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Planning for the end of the 2019 tax year

With the help of a financial adviser and some simple financial planning ahead of the tax year-end (5th April 2019) you can make the most of the tax allowances available to you such as your ISA and pension Annual Allowance.

ISA allowance

You have a £20,000 ISA allowance each tax year. This is a ‘use it or lose it’ allowance as it cannot be carried forward if it is not fully utilised. This allowance will remain at the same level in the 2019/2020 tax year.

There are 4 types of ISA and you can put money into one of each kind of ISA each tax year:

  • Cash ISAs
  • Stocks and Shares ISAs
  • Innovative Finance ISAs
  • Lifetime ISAs

An ISA such as the Help to Buy ISA can be beneficial if you are saving to buy your first home. First time buyers get a 25% bonus from the Government on savings in a Help-to-buy ISA. The maximum bonus you can receive is £3,000 (if £12,000 has been saved). The deadline for opening a new Help to buy ISA is 30th November 2019.

With a Junior ISA,a UK child under 18 can currently save up to £4,260 in one tax year.

A financial adviser will be able to help you find the type of ISA most suitable for you and your investment goals.

Pension Annual Allowance

UK individuals can ‘normally’ contribute up to £40,000 gross, or up to their annual gross income, per tax year into a pension scheme. This allowance will remain at the same level in the 2019/2020 tax year.

Funds are tax efficient within a pension although the Lifetime Allowance (currently £1,030,000) limits the total amount you can accrue in a pension pot without an additional tax charge. 

You can take a look at our previous blog to find out if you are making enough pension contributions.

The Annual Allowance can be carried forward, subject to a few rules. If you have been a member of a pension scheme but have not fully utilised your Annual Allowance for the previous three tax years, you could be able to carry this forward to make a larger contribution in the current tax year.

Tapered Annual Allowance – this is when the Annual Allowance is reduced by £1 for every £2 of ‘adjusted income’ over £150,000. It can affect you if your income from all sources is over £110,000.

Inheritance Tax

The Inheritance Tax (IHT) nil rate band is currently frozen at £325,000 until 5th April 2021.

Inheritance tax planning can enable you to utilise the available exemptions including:

  • Annual Exemption – up to £3,000 can be given away each tax year and unused amounts can be carried forward and utilised in the next tax year.
  • Small Gifts Exemption – up to £250 can be gifted to as many people as you wish each tax year.
  • Gifts out of Income – you can gift regular disposable income if your income often exceeds your expenditure.
  • IHT efficient investments can benefit from business property relief and are then IHT exempt after being owned for two years. These investments can be high risk and financial advice should be sought.

Capital Gains Tax 

The annual exemption for the current tax year is £11,700. This is also an allowance that cannot be carried forward if it is not fully utilised. Unused losses are carried forward and can be offset against future gains.

2019/2020 tax year – changes to some of these allowances

Minimum/Living Wage

After 6th April 2019, the minimum wage for 18-20 year olds will increase from £5.90 to £6.15 per hour. For 21-24 year olds it will increase from £7.38 to £7.70 and for anyone aged 25+ it will increase from £7.83 to £8.21 per hour.

Personal Allowance

This will increase from £11,850 to £12,500 in the 2019/2020 tax year.

Lifetime allowance

This will increase from £1,030,000 to £1,055,000 in the 2019/2020 tax year.

CGT Annual Exemption

This will increase from £11,700 to £12,000 in the 2019/2020 tax year.

One of our independent financial advisers at Temple Wealth Management can advise you on how best to plan for the end of the tax year, as well as how to fully utilise your available allowances in the new tax year.

To discuss your end of tax year planning needs, contact one of our advisers on 01329 282882 or use our website contact form.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor. The Financial Conduct Authority does not regulate Tax Advice.

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Critical Illness Cover – what does it really do?

Critical Illness Cover is protection that’s designed to pay a lump sum if you’re diagnosed with one of a list of specified critical illnesses. 

