3 minute read

Tax allowances 2021/2022

6 April and the start of a new tax year has come round again. But what’s new this year and how can you make the most of your new allowances? Find out here.
Written by Lucy Cowley
Published on 06 April 2021

What are the new tax allowances for 2021/22?

ISA allowance

Stays at a whopping £20,000.

Pension allowance

Stays at up to £40,000*.

*Find out more about the tapered pension allowance in our infographic.

Junior ISA allowance

Remains at £9,000 – lucky kids!

Personal allowance

This is the allowance you have before you start paying Income Tax.

This is now at £12,570, up from £12,500 last tax year.

The basic-rate band has increased from £37,500 to £37,700.

The personal allowance and the basic-rate band are now frozen until 2026.

Capital Gains Tax

This will remain the same at £12,300 and is also frozen until 2026.

Personal Savings Allowance

This is a tax-free allowance for interest.

This is at £1,000 for basic-rate taxpayers and £500 for higher-rate taxpayers.

Dividend income

This remains at £2,000.

If you want more detail on any of these allowances and what they mean for you, check out our Budget 2021 highlights.

Tax legislation is that prevailing at the time, is subject to change and depends on individual circumstances.

Making a success of your finances in 2021/22

So you know the allowances, now how do you make the most of them? We have some ideas for you.

Using your ISA and pension allowances

Investing in ISAs or pensions is a great way to use any spare cash you might have. They have excellent tax-free benefits and are a great way to save for the future. Plus they give you plenty of control over your own investments.

Why not open an award-winning Stocks & Shares ISA with us or Best SIPP* (psst – see all our awards here) with us?

We have low fees and lots of information on the investments that could work for you. Plus, if you don’t want to invest straightaway, you don’t have to. You can leave the money in your new account as cash and invest it later.

Remember: investments carry risk, you may get less than originally invested.

Open a SIPP

Open an ISA

If you’re not sure which way to jump between pensions and ISAs, read our article discussing this exact topic.

And don’t forget the kids…

Junior ISAs work in the same way as adult ISAs and have the same tax-free benefits. Take a look.

Open a Junior ISA

Should I use my allowances this early?

Squirreling away some cash into investments early in the tax year is never a bad idea. Your money will have more time to grow tax-free which may result in more returns.

Open an account now

How can I save regularly?

By setting up regular savings of course! It’s one of the easiest ways to invest because once you’ve done it, the money comes out automatically every month so you don’t have to think about it again.

Set up regular savings

Time to transfer?

Transferring can give your investments a new lease of life without you adding any new money (unless you want to). Having all your investments under one roof also means you have more control over them and it could even save you money in provider fees.

Transfer my investments

Book an investment checkup or pension review

If you’re close to retirement, have complicated finances, or simply don’t know where to start, speaking to someone about your investments can help.

Book a free pension review with one of our experts

Book an investment checkup with our guidance team

Or if you have a more general query, call us on 020 7189 2400 or email best@bestinvest.co.uk.

 

*SIPPs are not suitable for everyone.  If you don’t want to invest across different asset classes or don’t think you will make use of the investment choices that SIPPs give you, then a SIPP might not be right for you.

This article does not constitute personal advice. If you are in doubt as to the suitability of an investment please contact a financial adviser.