Allowances and exemptions can amount to sizeable savings and should be considered by every adviser looking to minimise the tax burden for their clients ahead of the tax-year end, says Shaun Moore.
Speaking on the FTAdviser In Focus podcast, the tax and financial planning expert at Quilter says Q1 is "very much end of the tax year tidy-up time", when loose ends are tied together and allowances maxed out.
The need to reduce the tax burden is particularly pressing this year, as many are facing a cost of living not seen for generations, alongside a tax burden that sits at a 70-year high.
So how can advisers help their clients make the most of the tax breaks available, be it through Isas, pension allowances, capital gains tax savings, or a combination of them?
Moore says: "[The pension and the Isa] is an obvious direct comparison to make. I see it as kind of three pots and I kind of put one pot to one side because I think it's a bit of a no-brainer. So workplace pension schemes, where the employer is prepared to contribute into it... I put these to one side.
"But then if you look at personal pensions and Isas... the key is tax on the way in or tax on the way out.
"So I think have both but the levels of contribution will be very dependent on the individual because with the pension for a 25 to 30-year-old it's probably a hard sell to say 'put all this money into your pension but you can't touch it for 40 years'."
But there are savings above the obvious allowances for pension contributions, which make tax planning even more valuable for clients.
"Some of the things we like to play on is if you have capital gains during the year above the annual exemption, particularly for individuals that are around the basic rate, higher rate threshold, and the capital gain is added on top of that to establish whether it's chargeable at 10 or 20 [per cent].
"So if you make a relief at source pension contribution it's quite a neat little trick where you can stretch the band to absorb the gain to not only reap the benefits of the pension contribution but also reduce the capital gains tax rate that you might pay on a gain that is moving into a higher rate. And you can do the same exercise with bond gains.
"It's those extra plays – yes you get the benefits that you normally get with a pension contribution but for some individuals who have had another event in the year [you] can add extra value... by extending a band and absorbing a gain."
To hear more about Moore's tips and tricks for tax savings this tax-year end, click on the link above.
carmen.reichman@ft.com