The tax year end is fast approaching and you only have until 5 April to make the most of your allowances in the current year before they are lost. If you have not yet considered investing in an ISA, maximising Pension contributions or made use of your Personal Allowance and Capital Gains Tax Allowance, now is the time to do so before it is too late.
The ISA allowance is currently £20,000 and this will remain unchanged in the new 2019/20 tax year. This can be invested in cash, stocks & shares or a combination of the two. Funds within an ISA can grow free from income tax and capital gains tax. Any income or capital drawn from ISAs is also tax-free.
Under current rules, you can invest the lower of 100% of your earnings or £40,000 into a Pension. Even if you have no earnings but are below age 75, you can still invest up to £2,880 net into a Pension. Contributions attract tax relief at 20%, which for a contribution of £2,880 net would equate to £720, making a gross contribution of £3,600. Higher and Additional rate taxpayers can also claim additional tax relief through self-assessment. As with ISAs, funds within Pensions can grow free from income and capital gains tax. When you draw the Pension, up to 25% of the Pension value can be received tax-free with the remainder being taxable.
The Personal Income Tax Allowance (the amount you can earn tax free) is currently £11,850, and will increase to £12,500 from 6 April in the new tax year. Have you made full use of your allowance?
The Capital Gains Tax Allowance is £11,700 and is the amount of net gains you can make on disposal of an investment before being subject to tax. This allowance is relevant to investments outside of an ISA, Pension or other tax efficient vehicles. If you have made large gains in excess of the allowance, you could look to stagger any disposals over multiple tax years to reduce any potential tax liability. The allowance will increase to £12,000 from 6 April.
If you have not yet made use of your available tax allowances and wish to do so before it is too late, please contact our office and speak to one of our highly qualified Advisers who will be able to advise you further.