As we come to the end of the tax year, we take a look at the 4 key points to consider before the 2018/19 tax year closes on 5 April.
This valuable allowance of £20,000 per person cannot be carried forward and so any unused amount will be lost. Individuals should consider whether they are able to contribute to either a new or existing ISA ahead of the deadline in order to benefit from the generous tax advantages associated with this type of wrapper. As a reminder, investments held inside an ISA are able to grow free of Capital Gains Tax (CGT) and Income Tax. Money can be taken out at any time and while Cash ISAs are popular, Stocks & Shares ISAs can often offer the greatest potential growth, where appropriate to the individual.
Furthermore, younger individuals may wish to consider either a Lifetime ISA (LISA) or Junior ISA. These are limited to contributions of £4,000 and £4,260 respectively, with the former aimed at those looking to purchase their first home or plan for their retirement. Care needs to be taken when selecting these types of investment, given the potential bonuses and indeed penalties involved.
The standard Annual Allowance is the lower of your salary or £40,000, though there are further restrictions for those who have previously accessed Flexi-Access Drawdown and higher earners. Investing in a pension is an extremely tax efficient way to save for your future and any money invested now potentially grow over time.
You can also ‘carry forward’ your remaining Annual Allowance from the last 3 tax years so it is important to consider whether you are about to ‘lose’ any unused Allowance before 5 April. This is an area that requires expert financial advice and is something that we have significant experience in dealing with.
Additionally, for those people who are self-employed, there can be even greater tax efficiency given the flexibility regarding employer pension contributions. Again, we deal with many clients in this situation and would be pleased to assist you with this.
While Capital Gains Tax remains comparatively low, there is still the opportunity to mitigate this by utilising an individual’s Annual Exemption. This currently stands at £11,700 and can be used when selling assets that have increased in value and aren’t held inside a tax efficient account.
For those people considering how they are going to pass on assets to their loved ones, you may wish to consider using the annual allowance of £3,000 per tax year. While the sum may be relatively modest, utilising this allowance each year can help reduce the impact of Inheritance Tax and ensure that as much of your Estate is passed on to your family as possible.
If you have any questions regarding any of the above points, or would like to a review of your financial position, call us on 01453822240 or Contact Us here and we will be in touch shortly.
The above is only intended to be a guide and does not constitute advice. The value of investments or income from them may go down as well as up.