The value of annual allowances
Each tax year individuals in the UK are entitled to generate tax free:
- Savings interest
- and Capital Gains.
For the 2020/21 tax year these annual allowances could be up to £32,870 for one individual or £65,740 for a couple. That’s £5,478 per month of tax-free spendable cash.
Using your allowances can reduce the income you need to earn to receive the same net cash
A – Couple generating pension and investment income using all the nil rate allowances
B – Single person’s gross pension income to have the same net income
The chart shows how much gross taxable income an individual would need to take from a pension account to generate the same after-tax income that a couple could generate assuming they could arrange their investments to take full advantage of all the nil rate allowances available to them in the tax year 2020/21.
Tax issues will depend on everyone’s individual circumstances. Future tax rates, allowances, tax types and the tax treatment of savings and pension accounts will be subject to change. Tax planning needs to be a regular ongoing process.
Non UK resident tax payers will need to get advice on the taxes payable in their country of residence.
Tideway are not tax advisers and if you have any doubt, you should seek specialist tax advice.