Calendar zoomed in on April 5th

The 2020/21 Tax Year – Use it or lose It

With the 2020/21 tax year drawing to a close, and many of us having our minds on other things (particularly given the challenges that the last year has brought to us all), I thought it would be timely to provide a reminder of the financial planning opportunities available, with a particular focus on utilising allowances available before the 5th of April.

ISAs

Individual Savings Accounts (ISAs), allow individuals to place £20,000 in the current tax year into a tax wrapper that is unencumbered by capital gains tax on investment growth, or income taxes on dividends and savings interest. There has been a change over the past year, with Junior ISAs having increased the allowances from £4,368 to a new higher limit of £9,000 per year.

Pensions

For longer term investments, pensions allow you to build up funds for retirement in a very tax efficient manner. The net contributions qualify for tax reliefs, instantly receiving a top-up at the basic tax rate within the pension (for every £1 saved this is topped up to £1.25), with higher rates of tax relief available for higher and additional rate tax payers. It is important to note that the rules around pension contributions are complex, and it is recommended that you speak to a Financial Adviser, as breaching limitations can incur tax charges, and to ensure contributions are done in the most effective manner.

Personal Allowances

There are many personal allowances available, such as nil-rate bands for income, dividend allowances, savings allowances and Capital Gains Tax Allowances. The allowances available can differ between individuals depending on their income. These are particularly important to consider when looking at retirement income planning, at which point individuals have the opportunity to take more control over their income.

Think you have exhausted your allowances?

Whilst many are aware of using ISAs and pensions to help invest for the longer term, there are also other tax wrappers/products available to individuals, especially for those wishing to discuss Inheritance Tax Planning. For many of these products, given their more complex nature, it would be recommended to seek financial advice, with options to defer tax, or invest into products that offer various tax reliefs. 

There are so many uncertainties at present, and no guarantees that current tax allowances will be the same in the future, with potential changes in the Chancellor’s Budget to be announced on the 3rd of March. Given our extensive experience of investing at Cave’s, helping people plan financially with their current objectives and future goals in mind, and navigating the ever changing taxation rules, you may find it useful to have a discussion with us about your financial planning. Please call on 01604 621421 and ask to speak to one of our Financial Advisers.

Cave & Sons Ltd is authorised and regulated by the Financial Conduct Authority (FCA), Financial Services Register number 143715. Tax and Estate Planning services are not regulated by the FCA.

Key Risks: Past performance is not a guide to future performance. The value of an investment and the income generated from it can go down as well as up, and is not guaranteed, therefore you may not get back the amount originally invested. Investment markets and conditions can change rapidly. Investments should always be considered long term.

This communication is for general information only and is not intended to be individual product/investment advice, tax or legal advice. The views expressed in this article are those of Cave & Sons and should not be considered as advice or a recommendation to buy, sell or hold a particular investment or product. You are recommended to seek professional regulated advice before taking any action.

For more information visit www.caves.co.uk or call 01604 621421.