Tax year ending

Dominic Thomas
Feb 2023  •  12 min read

Tax year ending!

There are not many weeks left of the 22/23 tax year, which ends on Wednesday 5th April. As a brief reminder of the key issues, I have done a quick summary … if you are not sure of what you have used or what you can use, please get in touch with us as soon as you can.


  • Everyone under the age of 75 can contribute £2,880 into a pension and get basic rate tax relief, irrespective of any income. This is as close as it gets to ‘money for nothing’
  • The annual allowance of £40,000 applies to those with incomes of £3,600 – £240,000. You and an employer may contribute up to 100% of your earned income (capped at £40,000) between you
  • Those earning over £240,000 need to be careful; your allowance reduces by £1 for every £2 of income over £240,000 until it reaches £4,000 – which includes any employer payments


  • Any adult can invest up to £20,000 over the course of the tax year into an ISA which grows free of income tax and capital gains tax
  • Those aged 18-40 can use a Lifetime ISA allowance of £4,000 if this is for a deposit on a first ever home. The Government will add £1,000


  • If you are selling an asset / investment (which would include rebalancing them) this triggers capital gains. The 22/23 allowance is £12,300 of gains before you pay any tax, but this is falling in 23/24 to just £6,000 and then £3,000 the following tax year. So if you are going to do this anyway, I would encourage you to get on with it – perhaps you have some shares that you don’t really want …
  • Trusts also pay capital gains, but only have half of the personal allowance, so even more incentive to take profits and rebalance
  • You can delay payment of capital gains tax using some investments (ask/see below)


  • If your income exceeds £100,000, you begin to have your personal allowance of £12,570 reduced by 50p for every £1 above £100,000. The personal allowance is the amount of income taxed at 0%. So it would be prudent to have bonuses paid into pensions for example
  • Dividends – the first £2,000 of dividends is tax-free in 22/23
  • Interest for non or basic rate taxpayers is 0% on the first £1,000 of interest (savings allowance) and £500 for higher rate taxpayers. Additional rate (45%) taxpayers don’t get the allowance. As some deposit accounts now pay 3% or 4%, you may be drawn into this (a higher rate taxpayer only needs £16,666 in savings earning 3% interest of £499. You need to declare all income to HMRC through self assessment
  • If you really must insist on a cash ISA (please only for ‘short-term parking’ of money) then this would ensure the interest is tax-free, but rates on cash ISAs are much lower than savings accounts now
  • If you are not using your full personal allowance and have investments that provide taxable income, this may be a sensible moment to trigger income that uses your allowance
  • If you rent a room in your home, there is a tax-free rent-a-room allowance of £7,500


  • You can gift £3,000 to any individual without recourse to tax by the recipient or your estate. If you do any substantial giving please put a scan of a signed note of this on our portal
  • If you are feeling generous, you are also permitted to gift your newlywed children £5,000 or grandchildren £2,500


  • If you have a spouse who does not earn up to the personal allowance of £12,570, you can elect to have 10% of this (£1,257) added to your own allowance
  • Spouses also can benefit from sharing assets and effectively doubling exemptions and allowances


It is generally thought that VCTs, EIS and SEIS are really for more sophisticated investors, about 3% of the population. All are long term in nature – meaning 6-10 years. Unlike your portfolio elsewhere (which – if we are managing it – will be an enormous portfolio of global equities), these are very small by comparison. Do not do these on your own unless you know your Sharpe ratio from your Beta. Unlike the above, the investments below can experience permanent loss:

Venture Capital Trusts

  • Tax-free income from your investment
  • Tax-free capital gains
  • Tax relief of 30% on your initial investment (tax reducer)

Enterprise Investment Schemes

  • 30% tax relief on your investment
  • The ability to defer owed capital gains tax
  • Loss relief
  • Exempt from inheritance tax

Seed Enterprise Investment Schemes

  • 50% tax relief on your investment
  • Reduce your due capital gains tax bill by 50% immediately
  • Exempt from inheritance tax


Income taxes are tiered. Each slice of your income is taxed at a different rate.

