The 2018/19 tax year has been and gone and with the start of the new 2019/20 tax year on 6 April, a new set of tax allowances become available. The Income Tax personal allowance has been increased to £12,500, allowing more of your income to be received without being subject to tax. For those who qualify for the marriage allowance transfer, (where a non-taxpaying spouse can transfer 10% of their personal allowance to a basic rate taxpaying spouse) the taxpayer can earn £13,750 before tax applies.
The Capital Gains Tax allowance has been increased to £12,000 for this tax year. If large gains have been made on shareholdings, you should look to utilise this allowance each tax year to avoid a tax liability arising.
The ISA allowance will also be available enabling you to invest up to £20,000 into a Cash ISA or Stocks and Shares ISA or a combination of the two. The ISA grows free from Income and Capital Gains Tax and any capital withdrawn and income received is also tax free. Therefore, if funds allow you should ensure that you make use of this allowance each tax year.
The Pension contribution allowance remains unchanged and individuals can invest up to the lower of 100% of their salary or £40,000 and will receive tax relief at their highest rate. Contributions made to Personal Pensions receive basic rate tax relief at source so for every £100 invested, you receive £25 to make a gross contribution of £125. Higher rate taxpayers and additional rate taxpayers can reclaim the additional 20% or 25%.
Whilst many leave the utilisation of their tax allowances to nearer the end of the tax year, investing in ISAs and Pensions now will provide more growth potential, enabling your funds to benefit from a longer period of investment within a tax efficient environment. Therefore, why not take advantage of these allowances sooner rather than later.
If you do wish to consider investing in ISAs and or Pensions or wish to consider existing investments with a view to utilising your Capital Gains Tax allowance, please contact the office and speak to one of our highly qualified Financial Advisers.