5 ways to utilise your Tax Allowances
The 2020/21 tax year ends on 5 April, so it’s the perfect time to make sure you take advantage of the tax incentives available so you don’t pay unnecessary tax.
Tips to make sure you don’t miss out.
1. Maximise your pension contributions
You can save into registered pension schemes and get tax relief on those contributions. There is an annual allowance on the amount that can be contributed to your pension each year, while still receiving tax relief. It's based on your earnings for the year and is capped at £40,000.
2. Use your annual ISA allowance
You can invest up to £20,000 in the 2020/21 tax year and all future investment growth will be free from income and capital gains tax. There are a number of options including cash ISAs, stocks & shares ISAs, and Lifetime ISAs. (Lifetime ISAs have an annual limit of £4,000, but you can put the remaining £16,000 into any other ISA)
**Investors do not pay any personal tax on income or gains, but ISAs do pay unrecoverable tax on income from stocks and shares received by the ISA managers**
3. Consider Junior ISAs (JISA)
Parents or guardians can open a JISA for their children. The JISA has all the tax benefits and investment choices of the normal ISA. The annual investment limit is £4,368 and you can split this between a cash JISA and stocks-and-shares JISA however you wish. Although only parents or guardians can set up a JISA, anyone can pay into it.
4. Don’t forget IHT and capital gains tax
You can give away up to £3,000 in this tax year and it will fall outside your estate for inheritance tax purposes.
You can also make gains of up to £12,300 without incurring capital gains tax. So if you’re thinking of selling some assets there may be a benefit in doing so by 5 April.
5. Act now!
Regardless of how or where you decide to invest your money, to take advantage of any tax incentives available in this tax year you must do so before 5 April.
We would love to help to make sure you don’t pay more tax than you need to.
Contact us or call Rachael on 01323 436680 and book a FREE initial consultation today.