In this blog, Senior Financial Adviser Shaun Murphy discusses tax year end....
The (Tax Year) End is Nigh.....
We live in uncertain times, but one constant that we can always rely on is that the tax year runs from 6 April one year to 5 April the next.
As Financial Advisers, we can also rely on an increase in calls from our clients, eager to make the most of this ‘use it or lose it’ allowance.
There are a number of ways that we, as advisers, can help maximise the available allowances, not only as April 5th approaches, but throughout the year.
ISA allowance: Use it Or Lose It
With a cash ISA or a stocks and shares ISA (or a combination of the two) you can save or invest up to £20,000 a year tax free.
To help you maximise the benefits of ISAs for you and your family, here are four things to consider when planning for the year ahead…
If you are in a position to, it makes sense for you and your spouse to take advantage of each other’s ISA allowance, particularly if one of you has more financial resources than the other. That way, you can save (in the case of cash ISAs) or invest (in the case of stocks and shares ISAs) up to £40,000 in the 2019/20 tax year (unless this is changed at the next budget, this will remain unchanged in the 2020/21 tax year)
Currently, 16- and 17-year-olds actually get two ISA allowances, as they’re able to open a Junior ISA (which for 2019/20 has a limit of £4,368) and an adult cash ISA. This means that you could put away up to £24,368 in your child’s name tax free this tax year.
People aged 18-39 can open a Lifetime ISA, which entitles them to save up to £4,000 a year until they’re 50. The government will top up the savings by 25%, up to a maximum of £1,000 a year.
Cash ISAs explained -
Cash ISAs are simply savings accounts where the interest is not taxed.
Any interest earned does not count towards your personal savings allowance.
Just like normal savings accounts, there are a variety of cash ISAs available, including instant access, regular savers and fixed-rate deals.
Lifetime ISAs explained -
Lifetime ISAs were launched on 6 April 2017. You can save up to £4,000 a year into the LISA as a lump sum or by putting in cash when you can. Then the state will add a 25% bonus on top. So if you save £1,000 you'll have £1,250 and if you save the full £4,000 you'll have £5,000. And that's before interest or growth.
The bonus is paid until you hit age 50, and is paid monthly - once in your account it counts as your own money.
The 25% bonus is paid on contributions, and the maximum bonus is £33,000 (unless the rules change). To get that you'd need to open one on your 18th birthday and keep contributing the maximum £4,000 each year until you are 50.
Stocks & shares ISAs explained -
You can also use your ISA for investing. This type of account is called a stocks & shares ISA, where you can invest in funds (shares or bonds from various companies pooled into one investment), bonds (basically a loan to a company or a government), and shares in individual companies.
You can think of a Stocks and Shares ISA as a shopping basket. The investments you put in the basket are up to you, and the ISA shelters them from UK income tax and capital gains tax.
Whatever option you decide to go for, making the most of your ISA allowance, if you have the available funds to do so, is a ‘no brainier’.
Speak to your Financial Adviser if you would like to discuss further.....