Understanding tax & tax efficiency

It makes sense to understand and carefully consider how you draw your income in retirement. Using the annual tax allowances and reliefs available can have the effect of increasing your net income.

Pension funds are now far more accessible and you should consider how your capital is invested and how your retirement income needs are addressed. Retaining as much capital as possible in the tax efficient wrappers of a pension and ISA will make the most of your returns.

Below are the latest tax rates and allowances for 2021/22:

Income Tax 2021/22


Band Taxable income Tax rate
Personal allowance Up to £12,570 0%
Basic rate £12,571 to £50,270 20%
Higher rate £50,271 to £150,000 40%
Additional rate over £150,000 45%

Capital Gains Tax 2021/22


The first £12,300 of realised gain is exempt. The below rates apply to chargeable gains on assets other than residential property.

Basic rate 10%
Above basic rate 20%

Dividend Tax 2021/22


A Tax Free Dividend Allowance applies to the first £2,000 of dividends received.


Basic rate 7.5%
Higher rate 32.5%
Additional rate 38.1%

Capital Gains Tax 2021/22 for second homes & buy-to-let properties


The first £12,300 of realised gain is exempt. 


Residential Property
Basic rate 18%
Above basic rate 28%

Personal savings allowance


Tax Rate Tax-free Allowance
Basic 20% Up to £1000
Higher 40% Up to £500
Additional 45% No personal savings allowance

Pensions 2021/22


Annual Allowance (AA) £40,000*

An eligible scheme member can contribute the higher of £3,600 p.a and 100% of relevant UK earnings and receive tax relief, subject to the overriding annual allowance (£40,000 for 2021/22). You can ‘Carry Forward’ unused AA from previous 3 years (subject to HMRC rules).

*subject to a taper if threshold income is above £200,000 and adjusted income is over £240,000.

If you use the new retirement flexibilities to access a defined contribution pension plan, this may reduce your Annual Allowance to £4,000

Lifetime Allowance (LTA) £1,073,100 Million

Individual Savings Account


ISA Allowances £20,000 Up to £20,000 can be held in cash and/or stocks and shares.
Did you know thin

Marriage Allowance lets you transfer £1,257 of your personal allowance to your husband, wife or civil partner if they earn more than you. To benefit as a couple (as the lower earner) you must have an income of £12,570 or less.

You are entitled to Marriage Allowance if all of the following apply:

  • You are married or in a civil partnership
  • You don’t earn anything or your income in under £12,570
  • Your partner’s income is between £12,571 and £50,270 (UK excluding Scotland).

You can still apply for Marriage Allowance if you or your partner:

  • Are currently receiving a pension
  • Live abroad- as long as you get a Personal Allowance.