Tax Year End is a great opportunity to boost your savings by taking advantage of the annual tax breaks which you may be entitled to. While some allowances will roll over into the next year, some, will be lost if unused when the new tax year begins on the 6th April.
Here are a few key considerations to ensure you aren’t missing out:
Have you maximised your pension savings?
Pensions come with great tax benefits; such as tax relief on pension contributions and the fact that investments held in your pension are free from income tax and capital gains tax (CGT).
It’s possible to contribute as much as you earn to a pension each tax year and benefit from up to 45% tax relief (different amounts apply in Scotland) depending on your level of income. However the amount you can save into your pension (including employer contributions) is capped by what’s known as the annual allowance, which for most people is £40,000.
Your annual allowance may be higher if you’ve not used all if it in the last 3 years. Or it might be less if you earn over £110,000 a year or have started taking your pension. This can get complicated and we’d recommend speaking to a financial adviser if you think you are affected.
But remember, the value of any investment can go down as well as up and may be worth less than you paid in. Laws and tax rules may change in the future. Personal circumstances also have an impact on tax treatment.
Have you maximised your Individual Savings Account (ISA) savings?
The ISA allowance for the current tax year is £20,000.
An ISA can offer valuable protection from income tax and CGT so it’s worth ensuring that you use up as much of the £20,000 allowance as you can afford. Furthermore, this allowance is given on a use it or lose it basis; meaning any unused allowance on 5 April will be lost.
Are you and your spouse both making use of your allowances?
If you’re married or in a civil partnership, ensuring you’re both using your tax allowances could potentially save you money.
For example, if one spouse pays tax at a lower rate than the other, transferring income-generating investments to the lower-rate tax payer could result in a lower tax bill. However, there are many things to consider before doing this so you may wish to seek financial advice before making any changes.
Planning on making gifts?
If you’re thinking about passing on some of your savings, you might be interested to know that each tax year you can make a range of inheritance tax-free financial gifts. They include:
- Gifts to your husband, wife or civil partner (as long as the UK is their permanent home)
- Gifts of up to £3,000 each tax year, which can be carried over one year for a total of £6,000
- Regular gifts from surplus income that won’t affect your standard of living
- Regular individual gifts of up to £250 per person
- Wedding gifts of up to £5,000 for a child, £2,500 for a grandchild or great-grandchild, or £1,000 to anybody else
This is a complex area, and before you take any action, we’d always recommend you seek advice from your financial planner about your individual circumstances.
Speak to a Financial Planner for help with tax
Our dedicated tax team works to ensure our clients’ finances are as tax-efficient as possible.
If you are yet to find a Financial Planner and have questions about Tax Year End, you can book a free, no obligation consultation with us today. You will spend time discussing your finances with one of our experts and get a feel for what it’s like having them in your corner when it comes to adhering to tax regulations.
Alternatively, if you already have an 1825 Financial Planner and have any questions surrounding Tax Year End, your Planner will be delighted to help.
The information here is based on our understanding in February 2019. The information in this blog or any response to comments should not be regarded as financial advice.