By Rachel Efetha, Chartered Financial Planner with Anstee & Co.
Having just had the Chinese New Year on Saturday 25th January, the festival traditionally will last to February 8th, about 15 days in total. The dates change every year because the festival is based on the Chinese Lunar Calendar. This calendar is associated with the movement of the moon. 2020 is the year of the “Rat” and according to the Chinese zodiac is seen as a sign of wealth and surplus both relevant when you are considering tax allowances.
As Financial Planners we are looking ahead to the next Financial New Year. This is as well as checking that all this year’s plans have been completed. Unlike the Chinese New Year, the tax year remains unchanged and runs from 6th April – 5th April each year.
The new Financial Year is the point at which a lot of tax allowances are lost if you don’t use them. So, what do you need to look out for in your tax year-end planning for 2019/20?
The ISA overall investment limit for this year is £20,000 and this can be used as a combination of stocks & shares and cash ISAs. Once we’ve reached 5th April this years allowance will be lost forever.
If you don’t have any new money to invest but have money invested in a unit trust, you can ‘bed & ISA’ them. This is where you sell the unit trust one day. Then buy it back inside an ISA wrapper the next day.
Each year you can pay a maximum of £40,000 or 100% of your earnings, whichever is lower, into a pension. Special rules apply if you are a high earner or have accessed Flexi Access Drawdown. Although you can use carry forward relief in later years to use unused relief, making a payment during this tax year will reduce the tax you pay this year.
You should particularly look at pension contributions as a way of reducing your salary. This is more relevant if you have lost child benefit or your personal allowance due to your earnings. By making a pension contribution you might be able to get these back.
Capital Gains Tax
Everyone has a capital gains tax allowance of £12,00 (2019/20). If you have an investment portfolio which is not wrapped in an ISA you should consider realising some capital gains up to the value of £12,000.
Venture Capital Trusts and Enterprise Investment Schemes
Venture Capital Trusts (VCT) and Enterprise Investment Schemes (EIS) are higher risk investments. They attract up to 30% relief. They may be suitable for those higher earners that have lost the ability to pay more than £10,000 into a pension.
If you have permanently separated from your spouse during this tax year, you may wish to consider passing assets between yourselves now. Transfers taking place after the tax year of separation may attract Capital Gains Tax.
Everyone has a “gift allowance” of £3,000 each tax year. This is known as your annual exemption.
This means you can give away assets or cash up to a total of £3,000 in a tax year without it being added to the value of your estate for Inheritance Tax (IHT) purposes.
If you don’t use it one year, it can be carried forward one year only. If you have enough assets to give away and have an Inheritance Tax liability, you may wish to consider making a gift of £3,000.
How Anstee & Co can help you make the most of your tax allowances?
Although we have some weeks until the end of the tax year, some deadlines, particularly for ‘bed & ISA’ are a few weeks earlier. It is also a very busy time of year in the office, so to ensure that our advisers have enough time to prepare a full assessment of your individual circumstances and to ensure that our administration staff have enough time to submit application forms, you should contact us as soon as possible.
We are a firm of Independent Financial Advisers (IFA’s). This means that the advice we offer is unbiased. Unlike some advisers who recommend only their own products or work from a limited panel, we will look at all the solutions from the “whole of market”. The initial “getting to know you meeting” is at our cost and without obligation. Meetings can be arranged at your home or at one of our offices.
- Kettering, Northamptonshire
- Stamford, Lincolnshire
- Pall Mall, Central London
We also have financial planners that live and make use of meeting rooms in-
- Bedford, Bedfordshire
- Market Harborough, Leicestershire
- Northampton, Wellingborough, Thrapston and Towcester in Northamptonshire
Finally, the information contained in this article is for information purposes only and does not constitute advice. No action should be taken based on this information alone.