Personal tax planning in 2021/22

Price Mann • April 15, 2021

What’s changing for the new tax year?

If there’s one thing to take away from Spring Budget 2021, it’s taking charge of your personal finances is going to be increasingly important over the next five years.

With the financial fallout from COVID-19 over the last year being the fiscal equivalent of fighting a war at more than £280 billion, we will be paying back that debt for many decades to come.

A new tax year is now upon us and it’s much the same as the previous 12 months from a personal tax planning perspective, while the threat of COVID-19 appears to be receding.

Here’s what you need to know from April 2021 and in some cases beyond.

Income

The personal allowance will increase from £12,500 to £12,570 for 2021/22, a modest 0.5% rise in line with the Consumer Prices Index (CPI) rate of inflation for September 2020.

How much income tax you pay this year will depend on where in the UK you live, with different thresholds and rates applying to taxpayers in Scotland.

Income tax bands & rates - England, N. Ireland & Wales

Band	2021/22	Rate
Personal allowance	Up to £12,570	0%
Basic-rate	Over £12,570 to £50,270	20%
Higher-rate*	Over £50,270 to £150,000	40%
Basic-rate	Over £12,570 to £50,270	20%
Additional-rate*	Above £150,000	45%

*The personal allowance is reduced by £1 for every £2 of income from £100,000 to £125,140.

The UK-wide personal allowance, along with all income tax thresholds in England, Northern Ireland and Wales, has been frozen by Chancellor Rishi Sunak until April 2026.

The income tax rates will also remain in place until the scheduled end of Parliament in 2024 in line with a Conservative manifesto pledge from 2019, which Sunak reiterated in last month’s Spring Budget.

Freezing these thresholds and tax rates amounts to stealth tax grab, which will inevitably push many taxpayers into a higher tax bracket over the next five years, resulting in them paying considerably more income tax.

Income tax bands & rates – Scotland

Band	2021/22	Rate
Personal allowance	Up to £12,570	0%
Starter-rate	Over £12,570 to 14,667	19%
Basic-rate	Over £14,667 to £25,296	20%
Intermediate-rate	Over £25,296 to £43,662	21%
Higher-rate*	Over £43,662 to £150,000	41%
Top-rate*	Above £150,000	46%

*The personal allowance is reduced by £1 for every £2 of income from £100,000 to £125,140.

Dividends

The dividends allowance remains at £2,000 for 2021/22, for the third year in a row.

Factoring in the slight increase to the personal allowance in 2021/22, the maximum tax-free income you can receive through dividends is £14,570.

Above that threshold dividends falling in the basic-rate band continue to pay tax at 7.5%, in the higher-rate band at 32.5% and dividends that fall within the additional-rate band will be taxed at 38.1%.

Capital gains tax

If you have any chargeable assets that you plan to sell and are worth more than you paid for them, your gain could be liable to capital gains tax.

Assets that are sold in 2021/22 for more than £12,300 will be liable for capital gains tax.

The rate of tax paid will depend on the type of asset sold and which marginal rate of income tax you pay, with different rates applying to basic-rate taxpayers and those in higher or additional-rate bands.

That is unless the asset is held in trust, in which case capital gains tax kicks in at 28% on gains from residential property or 20% for gains from other chargeable assets worth more than £6,150.

The lifetime limit for gains falling within business asset disposal relief, which reduces the capital gains tax rate to a flat 10%, remains at £1m for 2021/22.

Pensions & savings

Lifetime allowance

Usually, the pensions lifetime allowance increases in line with that all-important CPI rate of inflation from the previous September. But for 2021/22 until April 2026, the lifetime allowance stays at £1,073,100.

This might not sound like a big deal for many people who may not ever get close to reaching this limit on the total amount of pension benefit that can be drawn from a pension pot, either as a lump sum or retirement income.

But potentially vast numbers of pension savers face being hit with a 55% tax charge if they withdraw anything above this limit as a lump sum over the next five years. If taken as income, a 25% tax charge awaits.

Those who have already started taking retirement income, and people who are in the final stages of their retirement savings strategy, need to be aware of this lifetime allowance and factor it into their planning.

The most you can save into your pension pot in 2021/22 – otherwise known as the annual pensions allowance – remains £40,000, although personal circumstances can mean the actual allowance is lower for a particular individual. You can contribute more by utlising any unused allowance from the previous three tax years.

ISAs

ISAs remain tax-free up to an annual subscription value of £20,000, whether the income is from interest or investments.

