It's fast approaching tax year end (5 April 2018) and individuals across the UK should take the opportunity to boost savings in the most tax efficient way possible.
Experienced professionals can help you take advantage of valuable allowances so take a look at our checklist below to make sure you're putting appropriate plans in place.
1. Use your ISA allowance
Individuals are allocated a generous £20,000 tax free ISA allowance every year. This will effectively reset on 6 April 2018, so act now to use your allowance as you can't carry any unused allocations forward. Remember - use it or lose it!
As well as your own allowances, £4,128 per annum can be saved per child in a Junior ISA. It’s never too early to get into good saving habits!
2. Make the most of your Capital Gains Tax (CGT) annual tax-free exemption
Capital Gains, being any profit made from the sale of a property or an investment such as the sale of shares, is subject to tax. Everyone has a tax-free annual exemption of £11,300 in the current tax year that they may set against their capital gains profits.
Profits in excess of the annual exemption are currently 20% for higher-rate taxpayers (28% on residential property other than your own home) or 10% for basic rate tax payers (18% on residential property other than your own home).
With considered planning, it is worth noting that married couples may have an opportunity to utilise these exemptions to their advantage.
You cannot carry forward any unused annual tax-free exemption – so act quickly.
3. Dividend Allowance
The Government introduced a Dividend Allowance in 2016 which currently stands at £5,000 in the current tax year.
The allowance essentially means that you don’t pay tax on the first £5,000 of dividend income from your company, if you own one or from investments in stocks and shares.
The level is set to be reduced to just £2,000 from 6 April 2018, meaning in the future those in receipt of dividend income are likely to face increased tax bills.
Check with your financial planner to ensure that you’ve taken full advantage of your allowance this year and can look to plan for the year ahead.
4. Make the most of pension contributions
The annual allowance for pension contributions resets each new tax year. Currently, taxpayers who earn less than £150,000 are eligible for tax relief on pension contributions of up to 100% of earnings or a £40,000 annual allowance. The tax relief is at the individuals highest marginal rate.
Allowances on pensions have been cut heavily in the last few years, particularly for higher and additional rate tax payers.
It’s important to note that individuals are able to carry forward unused pension allowance from as far back as the 2014/15 tax year however this oldest tax year will drop away after 5 April 2018 – so move fast if you think this might apply to you.
Don't miss out on this important opportunity to maximise the opportunity to grow your pension fund.
5. Get professional advice
This content is for information only and is not under any circumstances to be considered as the provision of financial advice.
As regulated Independent Financial Planners, we would strongly advise individuals to seek professional advice when it comes to harnessing the very best options for their individual circumstances.