18th March 2021

As you may know the tax year runs from the 6th of April to the 5th of April. It has been that way since the year 1800!

The tax year is important as there are various limit and allowances that apply to a tax year rather than a calendar year.

As financial advisers, we recommend that clients make use of all the tax allowances that are available to them and therefore, we are always busy at this time of year.

There are various allowances under the taxation regime, including the personal allowance, the dividend allowance, the personal savings allowance and the capital gains allowance. The main two allowances I want to cover here, however, are the ISA allowance and the Pension contribution Annual Allowance.


Individual Savings Accounts (ISA’s)

The Individual Savings Account (ISA) is a tax-exempt savings vehicle for UK resident Investors.

  • Investors are not taxable on income received from ISA savings and investments, and no tax is payable on capital gains arising.
  • Investors can subscribe in each tax year to one cash ISA, one stocks and shares ISA, one innovative finance ISA and one lifetime ISA.
  • A child can hold two types of Junior ISA – a stocks and shares JISA and a cash JISA – but no more than one of each type throughout their childhood.


Subscription Limits for this tax year

The overall limit is £20,000 for the current tax year, except for Junior ISA’s, which is £9,000 in the current Tax Year.


Use it or lose it!

Allowances cannot be carried over from previous years, so if you do not use your allowance you will lose it.



The pension annual allowance (AA) is the annual limit on the amount of contributions paid to, or benefits accrued in, a pension scheme before the member has to pay tax.

An individual is limited to “tax-relievable” contributions of, the greater of £3,600 gross per annum, or 100% of relevant UK earnings in the tax year they pay the contribution.

Employers can also contribute to a member’s pension. Employer contributions can be claimed as a business expense and although there is not the same percentage or monetary limits as applicable to members own individual contributions, there is a “Wholly and Exclusively” limit.

The Standard Annual Allowance for pension contributions is £40,000 per tax year. However, for anyone who has accessed pension income under the new flexible pension rules, the Money Purchase Annual Allowance (MPAA) of £4,000 will apply.

For high earners, those with adjusted income over £240,000, the Tapered Annual Allowance (TAA) will apply. For every £2 of adjusted income over £240,000, an individual’s annual allowance is reduced by £1 down to a minimum annual allowance of £4,000.

With pensions, unlike ISA’s, you may be able to carry forward previous years unused allowances. There are great tax planning opportunities using pension contributions, however you must stay within your limits!


Contact us for advice!

If you would like to discuss your allowances and the tax planning that investments and pensions can offer, why not contact us. As ever the initial consultation is free and without any obligation.