Band Taxable income Tax rate
Personal Allowance Up to £12,570 0%
Basic rate £12,571 to £50,270 20%
Higher rate £50,271 to £150,000 40%
Additional rate over £150,000 45%

Please remember that HMRC will apply penalties for late payment and fines for non-payment which can result in the very worst of punitive measures – a custodial sentence.

As ever, be sure of two things – death and taxes. Neither are terribly welcome.

Tax year ending2023-12-01T12:12:37+00:00




I am going to have to put a lot of caveats with this item on tax free money. There are lots of ways to have tax free money, but I want to highlight a couple of issues, the first being the different tax treatment of different financial products and secondly how these might be used in conjunction with the current tax rules.

Joan is 65 and now finally retired – it’s about time!

Joan (10/02/1954) was 65 at the start of the tax year but she stopped working in February when she turned 65. She is single and back in the late 80’s a dead-ringer for Kim Bassinger. She has worked since leaving University in 1977 and much like her favourite band Fleetwood Mac, she has gone her own way. She did a bit of employed work whilst at Uni, but got her “first proper job” working as a junior assistant in an advertising company. Over the years she worked for various employers, most didn’t have pension schemes, anyway most wouldn’t let you join them until you were 30, so by the time she actually joined a scheme at 35 (in 1989), she didn’t really feel that she was too late to the party.  She didn’t really like pensions, or rather the sharp suited, red-tie wearing blokes from Merchant Investors that sold them, they reminded her of some of the worst people in advertising. Then there was Robert Maxwell, no she didn’t like pensions at all. Mind you she was quite pleased that her current adviser found an old Contracted Out of SERPS pension, worth about £85,000 – so one of those fellas must have persuaded her to sign a form at some point. It helped top up her pension fund quite a lot to about £400,000.

At the age of 30 Joan bought her Wimbledon house in 1984 for £34,000 which was a lot back then.  She recalls a great house warming party – lots of Wham! and Duran Duran. Looking back she wondered how she afforded it, (the house, not the party) given that interest rates were about 10% and kept going up. However property prices seemed to be rising (hers had doubled in value in 5 years) and she was forming a habit for nice things, which nearly got out of hand, but she spoke to her bank and remortgaged, increasing her loan in 1988 to almost £60,000. When the property crash happened shortly afterwards life got a little tricky, she had to economise. She enjoyed applying tips to improve her home from Tessa Shaw and the team on Home Front.  She loved relaxing in the evening having done a bit of decorating whilst listening to Simply Red’s “Stars” curled up on the sofa. It heped her manage her feelings about her large mortgage which barely seemed to reduce in the first 10 years, but at least it was – and she hung in there. She finally paid off her mortgage 10 years ago at the age of 55. She still believes it was her best investment.

Joan quite liked PEPs and ISAs. She remembered getting a little lucky with a few Building Societies that demutualised and even put the proceeds into a Single Company PEP. She wasn’t sure why she liked them, perhaps it was because she was told she could get her money out if she needed to (she never did) or perhaps it was because it seemed that they were more glamorous, or was that because she seemed to remember a tune by Right Said Fred called “I’m Too Sexy For My Shirt” that was playing a lot at the time. It wasn’t, that was 1991, no perhaps it was all those boy bands like Westlife and Boyzone that she secretly liked she remembers them being around in 1999, that was Tony Blair and all the optimism  and promise of equality of new Labour. She kept up her regular savings and built up her ISAs, which began 20 years ago in 1999.

Joan had learned a bit about investing, the important things like ignoring what everyone else said, she first learned this as her Yuppie thirtysomething friends got into a panic in the crash of October ’87 which she ignored. Then shortly after opening her new ISA learned never to invest in a technology themed fund when the dot-com bubble burst. She chalked it up to “experience”. Other than that, she took investment news in her stride, largely ignoring the mountains of paper that seemed to pile up each year. Over time she observed that stock markets tend to go up and down and up again. Admittedly Joan got a little lucky – 10 years ago at 55 when she had cleared off her mortgage, her career was going well and she had a decent disposable income. She saw an adviser who suggested she add more to her pension and ISA, as luck would have it the Government increased the amount she could contribute and she took advantage of 40% tax relief. It was just as well as her State Pension Age was being pushed even further into the future.

