With tax year end just around the corner, it’s time to check you are making the most of your tax reliefs and allowances to save for a brighter future. You may want to consider:
No bonus? No problem: recycle savings into a more efficient tax wrapper
- As mentioned in our earlier bonds and investments blogs, using tax allowances is a great way to harvest profits tax free. By re-investing this ‘tax free’ growth, there will be less tax to pay on final encashment than might otherwise have been the case. That is to say, when you actually need to spend your savings, tax will be less of burden.
- But there may be a better option to re-investing these interim capital withdrawals in the same tax wrapper. For example, they could be used to fund your pension where further tax relief can be claimed, investments can continue to grow tax free and funds can be protected from IHT.
- Similarly, capital taken could be used as part of this year’s ISA subscription. Although ISAs don’t attract the tax relief or IHT advantage a pension does, fund growth will still be protected from tax.
- Which leads nicely on to one final consideration; for those over (or approaching) 55 – should ISA savings be recycled into pensions to benefit from tax relief and IHT protection?
- Unused personal allowances for extracting investment profits.
- Remaining annual ISA allowance.
- Pension annual allowance available from current year and previous 3 years and relevant UK earnings.
Please be aware that the value of investments and the income derived from them can fall as well as rise and you may not get back what you invest. The Financial Conduct Authority does not regulate tax advice.
Effective tax planning is a year round job. It’s only at the end of the tax year that you have all the pieces to complete the planning jigsaw, but there are steps you can take now to get ahead of the game and give yourself time to put plans in place. And with less than 7 weeks until 6 April, there’s no time like the present to get started.