Here we are at the beginning of a new year and inevitably the headlines are focusing on March 29th, the date on which the UK is due to leave the European Union.
From a financial planning point of view, however, there is another date which is even more significant. The 2018/19 tax year ends just eight days later on Friday April 5th and, as always, making sure that you make the best use of the allowances open to you before the end of the tax year is an important part of your financial planning.
We have listed below five key ways that you can do this. If you have any questions on them then please do not hesitate to contact us.
1. Make the most of your Individual Savings Account contributions.
Maximising your ISA contributions is always a sensible idea and remember that if you do not maximise the amount you invest the unused portion cannot be carried over to the following year. The maximum allowance is £20,000 per person, which means that a married couple can invest £40,000 into ISAs between them. Remember too that there is no limit on how much of your ISA can be invested in cash. The whole £20,000 can be invested in this way if you so choose.
2. Check your pension contributions.
Everyone should check on their pension contributions at least once a year as they are an excellent way to manage your tax liabilities. However, high earners should keep the lifetime pension allowance in mind. At the moment it is £1,030,000. It was reduced from £1.25m in April 2016 and then subsequently indexed, and the Government now intends to increase it each year in line with the Consumer Prices Index. If you exceed the lifetime allowance then anything over that amount in your pension becomes taxable.
3. It is important to remember your Capital Gains Tax Allowance.
The CGT allowance for the 2018/19 tax year is £11,700 per person, meaning that couples can pay no tax on a total of £23,400 of gains. Remember that genuine gifts from a spouse or civil partner do not count towards the allowance. CGT is a tax allowance that is often overlooked, so it is well worth looking to see if you have any gains that can be crystallised before April 6th.
4. It is important to boost your children’s savings as well.
The Junior ISA allowance for this tax year is £4,260. Remember that children also have a Capital Gains Tax allowance and can make pension contributions. In addition, it may make sense for your children to save through a Help-to-Buy ISA, or through a Lifetime ISA, which is available to anyone between the ages of 18 and 40 and sees the Government provide a bonus of 25% of the money invested, up to £1,000 a year.
5. Inheritance Tax is payable on any estate above £325,000.
It is a tax where a little bit of planning can go a very long way, whether it is making full use of annual gift allowances, putting assets into trust or re-writing your will. Please do not hesitate to contact us if you would like advice on Inheritance Tax planning.