Types of ISA include cash, stocks and shares, innovative finance ISAs, lifetime ISAs, and junior ISAs for under-18s.

You can opt to put all your savings in one type of ISA, or you could split them across several items.

Bear in mind, the lifetime ISA (£4,000) and junior ISA (£9,000), have maximum annual contribution limits and the help-to-buy ISA is closed to new applicants.

In the family

Inheritance tax

It’s very much as business as usual with inheritance tax in 2021/22.

Estates worth less than £325,000 will be tax-free, while the flat-rate of inheritance tax above this threshold remains at 40%.

The final increase to the residence nil-rate band took place in 2020/21, making it possible to protect a further £175,000 when passing on the family home to direct descendants, such as children or grandchildren.

Beyond 2020/21, future increases to the so-called family home allowance are due to be determined by the September CPI figure. The inheritance tax thresholds, however, are to be maintained at their existing levels until April 2026.

The Treasury expects to net an extra £985m in inheritance tax receipts over the next five years as more estates become liable for the levy.

For married couples, providing the first person dies and leaves all of their assets to the spouse, it’s possible for the surviving spouse to double their nil-rate band to £650,000, rising to £1m when taking into account the residence nil-rate band.

Marriage allowance

If you earn less than your spouse or civil partner, you can continue to transfer £1,260 of your personal allowance to them in 2021/22 by using the marriage allowance.

The marriage allowance is only available if one spouse or civil partner earns less than the personal allowance, and the other is a basic-rate taxpayer.

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Managing risk in your investment portfolio

