Most of us risk being taxed on our income, our capital gains and the value of our estate when we die. It is worth getting a clear grasp of how these taxes work and then discussing with your financial adviser the most tax efficient financial planning for you.

Income tax

The single person's income tax allowance for the year to 5th April 2020 is 12,500.00 (2017/2018 - 11,850.00). If your total income is less than this during the tax year then there's no tax to pay.

Income tax bands 2018/2019

Rate 2019/2020 2018/2019 2017/2018 2016/2017
Band () Band () Band () Band ()
Personal Allowance 0% 0 - 12,500 0 - 11,850 0 - 11,500 0 - 11,000
Basic rate 20% 12,501 - 50,000 11,851 - 46,350 11,501 - 45,000 11,001 - 32,000
Higher rate 40% Over 50,001 Over 46,351 Over 45,001 Over 32,001
Additional rate 45% (from 6th Apr 13) Over 150,000 Over 150,000 Over 150,000 Over 100,000

The self-employed can claim business expenses against their income. So make sure you include all possible justifiable business expenses on your self-assessment form. This also applies to capital allowances for expenditure on plant and equipment, including computers and tools, for example, used for your business.

Don't forget pension payments either. You may be able to pay further contributions to your pension, which can soak up some unused tax relief.

One other point to remember, if one spouse is a tax payer and the other is not or pays tax at a lower rate it is worth considering switching some investments to take advantage of their unused tax allowances.

Capital gains tax

In the tax year to 5th April 2020 the CGT allowance is 12,000 (2018/2019 11,700).

This means that you do not have to pay tax on gains from buying and selling shares or other investments during the tax year up to that amount. Remember also that you do not normally have to pay tax on any gain you make when you sell your main residence and transfers between husband and wife or civil partners living together are generally exempt.

The capital gains tax (CGT) rate was significantly cut in the 2016 Budget. From April 2016, those who pay basic-rate income tax will pay CGT at 10% (down from 18%), and higher-rate taxpayers will be charged CGT at 20% (down from 28%)

If you have used your CGT allowance, don't forget your ISA allowance. An ISA can shelter capital gains and dividends on investments, for example shares, worth up to 20,000 per year.

The previous, higher, rates (18% and 28%) still apply to sales of residential property where it is a second home.

Inheritance tax

Inheritance tax is hanging over more and more of us each year. This is largely due to the rise in residential property values. The current IHT allowance is 325,000.00. Depending on the value of your house and other assets this may not be that big an allowance. If you die leaving an estate worth more than 325,000.00 and you have no spouse your estate will come in for IHT at 40% on the balance.

Even if you do have a spouse to inherit then this only puts off the time when tax will be payable because he or she will also pass away one day. It is worth doing some forward planning with a tax adviser to decide whether it would be appropriate to gift some of your estate, perhaps to children or other relatives, during your lifetime; or possibly redirect assets up to the value of the nil rate band into a trust on death.

One thing is for sure with all forms of tax; if you do nothing the government will use its considerable powers to make sure a share of your hard earned wealth ends up in their coffers.