Most Critical Illness Cover providers have a list of 40 plus conditions covered, but the big four are Heart Attack, Cancer, Stroke and Multiple Sclerosis (MS). Most companies offer children’s cover as an additional benefit and will pay an amount if any of your children are diagnosed with one of the listed conditions. Sadly, this is one of the biggest claim areas.

It doesn’t matter what happens after the diagnosis, it’s the diagnosis that triggers the claim on Critical Illness Cover (provided you survive more than 28 days after diagnosis). You don’t have to be terminally ill, off work for long periods of time, and you can make a complete recovery.

I’ve been a Financial Adviser for nearly 30 years and for much of this time I’ve been advising people to take out a range of protection insurance policies. For all of this time, I’ve been almost evangelical about the benefit of Critical Illness Cover.

Critical Illness Cover has been around for over 40 years. Most people now know somebody who has benefited from a Critical Illness Cover claim. If you don’t and you’re reading this – well – now you do. Whilst not unique, I’m unusual in that I not only advise on, and arrange critical illness policies for clients, I’ve also claimed on my own.

So what benefit does it really give?

You might just think it’s a lump of money – you can use it to reduce or pay off your mortgage and other debts, provide for additional health care and adapt your home if you need, but it also goes much deeper than that.

I was diagnosed with cancer in 2012. It goes without saying that it’s a pretty uncomfortable conversation that you have with your Consultant at this point. There’s shock, fear and even a bit of panic. The most difficult thing to deal with, in my view, is the uncertainty. Cancer, its treatment and subsequent hopeful recovery is a long road to travel and you ask yourself lots of questions. Will I make a recovery, will I be able to work, how will I react to treatment, if I do go into remission will it come back?

My NHS treatment was superb and with that, brilliant support from family and friends and a bit of luck I have made full recovery. The initial stages were very difficult with an endless round of hospital visits, surgery and chemotherapy which lasted around 6 months. Then you have regular checks and scans, hopefully to confirm that you are still clear. After 5 years, the big day when they tell you that you’re still clear and apart from for the occasional check every 5 years thereafter, they don’t want to see you again.

I made a claim on my Critical Illness Cover the day after I was diagnosed and within a month both policies had paid out.

I was doubly lucky in that I didn’t actually have to have too much time off work. I was able to work knowing that I didn’t have to if I wasn’t up to it. I knew that if I didn’t respond well to treatment that financially I was fairly secure. Believe me when I say that having that safety net is a massive comfort. I was able to concentrate on recovery without financial worries.

When you’re dealing with any critical illness you can count on superb care of the NHS. Hopefully you can rely on help from your family, friends and work colleagues, but in addition you need to be able to focus completely on the job at hand – recovery. To be able to do that you need to be free from financial worry. You need every possible advantage you can get. I know money isn’t everything, but it really does help. That’s the real point behind Critical Illness Cover and I truly believe that my policy helped me get to the stage I am at today.

About Critical Illness policies

Critical Illness Cover has evolved over the years and the modern policy offers flexibility with a much wider range of coverage. These include numerous additional benefits designed to aid recovery including, in some cases, specialist second opinions, access to complementary treatments and psychological support.

In 2017 (the latest full year statistics) 15,962 critical illness claims were paid in the UK with a total value of £1.16 billion paid. 92.2% of all claims made were paid by the insurers. (source: Association of British Insurers Claim Statistics 30/04/2018).

If you have existing policies, they are worth reviewing to make sure that the cover meets your current needs. If you don’t already have cover you can speak to an Independent Financial Adviser and see what’s available. It doesn’t need to break the bank.

If you’re ever in the unfortunate position that you need to claim on your Critical Illness Cover, you’ll think it’s the best money you’ve ever spent.

Critical Illness plans typically have no cash in value at any time and cover will cease at the end of term. If premiums stop, then cover will lapse. Plans may not cover all the definitions of a critical illness. The definitions vary between product providers and will be described within the Key Features and policy documentation if you proceed with the plan.

For more information on Critical Illness Cover, or any other protection needs, contact Simon Ereira at Temple Wealth Management on 01305 213150 or simon.ereira@templewealth.co.uk