The current tax year will end on 5 April. If you haven’t already taken advantage of the various allowances and exemptions you’re entitled to by that date, you’ll lose the benefits they provide. That’s because most of them cannot be carried forward into the next tax year – and the pension opportunity discussed below will vanish from 6 April.
The allowances include:
ISA allowance: You can invest up to £10,200 in an Individual Savings Plan (ISA) and take the benefits free of tax. You can invest all of your allowance into a stocks and shares ISA to take advantage of the growth potential of the stock market; or if you prefer, you can invest up to half in a cash ISA and the rest in a stocks and shares ISA. Because cash ISAs are not invested in the stock market, they add stability to your holding.
Capital gains tax allowance: This is currently £10,100. If the value of your investments has increased to above that limit this tax year, it might be sensible to sell some of them in order to help reduce your liability to future CGT.
Pension allowances: Do you have unused allowances for this year? Also, are you aware of the changes in legislation that may affect you next year? In particular, from 6 April 2011, the maximum amount you’ll be able to put into a pension plan and claim tax relief on it from the government will go down from £255,000 to just £50,000. So if you’re thinking about making a big lump sum payment into your plan, it would be a very good idea to do so before the tax year ends.
Inheritance Tax: Each tax year you can make a range of gifts and other potentially exempt transfers. These can help reduce the eventual IHT burden on your estate. Don’t make the mistake of thinking that this tax applies only to the mega-rich; currently, Inheritance Tax is charged at 40% on the value of your estate above £325,000. Due to the level of property prices, many people find that their house alone is worth more than this amount, let alone other assets, savings and investments.
Your circumstances and needs are unique to you, so it definitely makes sense to discuss these and other allowances with a reputable financial adviser to see how they affect you. Time is running out, though, if you want to make the most of these benefits – so why not contact your adviser today to arrange a meeting?
