Why wait? Make the most of the opportunities a new tax year brings.
Like most things in life, it is better to act sooner, rather than later. That includes taking early advantage of the tax-planning and investment opportunities presented by a new tax year.
A note from our Executive Director, he discusses the key tax considerations for the new tax year.
The annual ISA allowance of £20,000 is unchanged for this tax year, but still presents a generous and flexible opportunity to create tax-efficient capital and income for the future. But it needs to be invested wisely to give you the chance to make the most of the long-term tax benefits on offer.
Other than a small increase in the lifetime allowance to £1,055,000, the government resisted further pension changes in April. However, documents published in March confirmed that a review of pension tax relief is still very much in the government’s sights. So, it’s sensible to make full use of the current reliefs while they are still available.
April saw an increase in the personal allowance – the amount that you can earn before you start paying Income Tax – which has risen from £11,850 to £12,500.
The higher rate threshold – the point at which you start to pay 40% Income Tax – has increased from £46,350 to £50,000. The additional rate tax band of £150,000 remains unchanged. If you live in Scotland, there are a different set of changes, which can be found on HMRC’s website.
The Dividend Allowance remains at £2,000. That means you won’t pay tax on income generated from a share portfolio of around £57,000 held outside of an ISA or pension wrapper, based on a yield of 3.5%. The increased Income Tax thresholds mean that you can take more in dividends before paying the higher dividend tax rate.
The annual Capital Gains Tax allowance is often overlooked – but has risen from £11,700 to £12,000. This provides a valuable opportunity for individuals to transfer assets into more tax-efficient solutions.
An increase in the residence nil-rate band to £150,000, combined with the standard Inheritance Tax allowance of £325,000, means you can now pass on as much as £475,000 to direct descendants tax-free. For married couples and civil partners that figure is £950,000.
The rules around Inheritance Tax and the other allowances mentioned can be complicated, so it’s important to take financial advice from a professional who can review your individual circumstances and ensure you are making best use of the tax-saving opportunities available.
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ISA’s managed by Malcolm Gifford Wealth Management and there values will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.
The levels and bases of taxation and reliefs from taxation can change at any time and are generally dependent on individual circumstances.