There are several important and valuable tax-planning opportunities that will be lost after 5 April 2019. With only a few months to go until the end of the tax year, there is plenty of time to take advantage of various tax-planning ideas that can make the most of your money and help provide financial security for you and your family.
The ISA allowance of £20,000 in this tax year remains one of the simplest and most popular ways to shelter money from any further liability to Income Tax or Capital Gains Tax. It’s important not to overlook it. While Cash ISA rates have inched up over the last few months, the very best no-notice account is still only paying 1.35%. If you have yet to use your ISA allowance, or you have accumulated Cash ISA savings, you need to carefully consider their options to ensure that they are maximising this valuable opportunity.
By maximising allowances in this and the next tax year, a couple could potentially shelter up to £80,000, building a significant tax-efficient fund for the future. Remember that there is no tax to pay on the transfer of assets between spouses and civil partners, making it easier to ensure both allowances are used.
With the introduction of the savings allowance a few budgets ago, the government have effectively killed off the benefits of Cash ISA’s and these last two years we have seen more transfers of Cash ISA’s to Investment ISA’s than ever before.
Speculation continues over whether the government will cut back on allowances and reliefs provided to Pension savers. Therefore, you should think about boosting your pension savings now by making the most of available allowances in this tax year, so that you can potentially benefit from higher rates of tax relief on your contributions.
Don’t forget if you part with £800, then £1,000 is invested for you – that is a 25% return on your money. If you are a higher rate taxpayer you can claim another £200 in tax relief – making a 66% return on your money.
If you are a business owner with a limited company you can make a pension contribution as a deductable business expense. If you are a Basic Rate Dividend taxpayer and put £1,000 in to your pension it is effectively getting a 35% return on your money, for a Higher Rate Taxpayer it is the equivalent of an 85% return.
Inheritance Tax (IHT) is widely viewed as unfair, and even the chancellor agrees it’s complex, but only effective and early planning can minimise its impact on your estate. Lifetime gifting is one of the most underused and useful ways to help reduce your IHT bill. You can make gifts worth up to £3,000 in each tax year (£6,000 if you use the previous year’s allowance as well); money that will be immediately outside your estate. So, a couple could potentially remove £12,000 from their joint estate before 5 April but remember that last year’s allowance will be lost after that date.
And of course, you can also make gifts out of income, so if you do have excess income that can be gifted too. (Don’t forget to keep proper records of any gifts made).
If you don’t want to gift this money directly to the children yet but want to use the allowance then you can put the money into a Trust to hold, which we can arrange, ready to distribute at a later date. You can build up a fund to loan to your loved ones in the future whilst taking advantage of the allowance rather than losing it.
You can make contributions of up to £4,260 per child into a Junior ISA this tax year; an allowance that will be lost after 5 April. Making an early start with Junior ISA savings means that money will be locked away for a decade or more, so investing it wisely with a long-term view should help build up a more significant sum to help them with the future financial challenges they’ll face.
We are delighted to announce that we finally have an Investment Junior ISA available for you to invest in should you wish to do so.
And for longer term planners you can make contributions to children or grandchildren’s pensions and get tax relief, even if they don’t pay tax!
High earners could take steps to bring their taxable income down by making pension contributions or charitable donations. These can help individuals to: