Tenet & You

Springtime Tax Planning – Don’t Delay

By Peter Pearson Independent Financial Adviser, Tenet&You

With spring just about in reach, the earth is full of promise as early bulbs peak through, and we look forward to brighter skies; why not take the opportunity to get proactive and knuckle down on your finances?

With the end of the tax year (5 April) also in sight, this is the ideal time to double check you’ve taken full advantage of all your annual allowances. So, to help you on your way, here is a handy reminder of some of your main tax planning opportunities: Individual Savings Accounts (ISAs) – maximum annual contribution of £20,000 per adult.

Junior Individual Savings Accounts (JISAs) – maximum annual contribution of £9,000 per child.

Pensions – current Annual Allowance of £40,000. For every £2 of adjusted income over £240,000, an individual’s Annual Allowance is reduced by £1 (the minimum Annual Allowance is £4,000). The Lifetime Allowance places a limit on the amount you can hold across all your pension funds without having to pay extra tax when you withdraw money, the limit is currently £1,073,100. And don’t forget your children’s pension; the maximum annual pension contribution you can currently make is £2,880 which, along with tax relief, amounts to £3,600 a year.

Making Inheritance Tax-free gifts – each financial year you can make gifts of up to £3,000 (in total, not per recipient) and if you don’t use this in one tax year, you can carry over any leftover allowance to the next year (some other exempted/small gifts allowable). To reduce the amount of IHT payable, many families consider giving their assets away during their lifetime. These are called ‘potentially

exempt transfers. For these gifts not to be counted as part of your estate on your death, you must outlive the gift by seven years, though taper relief may otherwise reduce the applicable IHT rate. If you have enough income to maintain your usual standard of living, you can make gifts from your surplus income; advice is essential as strict criteria apply.

Using your Dividend Allowance – for the current tax year, investors can earn up to £2,000 in dividend income tax-free. How much tax you pay on dividends above the Dividend Allowance depends on your Income Tax band (Basic rate 7.5%, Higher rate 32.5%, Additional rate 38.1%).

Venture Capital Trusts (VCTs) and Enterprise Investment Schemes (EISs) – these are traditionally higher risk investments but can offer up to 30% tax relief and provide portfolio diversification. EISs – maximum investment of £1 million (or £2 million as long as at least £1 million of this is invested in knowledge intensive companies) with 30% tax relief provided the investment is held for three years, gains are also exempt from CGT provided they have been held for three years. VCTs – maximum investment of £200,000 with 30% tax relief provided the investment is held Using Capital Gains Tax (CGT) allowance – every individual is entitled to a CGT annual exemption which is currently £12,300 (£6,150 for trusts). CGT is a tax on the profits you make when you sell something, such as a second home or a personal possession worth £6,000 or more, except for your car. You can’t carry forward this relief and so you may look to crystallise gains up to this amount before the end of the tax year. Capital losses can also be used to offset gains. Above the CGT allowance, basic rate taxpayers selling investments would pay CGT at 10%, with higher rate taxpayers paying at 20%. Spouses have two annual exemptions between them and can take advantage of the rules allowing assets to be gifted with no CGT implication until the asset is subsequently disposed of. Remember that genuine gifts from a spouse or civil partner do not count towards the allowance.

Your adviser is on hand to help

Seeking professional advice with a company like Tenet&You is a vital step in achieving those objectives. So, get in touch and we can help you to develop sound plans to ensure you hit your short and long-term financial goals and ultimately provide a boost to both your financial and emotional wellbeing.

You can reach us by calling 01772 787011 or come and visit us in person at Tenet&You, 327 Garstang Road, Fulwood, PR2 9UP.

Alternatively, you can also find out more about Tenet&You on our website, www.tenetandyou.co.uk.

The value of investments and the income from them may go down. You may not get back the original amount invested.

Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from taxation, are subject to change.