Time waits for no person however, and there are plenty of opportunities to take advantage of before 6th April to make you and your family’s affairs more tax efficient. Explained below are some of the allowances you may be able to utilise.
ISAs
You are able to contribute up to £20,000 within an ISA for this tax year, which allows the assets to grow in a tax efficient environment. The contribution may be placed within a Cash ISA, Stocks and Shares ISA, or a combination of the two.
The minimum age limit for an ISA is 16, and you are able to invest on your child’s behalf. For children who are younger, you may utilise a Junior ISA, which has a limit of £4,128 this tax year, and similarly can either be in cash, a stocks and shares product, or a combination of the two. For a Junior ISA the child can take control of the account once they are 16, but will not be able to withdraw the money until they are 18.
If you are aged 18-39, you are able to use £4,000 of your £20,000 limit in a Lifetime ISA; a product designed to help people purchase their first home, or save for retirement. Upon investment the government provides an uplift of 25%; an uplift which is retained on the condition that the funds are used either to buy your first home, or withdraw at age 60 or above.
Similar to their precursors, the Help to Buy ISA, Lifetime ISAs have not proved particularly popular with investors. Limited providers offer this type of product (six as at January 2018); there are several caveats to the home one can buy; and the limited amount one can invest means that despite the uplift savers are unlikely to afford a deposit using this product alone.
Pensions
You may make a personal contribution of any amount into your pension each tax year, however there are two interrelated limits to the amount you may receive tax relief: your employment earnings, and what is known as the annual allowance.
The guidelines surrounding the annual allowance are significantly more complicated than ISAs, and it will vary between £3,600 and £40,000 depending on your employment earnings and total income. To add to the complications, you can sometimes use hitherto unutilised annual allowances from up to three tax years ago. In short, obtaining advice is crucial to ensure you are within HMRC’s rules and utilising the correct allowances. Getting this advice sooner than later will increase the likelihood of doing so before the tax year end.
Personal contributions receive tax relief of 20% directly to the plan when invested in a registered pension scheme, so for example if you would like £10,000 invested into your pension, you need only invest £8,000, with HMRC providing the ‘remaining’ 20% of the total (£2,000). If you are a higher or additional rate tax payer, you can obtain further tax relief of 20% for higher rate, and 25% for additional rate, via self-assessment,
Estate Planning
There are opportunities each tax year to make gifts to reduce the value of your estate for Inheritance Tax purposes, thereby securing more for your successors.
Unlike ISAs and Pensions, where the investments ultimately remain yours, gifting means that you lose control of the assets, and should only be considered if you have the capacity to spare it.
For further information on some of the options available, we have put together an article focused specifically on gifting, which can be found here. If you do consider utilising these allowances it is essential that you keep a clear record of what and when you do it, to make it clear to HMRC, and the administrators of your estate upon death.
Further Considerations
The opportunities above are just a few of the steps you can take to make your affairs more tax efficient, and many more may be available depending on your circumstances, objectives, and capacity.
If you do use some of these allowances, it is important to note that often the money will need to have reached the provider by the end of the tax year. This year, the bank holidays of Good Friday and Easter Monday fall just before tax year end, and they could affect the processing time of some providers and banks. Obtaining advice and getting your affairs in order sooner than later therefore can prevent a rushed job, and help ensure the deadlines are safely met.
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