With just a few weeks remaining before the end of the tax year, time is running out to use your tax-free ISA allowance. In addition to the well-known attraction of being completely tax-exempt, many investors are unaware of a small but hugely significant change to dividend tax, which make tax-free investment allowances all the more appealing.
In April last
year, the dividend allowance shrunk from £5,000 to £2,000 and, before the cut,
investors could hold around £135,000 of UK shares outside an ISA before paying
tax on dividends, but now that amount is just over £46,500.
If you receive dividends over your allowance
outside of an ISA, basic rate taxpayers are taxed at 7.5% on the excess, higher
rate taxpayers at 32.5% and additional rate taxpayers at 38.1%.
Mr Philip Milton, Managing Director of wealth
management firm and Chartered Financial Planners Philip J Milton & Company
Plc, commented “The UK market has a long and proud tradition of rewarding investors
with excellent dividends (currently exceeding 4%pa) and at the same time, the
potential for their money to increase in value over time. However, to avoid
paying unnecessary tax on that generous investment income, investors should consider
whether they should be sheltering as much of their savings as possible from
tax, within ISAs and also pensions for example.”
“Every UK resident has a £20,000 ISA allowance and that resets again on 6 April. So, a couple could actually shelter up to £80,000 in ISAs over the next month alone! Depending upon your circumstances, a pension could be even more attractive option. If you have your own shares which you hold directly, it really is worthwhile taking advice with a possible view towards switching the capital into a tax-exempt savings plan. Even if tax is unlikely to be payable now, who knows what the future holds? This might involve more tax changes or allowances reducing which might result in you suddenly facing large and unexpected extra tax bills.”
“For impartial advice our highly qualified advisers are happy to speak to you and/or meet you at our cost. Please remember to act soon though as time is fast running out before 5 April.”
On behalf of Philip J Milton & Company Plc
For further information or photo, please contact 01271 344300 – Email info@miltonpj.net
Mr Philip Milton
Managing Director
