The tax year 2018/19 ends on 5th April — so if you still have capacity to make money moves before the deadline, now is the time to act.
Taking advantage of unused allowances this year and tying them in with tactics for 2019/20 is crucial for a successful strategy.
And while there’s no substitute for regulated financial advice, this article serves as a savvy conversation starter.
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The cusp of the new financial year is an excellent time to capitalise on the ever-expanding varieties of ISAs available — from stocks and shares ISAs to lifetime ISAs for under 40s and possibly Innovative Finance or cash versions.
The allowance each financial year for most people is £20,000. So in theory, if you’re a married couple or in a civil partnership, if you’ve not yet used your 2018/19 allowances, you could invest up to £80,000 collectively in these tax-efficient products in a period of less than two months (£20,000 each on both sides of the April 5th deadline).
Worth a thought, but as always, please seek professional financial advice on how to invest your ISA allowance.
It bears repeating that paying pension contributions remain one of the most tax-efficient means of saving. Now that contributions are assessed on a tax year basis, they’re much simpler to navigate than the previous system of input periods (based on when the first contribution was made).
You’ll secure tax relief on pension contributions within the allowable limits — in part at 20% source and also via self-assessment for higher earners at either 40% or 45%, meaning that in this instance HMRC can significantly boost your savings.
Before you take the plunge and expand your pension pot, be aware of the following provisos — the government has altered the basis of the maximum allowable pension contributions and amount that can be accrued tax-efficiently and, after 5th April 2019, those earning over £150,000 annually will no longer be able to pick up unpaid contributions without the ‘tapered annual allowance’ being taken into account. Again, look before you leap and take professional advice before committing funds.
If you’d like to reduce the value of your estate for Inheritance Tax (IHT) and replace Easter eggs with something a little more substantial this year, remember that the government allows gifts of up to £3000 per donor (not recipient) per tax year — which are exempt from assessment for IHT on death.
If you’ve got sizeable assets and investments, now’s the time to take advantage of the various gifts and exemptions from inheritance tax, so that more of your money will end up with those you love when you pass, rather than swelling the coffers of the Exchequer — seek the relevant financial advice soon.
Finally, some positive news on the Main Residence Nil Rate Band, which facilitates passing property to a direct descendant such as a child or grandchild when you die — it’s rising from £125,000 to £150,000 from 6th April 2019 and £175,000 for tax year 2020/21 and freeing the financial burden from more medium-value properties in its wake.
As tax year 2018/19 wanes, the right financial manoeuvres replace worries with windows of opportunity — talk to a trusted adviser soon to make the most of the season.
For advice on maximising your tax efficiency, contact us for a chat today.
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