It’s cold and gloomy, and we’re enduring another lockdown – but don’t despair. Spring is just around the corner, so before it arrives, why not get proactive and knuckle down on your finances?
The end of the tax year (5 April) will be here before you know it, making this the perfect time to double check you’ve taken full advantage of all your annual allowances for maximum tax efficiency. It might seem a daunting prospect, but our handy list of allowances is here to help you on your way.
Here’s a reminder of some of your main tax planning opportunities:
– 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 will be £4,000)
– Pensions
– 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
– 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
– 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 7 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 Capital Gains Tax (CGT) allowances
– £12,300 annual exemption per person, £6,150 for trusts – currently under review, correct at time of publication.
It is important to take professional advice before making any decision relating to your personal finances. Information within this page is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK.
Tax and Estate planning are not regulated by the Financial Conduct Authority
The value of pensions and investments can fall as well as rise. You may get back less than you invested.
Will writing is not regulated by the Financial Conduct Authority.
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