Posted on: 20 Mar, 18
Life often feels like you're running a race... and in tax terms you kinda are. We are now on the final straight with only a few weeks remaining before the tax year ends and there are some last minute hurdles you should consider jumping
The tax-efficient ISA allowance for the current tax year is £20,000 per person (cash ISA or share ISA) which must be placed in an ISA account by 5 April.
No Capital Gains Tax (CGT) on sales of shares within the ISA wrapper
No tax on UK income such as interest and dividends paid on the capital in the ISA
No declaration of the ISA account, sales, interest or dividends is required on a UK self-assessment tax return
Unlike pensions, ISA allowances cannot be carried forward, they are used in the tax year or lost
A Junior ISA (JISA) is available to children under 18. Parent’s family or friends can fund the USA up to £4,128 in the current tax year.
A new Lifetime ISA (LISA) can be opened with a 25% annual bonus paid by the Government on every £1 invested up to £4,000 until the saver reaches 50 years old.
I can’t quite remember if you told me how old your friend is but if he’s close to your age… he’s under 40 and could look at opening a LISA if he hasn’t already. And if he is lucky enough to be married or civil partnered, the limits are per individual so they can double up! But don’t forget this is only one of the tax efficient investments he should consider.
The rules around how much you can pay into a pension have become more complex, but:
The standard annual allowance is £40,000 per person in 2017/18
The standard allowance can be reduced if you earn above £150,000, £1 for every £2 over, with a cap at £10,000 if you have gross pay over £210,000
The standard allowance can also be reduced if you have taken pension benefits previously
Contributing to a personal plan you pay contributions net of basic rate Income Tax and your pension provider collects the tax relief from HM Revenue & Customs (HMRC). Basic-rate tax relief is currently 20%. So, if you contribute £80 a month, £100 will be invested automatically in your plan – that’s an additional £20 at no extra cost to you.
A higher-rate or additional-rate taxpayer, can claim the extra relief from HMRC via your self-assessment tax return
Should the Company make the contribution the company receives the tax relief not the individual
Unlike ISA unused pension allowances can be carried forward from the three previous tax years, provided that you were a member of a registered pension scheme
We are but two fictitious characters throwing out ideas and comment to stimulate debate and collect information. As professional service firms, we are open minded people and think independent thought and debate is essential to help understand, as well as navigate, complex problems. By joves – doing business across Europe (and the world) is set to become a whole lot more complex in light of recent seismic political events. As businesses - we provide information and hopefully some wisdom - and we see this blog and its caricatures merely as a much more fun, perhaps slightly controversial way, of stimulating debate and collecting ideas. We’re searching for some true pearls of wisdom, and as we find them, we’ll share them with you.
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