Not long afterwards, she started investing into VCTs, (Venture Capital Trusts) well, she had a few friends that had some good business ideas, she had watched The Apprentice and Dragon’s Den and thought a little bit of a flutter was probably ok. She saved into a VCT for few years ago but has since stopped adding money.

Joan has always paid her National Insurance and has a full State Pension which only started in the summer when she was 65, 4 months and 26 days old. Her State pension is £168 a week. She was a bit miffed that it wasn’t 65 (and when she started out at Uni, it would have been 60) but she had enjoyed the benefits of working until 65.

Joan’s Portfolio

  • £400,000 – Personal Pension Plan
  • £400,000 – Stocks and Shares ISA Portfolio
  • £80,000 – VCT (Venture Capital Trust)
  • £50,000 – Bank Deposit Account
  • £600,000 – Home

Not an unreasonable sum of money – in fact having paid off her mortgage and owning her home, Joan has savings and investments of £930,000. Her home is not an investment, its where she lives. Though her friends regularly tell her that it is an investment if she sells and moves away from Wimbledon. However what would be the point? her friends all live in the area, she loves going jogging on the Common with some of them. Her mum (91) is still alive and living nearby, though Joan is worried that she may need care at some point and the cost of care in Wimbledon is, well… there may not be much of an inheritance.

Fleetwod Mac - Go Your Own Way

Tax Free Allowances

In the current tax year 2019/20. Joan has a personal allowance of £12,500 before she pays any income tax. Her State Pension will use up a lot of this. Income up to £50,000 is taxed at 20% (when the personal allowance is considered).

The VCT is a fairly “high-risk” type of investment, she isn’t paying any money into it any longer, but does enjoy income from it of 3% a year, this is tax free within a VCT. That’s £2,400 a year.

Her ISA is doing well, she has set up a monthly payment from it to her of £4,000 a quarter (£16,000 a year). As this is an ISA, the income that she takes (or capital) is tax free. By way of note £16,000 4% of £400,000.

The State Pension – Joan is caught by equalisation.

Joan originally expected her State Pension to start when she was 60, but following various rule changes and seeking advice in the early 2000’s she realised that it would be later than that. Joan’s State Pension actually began this summer on 6 July 2019. Over the full remainder of the tax year she will have 38 payments of £168 (£6,384) normally in a full tax year it would obviously be 52 weeks (£8,736) but she is one of many women that saw their State Pension Age increased. She’s a little miffed at having an extra 5 years to wait and wanted to know how she can minimise her tax payments.

Joan would like to know how much she could take from her pension without paying any tax. As her other investments are tax free, the only taxable income she has is money from her State pension (£6,384 in 2019/20) the personal allowance is £12,500. She puts £8,154 of her pension into a Flexible Access Drawdown pension. This enables her to take £2,038.50 as a tax free lump sum (25%) and £6,115 as taxable income. So rather like this:

  • State Pension £6,384 (taxable at 0%)
  • Drawdown Pension £6,115 (taxable at 0%)
  • Tax Free lump sum from pension £2,038 (tax free)
  • VCT income £2,400 (tax free)
  • ISA income £16,000 (tax free)
  • TOTAL income £32,927 and NO INCOME TAX

More and Less

The first point to make is that the above is not the maximum income that Joan could have. I simply want to identify some options. She could take more from her ISA, she is entitled to tax free interest on her money at the bank. She could take more from her pension (a larger tax free lump sum and no income from the pension if she was so minded). As an employed income £32,927 in 2019/20 would for most people result in about £7,000 paid in tax and national insurance.

Joan will need advice to adjust her portfolios and determine the most suitable way for her to draw income. Next year she will have a larger State pension, using more of her personal allowance as it will be a full year of income for her (and a likely increase in April).

Annuity Option

When she retired at the start of the year at 65, Joan had investigated using her pension to buy an annuity. She was going to simply take the 25% from her fund and put it in the bank and then use the £300,000 to buy an annuity. As a single person in very good health, she wanted an inflation-proofed income. The best annuity available would guarantee that she receives £9,851 a year rising by 3% a year. Job done. That’s an annuity rate of roughly 3.2%, but the income is taxable. In the first year she would have total income of £16,255 from the annuity and her State Pension, paying tax of £747. Her VCT and ISA income remain the same at £18,400 in all. So her total income would be £34,655 (more) but with tax of £747 (net £33,908) She has £300,000 less on her personal balance sheet and has £981 extra income in the year.

