New Years in April, are you sure? No, I’ve not been drinking! I am, of course, referring to the start of the 19/20 Tax Year. Working in the financial services industry many people will tell you it gets rather hectic whenever the tax year draws to a close, however a lot people let it pass by without a second thought. We see this as an opportunity missed as each year we are given various allowances and we believe everyone should be looking to utilise these to their full potentials.
Take ISAs, each year the government sets the allowance on how much money you are able to pay into one in that tax year. This is currently £20,000.00. Now I know not everyone has £20,000.00 ‘lying around’ but we all like to save money so why not take advantage of this allowance and ‘wrap’ your savings in a tax efficient ISA where you won’t be subject to Capital Gains Tax on any growth and also pay no Income Tax when you need to dip into it.
You also get an Annual Allowance for pension contributions. This is the amount you can pay in and benefit from the tax efficiency of a pension. Currently this allowance is set at 100% of your earnings or £40,000.00, whichever is lower. We feel a pension contribution is a valuable weapon in the financial planning arsenal but is incredibly underutilised. Not only do you receive Tax Relief on any personal contribution you make but it also extends out your basic rate income tax band, which is currently 20%, by the amount you personally contribute. So, if you’re currently a higher or additional rate taxpayer you may be able to reduce your tax liability – great!
Though it is now too late to take advantage of these allowances in the 18/19 Tax Year, the good news is that all the allowances reset as of the 6th April. If you feel you have missed out and would like to learn about all the advantages of utilising the available tax allowances then please contact the office on 01778 342291 to arrange a FREE initial consultation with one of our highly trained and experienced advisers.