Financial Advent Calendar

Getting into the festive spirit, we have created an advent calendar of sorts with a financial tip for each day leading up to Christmas;

1st – Marriage Allowance

If you are a non-taxpayer (ie earn below £12,500 for the current tax year) and your spouse is a basic rate taxpayer, you are able to transfer £1,250 of your personal allowance to them, saving £250 in Income Tax. This can be backdated too.

2nd – Personal Allowance

Each individual has a personal allowance of £12,500 (for the current tax year) which is the amount of income they can earn/receive before being subject to Income Tax. This allowance should be used! If you are accessing your pension flexibly for example, you could look to draw an income up to this limit tax efficiently.

3rd – ISA Allowance

The ISA allowance is currently £20,000 and this can be invested in cash, stocks & shares or a combination of the two. As the fund grows free from Income and Capital Gains Tax, individuals should look to use their ISA allowances each year.

4th – Dividend Tax Allowance

Up to £2,000 in dividends can be received, income tax free. Dividends in excess of this and not covered by spare personal income tax allowance are taxed at 7.5%, 32.5% and 38.1% for basic, higher and additional rate taxpayers respectively.

5th – Capital Gains Tax (CGT) Allowance

The CGT allowance is £12,000 for the current tax year and any net gains made from investments in excess of this are taxed at 10% if you are a basic rate taxpayer or 20% for higher rate taxpayers. Gains on residential properties (except your main residence) are taxed at 18% and 28% respectively.

6th – Personal Savings Allowance

The Personal Savings Allowance enables a basic rate taxpayer to receive up to £1,000 of interest tax free (reduced to £500 for higher rate taxpayers). Although savings interest is paid with no tax deducted, it is still liable for tax and so can be covered by the Personal Savings Allowance.

7th – Gift Aid

This is beneficial for higher rate taxpayers as gifts to charity are tax-free. The charity is able to reclaim 20% tax and in addition, you can also reclaim the additional 20% tax, thus reducing your tax bill.

If you have seen something you feel the need to discuss further, or this has whet your festive financial appetite, please do call in to discuss this further with one of our financial advisers at an initial meeting, provided at our cost – Merry Christmas!