to pass on a qualifying residential property to their direct descendants. The maximum RNRB is £175,000 so now the 2020/21 tax year has started, a married couple will be able to combine their NRB and RNRB allowances to pass on property to their children worth £1 million free of IHT.

The RNRB is reduced by £1 for every £2 that the value of the net estate exceeds £2 million. You can act at any time to help reduce potential IHT.

Tax exemptions released through gifting should form a key part of IHT planning. The annual allowance means you can gift up to £3,000 each year, exempt from IHT – so as a couple, you can make £6,000 worth of gifts.

It can also be carried forward for one year. You can give as many gifts of up to £250 to as many people as you like – that is, unless the person has already received a gift equating to the annual £3,000 exemption.

Some types of gifts, such as wedding gifts or gifts to help with living costs, can also be given tax-free. However, another factor to consider is the legislation around IHT, which could be subject to change in the near future.

The Office of Tax Simplification is currently undertaking a significant review that could inform forthcoming policy decisions, so reviewing your IHT plans, including gifting, should be a priority.

This is a complex area with qualifying conditions and requires expert estate planning advice.

Plan to reduce a capital gains tax bill

Capital Gains Tax (CGT) is a tax on the profits you make when you sell something such as shares, an investment portfolio or a second property.

Everyone has an annual allowance of £12,300 (in 2020/21) before CGT applies. The allowance is for individuals, so couples have a joint allowance for 2020/21 of £24,600.

If appropriate to your particular situation, it might be worth considering transferring an asset into your joint names so you both stay within your individual allowances.

Any gains in excess of the allowance are charged to CGT at either 10% (basic-rate taxpayers) or 20% (higher-rate taxpayers), depending on the individual’s other total taxable income in the year the gain arises. These rates apply to shares and funds but higher rates of CGT apply to property sales: 18% for basic-rate taxpayers, 28% for higher-rate taxpayers.

An important thing to remember with this aspect of taxation is that any losses you make on sales can be offset against your capital gains for CGT purposes.

CGT on the sale of a residential property, other than your main residence, is payable under self-assessment and previously would not have been due until 31 January following the end of the tax year. However this has changed with effect from 6 April 2020, and now payment of CGT from the sale of such a residential property will be required within 30 days of the date of sale/completion.