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Important things to think about at Tax Year End

Tax year end is a busy time for the financial planner, so our M&G Wealth Technical team have recorded a series of videos covering better outcomes for clients. Look out for an email each day with a link to the next video in the series. 

Crystallising gains up to the Annual Exempt Amount

Realising gains at the end of the tax year is a common activity but when investments are brought at different times the dreaded ‘share pool’ comes into play and the calculation of how much to surrender to use up your Annual Exempt Amount (AEA). This video takes you through a case study on how to realise gains up to the AEA and equally important, what you might want to do with the proceeds.

How much can I pay into my pensions?

Working out how much you can pay into your pension can be quite tricky, especially when you need to consider the interaction of the Annual Allowance with the general tax relief rules. In this video we look at the technicalities of getting to the important part - how much can I actually pay into my pension and get tax relief?

Who has to self-assess?

Investment income and gains may not actually be subject to tax but might still trigger a need to self-assess.   In this short video we look at when investment income and gains trigger self-assesmment returns along with some planning thoughts.

Higher than marginal rate tax relief

Tax relief isn't as simple as 20%, 40% and 45%, client circumstances dictate the level of tax relief. In this video, we explain how you work out tax relief and where higher than marginal rates can be found. The higher the relief, the higher the return!

Inheritance Tax and small gift exemption

Inheritance tax (IHT) receipts and IHT paying estates is on an upwards trajectory. In this video we look at the technicalities of the annual and small gifts IHT exemption - how they work and why you might want to use them.

ISA allowances

Individual Savings Accounts (ISA) are a cornerstone of any financial plan and a tax wrapper 'no brainer' for many. This video looks at why you should be putting your cash into an ISA and, maybe more importantly, what if you don't have cash in the bank?

Annual Allowance - use it or lose it

Maximising use of peoples allowance to meet their objectives is a key part of financial planning. In this video, we explain the ins and outs of making sure you use up all of your Annual Allowance.

Extracting Company Profits

Individuals tax year end is 5 April, but for business owners they'll also care about the company year end, which might commonly be the end of March to tie in with the financial year. In this video, we look at salary, dividends and employers pension contribution and explain why the latter needs serious consideration.

The normal expenditure out of income exemption

Some would say that the normal expenditure out of income exemption is the most generous of the Inheritance Tax (IHT) exemptions - it's unlimited. This video looks at how it works and also how you might use it to start making inroads in your client's IHT liabilities.

Who's retiring soon?

Making sure you have enough in pensions is essential. Those closing in on retirement will be especially concerned that they have enough in their pot to last them. Funding “one last hurrah” whilst your client has relevant earnings into a pension can be a valuable top up. But there are the recycling rules, so what can be done?

Normal expenditure out of income exemption case study

The normal expenditure out of income exemption is generous but there are three conditions that must be met. This video considers a case study showing how a client can meet their IHT planning objectives using this exemption.

To claim your CPD certificate, test your knowledge with the questions below. 

Write down your answers to each of the following questions and check your answers when you click through to claim your CPD certificate on the link below.

Test your knowledge 

1. In 2006, Sarah purchased 10,000 shares at £2.50 each in an OEIC fund. In 2012, she purchased a further 5,000 shares in the same fund at £4 each. She sells 6,000 shares from her 15,000 share portfolio. What is the acquisition cost per share in her capital gains tax calculation?

a. £2.50

b. £3.00

c. £3.25

d. £4.00


2. For the exemption to apply, it must be shown that a transfer of value meets certain conditions. How many conditions are there?

a. One

b. Two

c. Three

d. Four


3. Mark recently sold a rental property and after deduction of annual exempt amount, has ended up with a taxable gain of £40,000. Mark is employed, but also received some rental income this year, bringing his total income to £50,270. His adviser suggests making a net contribution to a personal pension of £32,000 to mitigate some of the capital gains tax payable. If Mark lives in England and subject to the UK income tax rates, how much tax relief will he benefit from if he makes this contribution?

a. £8,000

b. £12,000

c. £16,000

d. £20,000


4. Leon is 74 years old and his adviser has suggested he uses tax free cash from his pension to fund his ISA this tax year. Why might that be?

a. An ISA is more tax efficient than a pension

b. If Leon dies after age 75, the tax free cash will become taxable for those who inherit the pension

c. Leon can’t take tax free cash once he’s turned 75 so he should take it while he can

d. The adviser need to do something to justify his ongoing adviser charge


5. For someone with no relevant earnings, how much can they pay into a pension in the current tax year?

a. £0

b. £3,600

c. £12,570

d. £40,000 and any available carry forward


6. For a client whose not been a member of a pension scheme before, how much carry forward can they use?

a. £120,000 (assuming that they had relevant earnings of £40,000 for each of the last three years)

b. Any unused tax relief that they had available for the last three tax years

c. None

d. £80,000


7. If a client meets all 6 of the tests for recycling, they will definitely fall foul of the recycling rules?

a. True

b. False


8. Rohit gifted £3,000 to his daughter on 5 April 2022 and £3,000 to his son on 6 April 2022. In July 2022 he also gifted a further £1,500 to his son and daughter, £500 to each of his siblings and £250 to each of his six nephews and four nieces. What’s the total of exempt gifts made this tax year?

a. £5,500

b. £7,000

c. £6,500

d. £12,500

9. Mia is employed and her salary of £18,000 is her only source of income. She triggers an onshore bond gain of £11,000. Hans is self-employed with earnings of £8,000 this tax year end and he triggers an offshore bond gain of £4,000. Which of the following statements is true?

a. Mia won’t need to self-assess because no further tax is payable on the bond gain

b. Hans won’t need to self-assess because no further tax is payable on the bond gain

c. Hans needs to self-assess but Mia doesn’t because she’ll have no further tax to pay

d. Mia and Hans will need to self-assess


10. Which of the following methods of profits extraction reduces corporation tax?

a. Salary and dividends

b. Salary, dividends and pension contributions

c. Salary and pensions

d. Pensions only 


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