Tax tips so you make the most of your allowances for the 2018/19 tax year

Tax tips so you make the most of your allowances for the 2018/19 tax year

Ray McHugh, independent financial adviser, IFA, Barnet, North London

Ray McHugh, independent financial adviser, IFA, Barnet, North London

Ray McHugh, IFA - Tax tips to make the most of your allowances by April 5th

Wednesday 3 April, 2019

There are several important and valuable tax planning opportunities that will be lost after April 5th 2019. 

With only two months to go until the end of the 2018/19 tax year Ray McHugh, independent financial adviser in the Lonsdale Wealth Management Barnet financial planning team reviews ways of tax planning to take advantage of any available allowances so you provide financial security for you and your family.

Boost your ISA savings

The individual ISA allowance of £20,000 in the 2018/19 tax year remains one of the simplest and most popular ways to shelter money from any further liability to income tax or capital gains tax.  It’s important not to overlook it.  While cash ISA rates have increased over the last few months according to Moneyfacts most no-notice accounts are still paying less than 2%.  Individuals yet to use their ISA allowance, or with accumulated ISA savings should carefully consider their options to ensure that they are maximising this valuable opportunity. By maximising their ISA allowances in 2018/19 and the following 2019/20 tax year a couple could shelter up to £80,000, building a significant tax-efficient fund for the future.  Remember also that there is no tax to pay on the transfer of assets between spouses and civil partners, making it easier to ensure both allowances are used up.  Visit our website investment planning page for more information.

Top up your pension pot while the current allowances remain

Speculation continues over whether the government will cut back on allowances and reliefs provided to pension savers.  Therefore consider boosting your pension savings now by making the most of available allowances for this tax year, so you can potentially benefit from the higher rates of tax relief on your contributions.  Visit our website pension planning page for more information.

Reduce your taxable estate by inheritance tax planning

Inheritance Tax (IHT) is complicated and early planning can minimise its impact on your estate.  Lifetime gifting is one of the most underused and useful ways to help you reduce your inheritance tax bill.  You can make gifts worth up to £3,000 in each tax year (£6,000 if you use the previous year’s allowance as well); money that will be immediately outside your estate.  So, a couple could potentially remove £12,000 from their joint estate before 5th April but remember that last year’s allowance will be lost from that date.  You can also make gifts out of income, if you do have excess income that can be gifted too, but remember to keep proper records of any gifts made.  Visit our website estate planning page for more information

Give younger generations a head start

You can make contributions of up to £4,260 per child into a junior ISA this tax year, an allowance that will be lost after April 5th.  Making an early start with Junior ISA savings means that money could be locked away for a decade or more depending on the age of the children, so investing it wisely with a long-term view may be beneficial.  For longer term planners you can make contributions to children or grandchildren’s pensions.  For more information on inheritance tax planning visit the website estate planning section.

Don’t’ waste your annual Capital Gains Tax (CGT) exemption

The annual tax-free allowance of £11,700 remains one of the most valuable, yet underused opportunities to minimise the impact of tax on your wealth.  Gains above this figure are taxed at up to 20% in the 2018/19 tax year on assets such as shares, and up to 28% from the sale of residential investment properties.  By crystallising gains each year up to the limit of your allowance, you can reduce the risk of a larger CGT bill in the future.  Better still, reinvesting the proceeds into tax-exempt wrappers such as ISA’s and pensions can avoid any future CGT liability.  Don’t forget that assets can be transferred tax-free between spouses to utilise both allowances.

Review your taxable income

High earners could take steps to bring their taxable income down by making pension contributions or charitable donations.  These can help individuals:

Bring their income to below the additional rate tax band which starts at £150,000

Regain their personal allowance which starts to be withdrawn for incomes over £100,000

Avoid losing child benefit which is gradually removed if one person in the household earns more than £50,000

Take income from savings tax efficiently

If you are thinking of making a large pension withdrawal it could make sense to spread the withdrawal over two or more tax years to minimise your income tax liability.  Alternatively if you expect the amount you draw from your pension pot to tip you into a higher rate tax bracket you could use ISA savings instead.  ISAs don’t attract income tax no matter how much you take. 

Ray McHugh, independent financial adviser in our Barnet financial planning team said:

‘Our teams of independent financial advisers see most of their clients at least annually to advise them on tax planning issues and ensure they invest tax efficiently and use up available allowances.  Reviewing your finances before the start of the new tax year is important and if you are new to investing it is never too late to start tax planning.  We recommend you visit our New to Investing web page and read our Beginner's guide to investing. If you require independent financial advice please contact me at our Barnet office in North London on 0208 275 1161.  Or contact our St Albans, Harpenden, Stafford, Ware, Leeds / Bradford or Ringwood offices.  Alternatively complete our booking form to arrange an initial free financial planning consultation with one of our offices.’

For more information read: Richard Porter, independent financial adviser St Albans  - Use pension and ISA allowances before April 6th
 

The value of an investment will be directly linked to the performance of the funds you select and the value can therefore go down as well as up.  You may get back less than you invested. 

Please note the Financial Conduct Authority does not regulate tax advice.

An investment in a Stocks & Shares ISA will not provide the same security of capital associated with a Cash ISA.

The favourable treatment of ISAs may be subject to changes in legislation in future

The levels and bases of taxation, and reliefs from taxation, can change at any time.  The value of any tax reliefs depends on individual circumstances.

 

 

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