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Tax saving ideas for 2022

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This content is for information purposes only and should not be taken as financial advice. Every effort has been made to ensure the information is correct and up-to-date at the time of writing. For personalised and regulated advice regarding your situation, please consult an independent financial adviser here at Castlegate in Grantham, Lincolnshire or other local offices.

With the cost of living rising across the UK (inflation now stands at 9%), many people are looking for ways to increase their disposable income. One method is to lower your discretionary spending – e.g. cutting out digital subscriptions you do not use, like online streaming services. Yet another often overlooked approach is to examine your tax plan to see if it can be made more efficient. In this guide, our financial planners at Castlegate in Grantham, Lincolnshire offer some tax-saving ideas for households in 2022.

We hope you find this content helpful. If you want to discuss your own financial plan with us, please get in touch to arrange a no-obligation financial consultation, at our expense:

01476 855 585


Pension contributions

According to a House of Commons Library analysis, an extra 1.2m people are expected to be pushed into the 40% Higher Rate income tax bracket by 2026. This is because average wages should rise slowly each year (to help keep up with inflation), but the threshold from which you start paying the Higher Rate has been frozen at £50,070. As such, those with salaries nearing this figure may inadvertently be pushed into a higher tax bracket in the coming years.

There are ways to protect from this, however. One idea is to put money from any pay rises into your pension once your annual income hits £50,070. Your pension contributions are shielded from tax, and even receive a “boost” (via tax relief) from the UK government in line with your highest rate of income tax (e.g. 40% for someone on the Higher Rate). Of course, if you need the money from pay rises to cover your rising spending (e.g. if you have children), then you will need to approach this carefully.

Remember, any money you lock away into your pension pot(s) cannot be accessed until you reach age 55 (rising to 57 in the coming years).


ISAs & allowances

Those with investments do not always organise their portfolio in the most tax-efficient way. Remember, wherever there is a return to be made, there is a government not too far away – looking to tax it! Here, you can help protect your returns by making use of allowances and tax-efficient investment vehicles.

A range of options are available here, and their suitability will depend on your goals, attitude to risk, strategy and investment horizon. Most people will benefit from maximising their annual ISA allowance. Here, you can put up to £20,000 into, say, a stocks & shares ISA and any dividends, capital gains or interest you make will be tax-free. Be careful not to use too much ISA allowance towards cash, since today’s interest rates are nowhere close to beating inflation (meaning you make a real-terms loss).

It is also a good idea to use your ISA strategically with your allowances. In 2022-23, you can earn up to £12,300 in capital gains before your profits on asset disposals (e.g. selling shares in a GIA) become liable to tax. If you own a Buy to Let and want to sell it soon, for instance, then this cannot be held in an ISA to protect from capital gains tax (CGT). For greatest tax efficiency it would, therefore, make sense to use your full £12,300 CGT allowance when selling it. If you can hold other investments in an ISA (e.g. bonds and shares), then this helps give you flexibility to do this and get the highest after-tax returns.


Don’t forget inheritance tax

Whilst many people in 2022 are, understandably, focused on optimising their more immediate tax plan (to ease strain on their budget), be careful not to forget the long-term view. Your loved ones may depend very much on money/assets from your estate in the event of your death, and so it would help them to ensure as much passes to them as possible. A tax-efficient estate plan can be very valuable, in this respect.

In 2022-23, IHT stands at 40% on the value of your estate over £325,000. This can be extended by another £175,000, however, if you leave your family home to “direct descendants” (e.g. your children). Married couples and civil partners can combine these allowances, theoretically letting you pass down £1m to your beneficiaries – free of IHT.

However, this may not be sufficient to minimise a future IHT liability for some people. Perhaps you are not married or do not have “direct descendants”. Fortunately, a financial planner can help you navigate the UK’s complex IHT landscape to make savings. For instance, in 2022 you can pass down a pension pot to a beneficiary, IHT-free (although they may need to pay income tax on withdrawals from your pension if you die after age 75). Your pension, therefore, can be a valuable tool not only for retirement planning, but also for estate planning!



If you are interested in discussing your own financial plan or investment strategy with us, please get in touch to arrange a no-commitment financial consultation at our expense:

01476 855 585