Tax Year-End Planning
With tax year end fast approaching, it is time to capitalise on the government tax allowances
within various tax wrappers.
The current tax free allowance for ISA investments is £20,000. There are now multiple ISAs
that you can contribute to. These are; Stocks and Shares ISA, Cash ISA, IFISA and Lifetime
ISA which all have slightly different qualifying rules. The £20,000 is a total allowance which
is accumulative across all ISAs. All of these ISAs benefit from a protected tax free wrapper,
meaning no tax on dividends, interest or growth within the account. Please speak to your
adviser should you wish to understand the options open to you with regards to ISA
contributions in this tax year.
Annual pension contributions are currently capped to your earned income to a limit of £40,000 gross*. Some individuals are
also eligible to make use of a piece of government legislation named ‘Carry Forward’ where
you can utilise previous unused annual allowance from the three previous tax years. All
pension contributions attract an immediate 20% government tax relief and more can be
claimed for higher and additional income tax payers. Due to ever changing legislation in the
pension market we recommend contributions are explored each year as part of a tax year
end exercise. Your financial adviser can provide a bespoke tax calculation on the benefits of
this for you, even if you are a non earner.
*This annual allowance is tapered down for high income earners.
Capital Gains Tax
Capital gains tax is tax on profit of an asset that has sold with a ‘gain’. The current capital
gains tax free allowance is £11,700 for individuals and £5,650 for trusts. Please speak to
your adviser if you would like to know more about your current capital gains position.
The current dividend tax free allowance is £2,000. The tax rate on dividends over your allowance depends on the income tax band that you are in. See below the break down of the tax rate on dividends for the respective tax band.
Tax Band Tax Rate on Dividends over your allowance
Basic Rate 7.5%
Higher Rate 32.5%
Additional rate 38.1%
The current inheritance tax free threshold is £325,000 for individuals plus a potential
£125,000 in residents nil rate band*. One way to reduce potential inheritance tax liability is to
make use of your annual gifting allowance. The gifting current allowance is £3,000 per tax
year, however if you’ve not optimised this allowance in the previous tax year you can carry it
*Residents Nil Rate Band is only applicable to some individuals. Please speak to your
adviser for more information.
Save up to £4,260 in a Junior ISA for your children under 18, living in the UK. There are 2 types of Junior ISA’s, A cash Junior ISA, you wont interest on the cash you save and a stocks and shares Junior ISA, your cash is invested and you wont pay tax on any capital growth or dividends you receive. Children are able to have one or both types of Junior ISA