Get your ISAs topped up. Saving without income or capital gains tax is always good! The maximum is £20,000 per tax year per person and you’ve got until the 5th April for it to count in this tax year. Don’t forget £9,000 for junior ISAs (JISA) for the kids and there’s Lifetime and Help to Buy ISAs for those saving for a home.
Three key things to remember:
1. Anything is better than nothing – don’t feel it is only worth it for the maximum amount, everything saved in an ISA is worth doing.
2. Left it too late to decide which investment is best for you? – just get your allowance into a Cash ISA and it can always be transferred later
3. Make a resolution not to leave it until the last minute next year – why not get £20,000 into your ISA on 6th April or set up a direct debit to get it done monthly?
Here’s a nice quick one for you. What about transferring your income producing assets to your spouse! You both have an annual personal allowance that is there to be used, so consider transferring rental property, savings and investments to make use of both.
Pension Annual Allowance
Next is pensions: Maximise your contribution amount and tax relief. Take full advantage by utilising the annual allowance, which is £40,000 (tapered if you earn over £150,000) or the value of your whole earnings – whichever is lower. Unused annual allowances may also be carried forward from the previous three tax years. We IFAs like pensions even more than ISAs as they’re potentially inheritance tax free too.
Give some money away! You can act at any time to help reduce a potential Inheritance Tax bill when you’re no longer around. Make use of the Inheritance Tax annual exemption that allows you to give away £3,000 worth of gifts outside of your estate. If unused, the exemption can be carried forward one year.
Capital Gains Tax allowance
When you sell or dispose of certain assets, you may be liable for Capital Gains Tax (CGT) on the profit made. The current CGT allowance of £12,300 means that most people will not have to pay this tax. However, if you’re likely to exceed the limit, spreading out the sale of assets across several tax years can make sense.
If you’re invested in dividend-paying companies, the dividend allowance can be a useful way to boost your income without increasing tax liability. For 2020/21, the dividend allowance is £2,000. If you’re a company director, you can also pay yourself in dividends to make use of this allowance.
This blog is for general information only and does not constitute advice. The information is aimed at retail clients only. The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation which are subject to change in the future.