New Tax Year Checklist
The new tax year, which began on 6th April 2010, offers a golden opportunity for tax savings. Make use of your brand new tax allowances to fine-tune your financial planning, and minimise tax. Our checklist below highlights some of the main areas you can benefit. If at any point you have any questions, please call one of our friendly advisers on 0800 678 5929 or request financial advice here
ISAs
The new ISA allowances went live on April 6th, providing for £10,200 in tax-sheltered savings this year (until April 2011). Savings currently sitting in a bank or building society account, and liable for tax on growth, can be put beyond the reach of the taxman by investing them in an ISA right now. If you do not use your ISA allowances, you are probably paying unnecessary tax! ISAs come in two variants, the Cash ISA, which combines the security of a bank account with tax-free savings growth, and the Stocks and Shares ISA, which invests in the stock markets and is therefore more suitable for longer-term savings, over 10 years or more.
Pensions
The start of a new tax year is an ideal time to review your pension savings. Pensions contributions are an excellent way to put money away for your retirement. What other savings option tops up your savings cash with 20% in tax relief, on day one? The taxman will even give relief of 40%, if you are a higher rate taxpayer. However, you need to have a pension plan, to cash in on the taxman’s generosity here. Time is a crucial factor. If you do not already have a pension set up, it makes sense to do so right away. When saving in a pension, long-term exposure to the stock markets is the key to growing your cash. It really is that first pound, which earns the most for you. Use our online pension planner to check or plan your pension savings now.
Capital Gains Tax (CGT)
Capital Gains Tax (CGT) is a tax on the profit or gain you make when you sell, dispose of, or are compensated for an asset. That asset might be a buy-to-let property, a stocks and shares investment, or gains from an insurance payout when an asset is destroyed. Some assets are exempt from Capital Gains Tax, such as your car, personal possessions disposed of for £6,000 or less, and, usually, your main home. You have a personal Capital Gains Tax (CGT) allowance of £10,100, which can double to £20,200 if you are a couple. Capital Gains Tax (CGT) savings can also be made when you have made a loss on investments, by carrying those losses forward to offset them against profits in the future. Find out more by speaking to one of our advisers on 0800 678 5929.
Venture Capital Trusts (VCTs) & Enterprise Investment Schemes (EISs)
A Venture Capital Trust or VCT allows investments of up to £200,000 per year which attract tax relief of 30% on the investment, subject to the amount of tax you pay in that year (i.e. you can only reclaim tax you have already paid). A VCT is a listed company, and you must hold your shares in the VCT for 5 years, in order to retain your 30% tax relief. A Venture Capital Trust (VCT) invests in small and medium-sized UK companies with up to 250 employees, and market capitalisation of up to £15m. These companies are turning more and more to Venture Capital Trusts (VCTs) for finance as banks are not lending freely at present, and as a result the quality of projects in which VCTs are investing has never been higher. This assists forward-thinking and innovative VCT providers such as Octopus to offer VCTs which are planned in such a way that they have meaningfully minimised risk. Enterprise Investment Schemes are similar to VCTs, in that they also offer tax relief , though in this case at 20%. However you only need to keep your investment in an Enterprise Investment Scheme (EIS) for 3 years to keep the tax rebate permanently.
If you think these options could benefit you, why not speak to us on 0800 678 5929?
Inheritance Tax (IHT)
You can give away gifts worth up to £3,000 in each tax year, and these gifts will be exempt from Inheritance Tax when you die. You can carry forward any unused part of the £3,000 exemption to the following year, but if you don’t use it in that year, the carried-over exemption expires. On wealth that falls liable to Inheritance Tax (IHT), tax is due at 40%. However, with good financial planning, an IHT liability can often be vastly reduced or eliminated altogether.
Don’t leave it until the last minute
All of the above are easy to set up and we have advisers who can help answer any questions you might have. We believe it is best to organise your finances at the start of the tax year, to get the full benefit. If you have any questions, please call us on 0800 678 5929 or make a financial advice enquiry here.
