It’s hard to believe we are already approaching the tax year end, April 5th. The good news: this presents great planning opportunities, and hopefully, better weather… So, how can your planner help?
Pensions continue to be one of the most advantageous tax planning vehicles. Contributions provide a number of benefits above and beyond saving for long-term retirement. They receive basic-rate tax relief, meaning an instant 20% top-up from the Government. For those who pay higher and additional rate tax, this can allow a further reclaim of 20%-25%, generally through self-assessment. Contributions can also restore personal and/or annual allowances for higher earners. Individuals can also use up previous year’s annual allowance for pensions, but this can be quite complex. Lastly, any contribution is usually immediately outside your estate for inheritance tax purposes, but you retain control and access (from age 55) to the fund. You can have your cake and eat it!
For business owners, pension contributions can be a great way to reduce corporation tax.
This tax year introduced the Lifetime ISA (LISA), that’s right, another type of ISA. It is, however, a great way to help those who are looking to make their first step onto the property ladder or boost their retirement savings. The 17/18 ISA allowance of £20,000 (£4,000 for ‘LISA’s) will remain unchanged for 18/19 and monies placed in ISAs are sheltered from income and capital gains tax, making it a very tax efficient means of saving.
For investments not held in ISAs, using the annual capital gains tax allowance can allow these to be sold and moved into an ISA environment. If unused each year, the allowance would otherwise be lost. Completing this exercise either side of the tax year results in two years’ allowance being used, achieving a potential ultimate tax saving of perhaps £4,600, if spaced out over these few days; better still, if you are married or in a civil partnership, perhaps over £9,000 of potential tax savings.
For those with more complex affairs, a higher risk appetite and high levels of taxable income, specialist investments, with very attractive tax benefits, like Venture Capital Trusts and Enterprise Investment Schemes may be worth considering. They invest in small growth companies and offer very generous tax reliefs. These are niche investment vehicles, normally requiring advice to ensure they are suitable.
This is not an exhaustive list. By working with your financial planner, who will take into account your unique, personal circumstances and objectives, you will be able to make sure you take advantage of the most beneficial tax year end opportunities.
Laurie Hogan can be contacted on 0131 220 0000 or at firstname.lastname@example.org The value of investments and the income derived from them can fall as well as rise. You may not get back what you invest.
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