ISA, pension and tax rules can change, and their benefits depend on your circumstances. Here are some things you can do:
Pension Contribution
We’ve seen a 71% surge in people maxing out their Self-Invested Personal Pensions (SIPPs) so far this tax year – likely in response to rumours that the chancellor might have the annual allowance or tax relief in her sights.
Higher and additional-rate taxpayers benefit enormously from tax relief – a £60,000 contribution costs just £36,000 for a higher-rate taxpayer and £33,000 for someone paying additional rate.
If you’re planning to add money to your pension this tax year, and you have the money available now, you might want to consider doing it before the Autumn Budget.
Just remember though, you can only access money in a pension at 55 (rising to 57 in 2028). Scottish rates of tax differ and you need to pay enough tax at the higher rate to claim back the full amount of tax relief.
ISA
Almost a third more HL clients are maxing out their Stocks and Shares ISAs this tax year, as rumours of potential changes to capital gains tax (CGT) swirl.
It’s a straightforward step that can make a big difference.
By investing through a Stocks and Shares ISA, you pay no CGT, both when you sell and cash out, and whenever you rebalance your portfolio as you go along.
You also don’t pay any income tax.
Although this would be a drastic step, some investors are concerned the government could cut the ISA allowance too.
If you have the money available, and were planning to invest this tax year anyway, it’s worth doing it before any potential new changes.
JISA
The number of people maxing out their children’s Junior ISAs (JISAs) has shot up significantly in the current tax year.
JISAs offer a triple-tax benefit.
- They grow free of capital gains tax and dividend tax.
- They also fall outside the rule that money invested by parents for their child will be treated as theirs for tax purposes when it produces income of more than £100 a year.
- Plus, they’re handy for anyone concerned about inheritance tax (IHT). Money paid into a Stocks and Shares Junior ISA for a child under 18 will count as being given away immediately for IHT purposes. However, it will be tied up until they’re old enough, aged 18,to make more sensible choices with it.
Capital Gains
You can often choose when to take a capital gain.
You can do so this tax year and make up to £3,000 of gains tax free.
To reset the CGT, you can either stay out of the market for 30 days and buy the same assets again, or consider new investments and buy back in immediately.
It means you might want to realise any gains now while you know where you stand. However, this isn’t guaranteed to save tax – it just means you can choose to realise the gains when you have certainty over what they will cost.
To ensure you are maximising your tax allowances, talk to one of our FCA authorised wealth managers by arranging a Discovery Call [Here]
This article is for informational purpose only. It does not constitute finacial, tax or legal advice, nor is it a recommendation to buy, sell or hold any investment. Past performance is not a guide to the future, investments rise and fall so investors could make a loss. No view is given on the present, future value or price of any investment and investors should form their own view on any proposed investment.