Clock is ticking to make most of tax allowances

free allowance reduces at a rate of £1 for every £2 where earnings exceed £100,000, anyone above £123,000 loses this allowance entirely. The effective marginal rate of income tax for those with earnings between £100,000 and £123,000 is, therefore, 60 per cent. Making a pension contribution which reduces earnings between these figures is consequently beneficial.

Furthermore, any unused annual allowance for the previous three tax years can be utilised to increase the amount of contribution permitted through something called “carry forward”, up to £160,000 tax relief, subject to a maximum of not exceeding your current tax year relevant UK earnings.

Given child benefit reduces by one per cent for every £100, the highest earner in the household’s annual income exceeds £50,000 a year, where earnings top £60,000 no child benefit can be received and is paid back via increased income tax. However, one way of retaining some of the available child benefit is to make a pension contribution thereby reducing earnings.

Next on the list should be the dividend tax free allowance. Since this is reducing from £5,000 to £2,000 from April 6, married couples should consider transferring assets between themselves prior to April 5 to enable both to maximise this valuable concession, particularly where one spouse pays income tax at a lower or nil rate.

The capital gains tax annual allowance is £11,300 per person – if it is not used prior to April 6, it will be lost. So individuals should look to crystallise any gains up to that figure from any non ISA investments. Spouses may also wish to consider transferring assets between themselves to maximise their individual allowances.

Some higher rate taxpayers with gains exceeding this year’s allowance, who have access to a company pension scheme where tax relief is provided “at source”, could consider making an ad hoc pension contribution to reduce their earnings sufficiently below the higher rate threshold and so their tax liability.

The starting rate for savings allowance is £5,000. By making full use of this any individual can receive up to £17,500 in this current tax year with no tax to pay given that the personal allowance is £11,500 and the personal savings allowance (for interest) is £1,000.

Up to £20,000 per person can be invested within an ISA prior to April 6 where there is no tax liability on any interest earned and no income tax or capital gains tax liability on any future income/withdrawals.

Consider also inheritance tax exemptions – any individual is able to gift up to £3,000 in any tax year and, where they have not used their annual exemption in 2016/17, they can are able to “double up” in this tax year. This facility ceases, however, after April 6 as you can only ever “carry forward” the previous year’s exemption.

You can, of course, make as many individual “small gifts” of £250 as you wish. The clock is ticking. Trevor Law is managing director of Eastcote Wealth Management, chartered financial planners, based in Solihull. Email: tlaw@eastcotewealth.co.uk The views expressed in this article should not be construed as financial advice