By Price Mann • September 17, 2025

Managing risk in your investment portfolio Tips for a balanced investment approach. Investment markets rise and fall, yet the goals that matter to you – retirement security, children’s education, a comfortable buffer against the unexpected – remain constant. Managing risk means giving each goal the best chance of success while avoiding avoidable shocks. You can do that by holding the right mix of assets for your timeframe, using tax wrappers efficiently, and controlling costs and emotions. The 2025/26 UK tax year brings unchanged ISA and pension allowances. This guide explains the key steps, such as diversifying sensibly, rebalancing with discipline, safeguarding cash, and monitoring allowances, so you can stay on track whatever the markets deliver. It is an information resource, not personal advice. Start with a clear plan Define goals and timeframes: Decide what each pot of money is for (for example: house deposit in three years, retirement in 20 years). Time horizon drives how much short-term volatility you can accept. Short-term goals usually need more cash and high-quality bonds; long-term goals can justify more equities. Set your risk level in advance: Ask yourself two questions. Risk capacity: How much loss could you absorb without derailing plans (linked to your time horizon, job security and other assets)? Risk tolerance: How do you feel about market swings? Use a more cautious mix if you are likely to sell in a downturn. Ring-fence cash needs: Keep 3-6 months’ essential spending in easy-access cash before you invest. This reduces the chance of selling investments at a low point to meet bills. Choose simple, diversified building blocks: Broad index funds and exchange-traded funds (ETFs) covering global equities and high-quality bonds provide instant diversification at low cost. Avoid concentration in a single share, sector or theme unless you are comfortable with higher risk. Diversification: Spread risk across assets, regions and issuers Diversification reduces the impact of any single holding. Practical ways to diversify include the following. Assets: Use both growth assets (equities) and defensive assets (investment-grade bonds, some cash). Regions: Combine UK and global holdings. Many UK investors hold too much domestically; global funds spread company and currency risk. Issuers: In bonds, mix UK gilts and investment-grade corporate bonds to diversify credit exposure. Currencies: Equity funds are commonly unhedged (currency moves add volatility but can offset local shocks). For bonds, many investors prefer sterling-hedged funds to lower currency risk. A diversified core helps the portfolio behave more predictably across different market conditions. You can add small “satellite” positions if you wish, but keep any higher-risk ideas to a modest percentage of the whole. Use tax wrappers to reduce avoidable tax and trading frictions Efficient use of ISAs and pensions is one of the most effective risk-management tools because it protects more of your return from tax. ISAs (individual savings accounts) Annual ISA allowance: £20,000 for 2025/26. You can split this across cash, stocks & shares and innovative finance ISAs. Lifetime ISAs (LISAs) are capped at £4,000 within the overall £20,000. Junior ISA (for children under 18): £9,000 for 2025/26 (unchanged). ISAs shield interest, dividends and capital gains from tax. Rebalancing inside an ISA does not create capital gains tax (CGT), which helps you maintain your chosen risk level at lower cost. Note: There has been public discussion about potential ISA reforms, but the current 2025/26 allowance is £20,000. If government policy changes later, we will let you know. Pensions (workplace pension, personal pension/SIPP) Annual allowance: £60,000 for 2025/26 (subject to tapering for higher incomes; see below). You may be able to carry forward unused annual allowance from the three previous years if eligible. Tapered annual allowance: If your adjusted income exceeds £260,000 and threshold income exceeds £200,000, the annual allowance tapers down (to a minimum of £10,000 for 2025/26). Money purchase annual allowance (MPAA): £10,000 for 2025/26 once you’ve flexibly accessed defined contribution benefits (for example, taking taxable drawdown income). Tax-free lump sum limits: The lifetime allowance has been replaced. From 6 April 2024, the lump sum allowance (LSA) caps total tax-free pension lump sums at £268,275 for most people, and the lump sum and death benefit allowance (LSDBA) is £1,073,100. Pensions are long-term wrappers designed for retirement. Contributions usually attract tax relief and investments grow free of UK income tax and capital gains tax while inside the pension. Personal savings: Interest allowances Personal savings allowance (PSA): Basic-rate taxpayers can earn up to £1,000 of bank/building society interest tax free; higher-rate taxpayers up to £500; additional-rate taxpayers do not receive a PSA. Starting rate for savings: Up to £5,000 of interest may be taxable at 0% if your other taxable non-savings income is below a set threshold. For 2025/26, that threshold is £17,570 (personal allowance of £12,570 plus the £5,000 starting rate band). Dividends and capital gains outside ISAs/pensions Dividend allowance: £500 for 2025/26 (unchanged from 2024/25). Dividend tax rates remain 8.75%, 33.75% and 39.35% for basic, higher and additional-rate bands, respectively. The annual capital gains tax (CGT) exempt amount , £3,000 for individuals (£1,500 for most trusts). CGT rates from 6 April 2025: For individuals, 18% within the basic-rate band and 24% above it, on gains from both residential property and other chargeable assets (carried interest has its rate). HMRC examples confirm the £37,700 basic-rate band figure used in CGT calculations for 2025/26. CGT reporting reminder: UK residents disposing of UK residential property with CGT to pay must report and pay within 60 days of completion. Other gains are reported via self assessment (online filing deadline is 31 January following the tax year; if you want HMRC to collect through your PAYE code, file online by 30 December; payments on account remain due 31 January and 31 July). Why this matters for risk: Using ISAs and pensions lowers the drag from tax, allowing you to rebalance and compound returns more effectively. Outside wrappers, plan disposals to use the £3,000 CGT allowance and each holder’s tax bands and consider transfer to a spouse/civil partner (no CGT on gifts between spouses) before selling where suitable. Bonds and cash: Interest-rate and inflation considerations Interest rates: The Bank of England reduced the Bank Rate to 4% at its August 2025 meeting. Bond prices can move meaningfully when rates are high or changing, especially for longer-dated bonds. Consider the duration of bond funds and whether a mix of short- and intermediate-duration exposure suits