In the second year, she would expect £10,146 from the annuity and a State Pension of £8,736 a total of £18,882, which if the personal allowance remains at £12,500 would mean that £6,382 is taxed at 20% (£1,276.40 tax). Whilst there are good things about an annuity (it’s a guaranteed income) this is also a problem for tax planning as the income cannot be switched off and is taxable.

The purpose of this fictional case study is simply meant to highlight the issues involved, everyone’s circumstances will be different. I have not considered that Joan may live a very long time and whether taking 4% from her ISA is a good idea or indeed if she has a suitable globally diverse portfolio. I have done no inheritance tax planning and no contributions to anything that might get tax relief. Had Joan had other investments, she could also use her capital gains tax allowance. There are lots of options.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email


Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email – 
Call – 020 8542 8084


Are we a good fit for you?


Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email –    Call – 020 8542 8084


Are we a good fit for you?

TAX FREE AT 65 – IT’S ABOUT TIME…2023-12-01T12:17:07+00:00

Investing in a Business

Investing in a Business

One of the ways that Government attempts to create jobs is to encourage and stimulate small businesses, start-ups or recently started businesses. The Prime Minister wants these to scale up, not simply start up. So as a regular investor (which in my world we call a retail investor) there are various ways that you are incentivized to be part of this wealth creation.

Tax effective incentives

Venture Capital Trusts, Enterprise Investment Schemes, Small Enterprise Investment Schemes are all such investment structures designed to encourage you (with tax incentives) to invest into new businesses. Generally, though not always the case, these would be businesses looking for money, to which traditional banks don’t, can’t or won’t lend. Since the credit crunch, despite the Government pouring billions into the system, most lending to small businesses has not increased. Indeed any chart on the topic would suggest that Banks are positively less than helpful.

A Different Approach

As we approach the end of the tax year, various specialist companies will produce offers for these tax efficient investments. The rules for them are fairly complex, primarily because they  (the rules) seem to get changed each year. It would certainly be true to say that the degree of investment risk is generally much higher than say investing into most normal investment funds that track an index. As with most things, there are good and not so good and some downright awful. Despite being 3 or 5 year investments, in reality they are long-term investments, where the positive rewards may take some years to bear fruit, and as with almost every business, extracting money from them requires a carefully considered exit strategy and ideally several potential buyers.

The company you keep

In the latest Trainspotting film, (T2, which is a return to Edinburgh and the characters from 20 years ago) two of the characters (Renton and Simon) decide to have a proper go at running a “business”. Despite being “creative thinkers” and possessing “the gift of the gab” rather more is required to run a successful business.  Sadly, their skill set and personal focus do not lend themselves to a successful outcome. Some investors could be forgiven for thinking that the degree of risk being taken is similar to that of investing into non-mainstream investments. However the only thing in common is the capability of the management of the business. Good managers can turn a bad business around, but equally a good business can be ruined by bad management. We all know that there are some very unsavory characters in business, some even cross-over into politics. Trainspotting has a particularly nasty character. As is always the case, people are key. In this form of investing, it is certainly the case that a good business plan  requires a good management team to implement it.

Choose wisely

So (and here is where you imagine Ewan McGregor reading this) if you think that you might want to choose to invest in small businesses, choose to create jobs, choose wealth creation, choose something a bit different, choose a dose of tax relief, perhaps you should be thinking about choosing to invest into an EIS, SEIS or VCT. As with T2 it won’t be everyone’s cup of tea, (or drug of choice).  Generally, you’ll need a minimum of £25,000 to invest. This is for those that do want to choose some of the companies that will make a mark on the next 20 years. Those that are comfortable with the risk. Those that are choosing to invest for the long-term and have a clear idea of what they are getting into. Then investing in businesses can provide a rewarding experience. But choose wisely. Here is the trailer for T2: Trainspotting.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email

Investing in a Business2023-12-01T12:18:49+00:00
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