As the end of the tax year (5 April) approaches fast, now is the perfect time to make sure that you’ve made the most of your personal tax allowance. Here are our top four tips to help you minimise your tax bill for this year:
1. Save in an ISA
The “Individual Savings Account” allows you to hold cash, shares, and unit trusts free of tax on dividends, interest, and capital gains.
Make sure you use your allowance! Any outstanding allowance cannot be carried forward, however your full allowance will be reinstated for next tax year. Plus – parents should consider investing in a Junior ISA, which has an annual savings limit of £4,368.
The ISA rules to remember are:
- The maximum adults can invest in a tax year is £20,000
- If you’re aged under 50 years, you can pay £4,000 into a Lifetime ISA (you must open it before you’re aged 40 and contributions form part of your £20,000 annual allowance)
- You can only pay into one of each type of ISA in a tax year
2. Invest in a Pension
If you have a pension, think about investing a lump sum – or even increasing your monthly payments. Maybe now is a great time to start a pension plan? Contributions attract tax relief, effectively boosting them by 25%.
A huge perk that comes with pension investment (alongside 25% tax relief) is the ability contribute any unused allowances, going back three years.
3. Capital Gains Tax Allowance
Each investor has a tax-free capital gains allowance (currently £12,000). This is a ‘use it or lose it’ allowance, so planning ahead is key. Big changes will be implemented on 6 April 2020, which will affect reporting and payment of capital gains tax, including residential property sales. (More details.)
4. Legacy Planning
Is your estate likely to incur Inheritance Tax (IHT) in the future? If so, now is a great time to think ahead. If your current financial position is very healthy, you should consider gifting money now to help minimise IHT later. Up to £3,000 can be given away each tax year without it being added to your estate for IHT purposes. You can carry any outstanding allowance forward for one year.
“Saving people tax is our passion,” says Emily Bridges of Re:Accounts Chartered Accountants in Stevenage. “There are so many ways to minimise tax payments – now is the time to review your finances and take action to make the most of this financial year.”
Would you like to know how you can make the most of your allowances and minimise your tax? Let’s talk – in time for this tax year!