With the end of the 2020-2021 tax year on 5 April 2021, here are a number of ideas to make the most of your tax allowances and available tax reliefs.
Income from an ISA is tax-free, so there is no exposure to Income Tax or Capital Gains Tax. Annual limits for ISA investment are currently £20,000 in total for an adult and £9,000 for Junior ISA for a child under the age of 18. In a calendar year, an adult can contribute £40,000 into an ISA. This is because the new tax year starts on April 6th 2021.
Personal pension contributions
Personal pension contributions are net of basic rate tax at 20%. Higher or additional rate taxpayers can claim further tax relief through their tax returns. The current annual allowance is £40,000.
You can make pension savings for children and grandchildren, as contributions can be made by a third party on behalf of another person.
The standard annual exempt amount is £3,000. If total gifts within a tax year are less than this, the gifts will be immediately exempt for Inheritance Tax purposes. You can also carry forward any unused annual gift exemption for one year if it has not already been used.
You can make as many gifts of up to £250 per individual per tax year as you wish free of IHT, provided that the recipient does not also receive the £3,000 annual exempt amount. The annual £250 exemption cannot be carried forward.
The Marriage Allowance is available where both spouses were born after 6 April 1935 and both are basic rate taxpayers (both individually earning between £12,501 to £50,000). If a spouse is not utilising their tax-free personal allowances, they can claim the Marriage Allowance to transfer 10% of their personal allowance to their spouse.
The Financial Conduct Authority does not regulate Tax Advice.
The value of your investment (and any income from them) 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.