See how to maximise your allowances from your savings to your pension pot and also get your head around some key tax terms.
Keep in mind, tax rules can also change and any benefits will depend on your individual circumstances.
In the 2021/2022 financial year, you can save up to £20,000 in a tax-efficient Individual Savings Account (ISA). You can either save money in one ISA or split it between a cash ISA and a stocks & shares ISA. There are other types of ISAs available, each with different limits and restrictions.
If you already have an HSBC ISA but didn’t make payments in the 2020/2021 tax year, you’ll need to reactivate it before you can pay in any more money.
Find out how to:
Please note an InvestDirect stocks & shares ISA requires a fresh application to be made each tax year.
Depending on the type of ISA you have, it may take a few working days to reactivate it, so please allow plenty of time.
If you open, or already hold, a Junior ISA , or you already hold a Child Trust Fund (CTF) for a child, you can save up to £9,000 in the 2021/2022 tax year without paying any UK income tax or capital gains tax on any income or gains arising.
Most people can add up to £40,000 to their pension pot each year, tax-free – or up to 100% of their earnings if they earn under £40,000 a year. This means the total sum of any personal contributions, employer contributions and tax relief can’t usually exceed the £40,000 pension annual allowance.
If you haven’t reached this limit, you may want to consider adding more to your pension from your pre-tax income. Keep in mind you might not be able to access this money until you’re at least 55 years old (or 57 from 2028). Find out more about tax relief on pension contributions.
You can sell investments, property and other assets in the 2021/2022 tax year without having to pay any tax on the first £12,300 worth of gains.
Keep in mind, you can’t carry over any unused capital gains tax allowance to the next tax year. So if you’re planning to sell assets that would make you more than £12,300 in profit, it might be worth staggering the sale over two tax years.
If your employer or pension provider doesn’t have a tax code from HMRC, it has to apply an emergency tax code. If this happens, you might have more tax deducted from your earnings or pension than necessary.
But don’t worry, emergency tax codes are temporary. Your employer or pension provider should receive a tax code from HMRC quickly.
Tax credits are extra funds given by the government. There are two types:
working tax credits
child tax credits
Find out if you should be receiving tax credits by contacting HMRC.
As part of your annual tax summary, you’ll also see National Insurance (NI) contributions. If you’re over 16 and earn more than £184 a week from your employer or £6,515 a year if you’re self-employed, you’ll need to pay National Insurance.
These contributions go towards initiatives such as the State Pension, maternity pay and the Jobseeker’s Allowance.