A new year brings financial planning opportunities

Jim Noble

Origen Private Client Adviser

The clock towards the end of the tax year on 5 April continues ticking, so now is the time to look at maximising ISA allowances, making pension contributions, using Capital Gains Tax allowances or using gifting allowances.  Many of your allowances are lost if they are not used before the end of the tax year.

Making investments
An Individual Savings Account (ISA) is one of the most tax efficient ways to save, as your money is free from Income Tax and Capital Gains Tax. An ISA should be an essential part of your financial arrangements; allowing your savings more potential for tax-free income and growth.

Every UK resident over 18 has an ISA allowance (age 16 for cash ISAs) for each tax year, which can be invested in a stocks and shares ISA, a cash ISA or an Innovative Finance ISA. In the current tax year, your annual ISA allowance is £20,000. The Lifetime ISA is available for people aged under 40, with an annual limit of £4,000 which counts towards your overall ISA allowance. If a Lifetime ISA is used for a first time property purchase up to the value of £450,000 or retirement, it qualifies for a 25% bonus from the Government.

If you have used your own allowance, you may wish to make payments into an ISA for a spouse, civil partner or family member. Children have a Junior ISA allowance of £4,368 in the current tax year, which can be an excellent way to help them save for their future.

Saving for retirement
Putting money aside while you are working is vital if you want to maintain a good standard of living in retirement. You may have pension savings with your employer or previous employers – but you can also make your own pension contributions.

The current annual allowance is £40,000 which applies to all pension contributions made by you or on your behalf. If you have started taking retirement benefits using flexible options such as income drawdown or you are earning over £110,000, you may have a lower annual allowance. If you haven’t used all of your annual allowance, it is possible to ‘carry forward’ any unused annual allowances from the three previous tax years.
You will receive tax relief on your personal pension contributions up to the value of your annual earnings in each tax year, so pension contributions can provide valuable tax benefits. For example, a £100 contribution will be immediately be boosted to £125 by tax relief. Higher or additional rate taxpayers can claim additional tax relief through their tax return.

Releasing money from your investments
If you sell certain investments, including shares, your gains will be subject to Capital Gains Tax (CGT) at either 10% or 20% (with an additional 8% on the sale of properties, other than your main residence which is generally CGT exempt). You have a CGT allowance of £12,000 for this tax year. You should also remember that if you receive dividends from shares, you have an annual dividend allowance of £2,000.

If you are planning to make a sale which will have a gain in excess of the CGT allowance, you may consider splitting the sale over tax years, so that you use this year’s and next year’s CGT allowance, thereby reducing the taxable gain.

There are many tax planning opportunities available for you and your family, including gifting allowances to reduce the value of your estate. Our guide provides more details.

Looking ahead
Also with a new government, new changes may be announced in the Budget which could change tax planning opportunities in the new tax year from 6 April 2020. The Budget date has been set as 11 March, but you should act now for this tax year to ensure that your plans can be in place before the end of the tax year. 

Please contact your Origen adviser or our Client Liaison team on 0344 209 3925* if you would like to talk to us about tax year end actions and please act soon before some allowances are lost at the end of this tax year.

The value of tax reliefs depends on your individual circumstances. Tax laws can change. 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. Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.
*Calls are charged at your phone company’s basic rate. All calls are recorded for business purposes.

CA4856 Exp: 01/2021

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