“It’s possible to shelter many more of your assets from the taxman than most realise, as long as you remember to put together all the pieces of the tax jigsaw puzzle,” says Tim Walker, Head of Office at Brewin Dolphin Exeter. “While the increased flexibility and rise in Isa limits is welcome, it is also important that savers consider other forms of tax planning.”
Here are some tips to complete the jigsaw puzzle:
As well as the extra £5940 you can now put in this year’s Isa, you can also add to your child’s JISA (Junior ISA) or CTF (Child Trust Fund). The limit for these rises to £4000 on July 1st, so make sure you use all you can. “Income and capital gains from ISAs are tax free, so consider using the allowance for your risk based investments rather than your cash,” suggests Mr Walker.
The pension Lifetime Allowance (LTA) reduced to £1.25m on 6th April this year. You need to ensure that you won’t exceed that or you will be hit with a hefty tax charge. Ignoring this, you’ve got £40,000 gross that you can put into your pension. You should check this year and contribute your maximum if your UK relevant earnings allow it. If you have neglected your pension in previous years you might also be able to add up to £50k a year for the last three years and get tax relief on that as well.
You can also make a Stakeholder contribution of up to £3600 gross for your children or non-working spouse and receive 20% tax relief on their pension.
For parents: if making a further pension payment brings your individual taxable income(s) below £50,000, you may be able to reclaim or retain child benefit.
Consider transferring income producing assets to your spouse or civil partner. If one of you is a lower-rate taxpayer than the other, work out the income from the asset per £1 and transfer enough to use up the lower tax band. The same applies for Capital Gains Tax, which is charged at 28% for high rate taxpayers and 18% for basic rate. Transfer assets with gains to the lower rate taxpayer and use up both of your allowances. Also remember to use y0ur annual exemption allowances for Inheritance Tax.
For those with a higher risk appetite, an Enterprise Investment Scheme (EIS) or Venture Capital Trust (VCT) can offer some great tax incentives.
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