your time horizon. Inflation: Headline Consumer Price Index (CPI) inflation was 3.6% in the 12 months to June 2025, while the CPI including owner occupiers’ housing costs (CPIH) rose by 4.1%. Inflation affects the real value of cash and bond coupons, and can influence central bank policy, affecting bond prices. Review whether your mix of cash, index-linked gilts and conventional bonds remains appropriate as inflation and interest-rate expectations evolve. Cash strategy: For short-term needs, spread deposits to respect Financial Services Compensation Scheme (FSCS) limits. For longer-term goals, excessive cash can increase the risk of falling behind inflation. Control costs and product risk Keep fees low: Ongoing charges figures (OCFs), platform fees and trading costs compound over time. Favour straightforward funds and avoid unnecessary expenses. Understand the product: Structured products, highly concentrated thematic funds or complex alternatives can behave unpredictably. If you use them, size them modestly within a diversified core. Use disciplined trading rules: Avoid frequent tinkering. Set rebalancing points (see below) and resist acting on short-term news. Rebalancing: Why, when and how Markets move at different speeds. Without rebalancing, a portfolio can “drift” to a higher or lower risk level than you intended. Follow this simple rebalancing framework. Invest in something that will rebalance automatically (i.e. certain ETFs) Frequency: Review at least annually. Thresholds: Rebalance when an asset class is 5 percentage points away from target (absolute) or 20% away (relative). Tax-aware execution: I prefer to rebalance inside ISAs and pensions. Outside wrappers, use new cash or dividends where possible; then consider selling gains up to the £3,000 CGT allowance and factoring in dividend and savings allowances. Implementation tip: If markets are volatile, use staged trades (for example, three equal tranches a few days apart) rather than one large order. Safeguard cash and investments with the right protections FSCS protection (cash deposits): Up to £85,000 per person, per authorised bank/building society group is protected. Temporary high balances from specific life events can be covered up to £1m for six months. The Prudential Regulation Authority has consulted on raising the standard deposit limit to £110,000 and the temporary high balance limit to £1.4m from 1 December 2025 (proposal stage at the time of writing). FSCS protection (investments): If a regulated investment firm fails and your assets are missing or there is a valid claim for bad advice/arranging, compensation may be available up to £85,000 per person, per firm. This does not protect you against normal market falls. Operational risk checks: Use Financial Conduct Authority authorised providers, check how your assets are held (client money and custody), enable multi-factor authentication, and keep beneficiary and contact details up to date. Currency risk: When to hedge For equities, many long-term investors accept currency fluctuations as part of the growth engine, since sterling often weakens when global equities are stressed, partly offsetting losses. For bonds, many prefer sterling-hedged funds to keep defensive holdings aligned with sterling cashflow needs. A blended approach works: unhedged global equities plus mostly hedged bonds. Behavioural risks: Keep decisions steady Common pitfalls include chasing recent winners, selling after falls or holding too much cash after a downturn. Tactics to keep you on track include: automate contributions (regular monthly investing), which spreads entry points write down rules (what you will do if markets fall 10%, 20%, 30%) separate spending cash from investments so you do not sell at weak prices to fund short-term needs use portfolio “buckets” in retirement. Retirement planning: Sequence-of-returns risk and withdrawals If you are drawing an income from investments consider the following. Hold a cash buffer (for example, 12–24 months of planned withdrawals) to avoid forced sales during sharp market falls. Be flexible with withdrawals: Pausing inflation-indexing or trimming withdrawals after a poor market year can help portfolios last longer. Use tax bands efficiently: Consider the order of withdrawals (pension, ISA, general investment account) to make use of personal allowance, PSA, dividend allowance and the CGT annual exempt amount. Take care around the MPAA if you are still contributing to pensions after accessing them. Putting it together: A repeatable checklist Confirm goals and time horizons. Check emergency cash (3-6 months). Map your target asset allocation. Use wrappers first: Fill ISAs and workplace/personal pensions as appropriate. Keep costs low: Prefer broad index funds/ETFs. Set rebalancing rules: Annual review + thresholds. Document tax items: Monitor dividend/CGT use; note 60-day property CGT rule; plan for 31 January/31 July self assessment dates if relevant. Review protection limits: Spread larger cash balances across institutions in line with FSCS; note proposed changes for late 2025. Schedule an annual review to update assumptions for interest rates, inflation and any rule changes. Get in touch if: you are unsure how to set or maintain an asset allocation you plan to draw income and want to coordinate wrappers and tax bands you expect large one-off gains or dividends and want to plan disposals or contributions you have concentrated positions (employer shares, single funds) and want to reduce single-asset risk tax-efficiently you are considering more complex investments. Wrapping up Risk management is not a one-off task but an ongoing discipline. By defining clear objectives, spreading investments across regions and asset classes, using ISAs and pensions to shelter returns, and reviewing allocations at least annually, you create a framework that limits surprises and keeps decisions rational. Document key dates – self assessment payments on 31 January and 31 July, the 60-day CGT rule for property, and the annual ISA reset on 6 April – so tax never forces a sale at the wrong time. Check deposit limits and platform safeguards for peace of mind, and keep a written record of your rebalancing rules to prevent knee-jerk trades. If life events or regulations change, revisit your plan promptly. A measured, systematic approach lets your portfolio work harder while you stay focused on the goals that matter most. Important information This guide is information only and does not account for your personal circumstances. Past performance is not a guide to future returns. The value of investments and income from them can fall as well as rise, and you may get back less than you invest. Tax rules can change and benefits depend on individual circumstances. If you need personalised advice, please contact a regulated financial adviser. If you’d like advice on managing your portfolio, get in touch.