As 5 April 2019 approaches it presents an opportunity to consider taking advantage of tax allowances and reliefs, available both before the end of the current tax year and at the start of the new tax year. Here we highlight some of the more significant planning opportunities for consideration.
Maximise your Individual Savings Account (ISA) allowances
ISA contribution allowances operate on a tax year basis with no carry forward of any unused allowance. There are several important tax benefits applying to ISAs:
The maximum annual contribution to ISAs is £20,000 each year; for those who do not have new money to invest, non-ISA investments can be sold and reinvested into an ISA. However, doing this may generate taxable capital gains and a discussion should always be had with your adviser in the first instance.
Tax efficient pension contributions
Those building up a fund for retirement should consider making a tax efficient pension contribution; such contributions receive income tax relief at between 20-45% and once in the pension, grow free of income and capital gains tax.
A pension strategy which relies on occasional large, one-off contributions is best avoided in favour of regular contributions made throughout your working life. However, if you are self- employed and have a fluctuating income a one off contribution at the end of the tax year can be a useful planning exercise.
Capital Gains Tax (CGT)
Regular management of CGT exposure is a key element of personal financial management, particularly whilst the rate of CGT remains at a relatively low level.
Inheritance Tax (IHT)
IHT receipts have been growing steadily in recent years. This tax year’s IHT payments are projected to be £5.5bn, over double the amount raised eight years ago. There are three main yearly exemptions to be considered prior to the end of this tax year:
There are no cash limits to the normal expenditure exemption. You can gift dividend or other investment income, which would otherwise usually be reinvested, with the normal expenditure exemption covering the gift.
Venture Capital Trusts (VCTs) and Enterprise Investment Schemes (EIS)
For sophisticated investors with significant tax liabilities, these investments offer the opportunity of a variety of tax reliefs.
These are investments in growing companies, inherently higher risk, and should represent only a small part of a well-diversified investment portfolio.
A regular review of your overall financial circumstances will highlight these and other planning opportunities. For further information and to discuss tax efficient planning, please get in touch with your usual Brown Shipley adviser or contact us now.
Tax year take-aways
Head of Wealth Management
Roger has extensive client facing and business management experience and provides advice across all aspects of our clients’ financial affairs, including risk management, investment, retirement solutions and estate planning.
The information contained in this article is provided by Brown Shipley for information purposes. It does not constitute investment advice and must not be treated as a recommendation or an offer or solicitation for investment.
Our Wealth Planning service can involve investing your capital which places it at risk. Investment risk means the value of your investments or any income can fluctuate and you may not get back some or all of the amount invested. We recommend our clients seek professional tax advice to understand their personal liability for investment income and/or gains. This will depend on personal circumstances and the prevailing tax rules, which are subject to change.