End of Tax Year - A Guide to your Allowances
10 February 2012
End of Tax Year – A Guide to your Allowances
The tax year end is fast approaching. If you haven’t already taken advantage of all the various allowances and exemptions you’re entitled to by 5 April 2012, these could be lost. These are "use it or lose it" allowances. These include:
ISA allowance: For the 2011/12 tax year the overall individual ISA allowance is £10,680 – you can choose to invest the whole of your allowance into a stocks and shares ISA, or up to £5,340 into a cash ISA and the remainder placed in to a stocks and shares ISA. As of the 6th April 2012, the new ISA allowance will be £11,280 - £600 higher than the current limit.
Capital gains tax allowance: Every individual has an annual Capital Gains Tax (CGT) allowance. For the current tax year (2011/12) this is £10,600. Any gain in excess of this allowance is taxed at 18 per cent for basic rate taxpayers and 28 per cent for higher rate taxpayers. If the value of your investments has increased to above that limit this tax year, you might want to consider selling some of them in order to help reduce your liability to future CGT.
Pension allowances: From April 6th 2012, the lifetime allowance - the total capital value of all your private pension arrangements, which you can build up without paying extra tax - for individuals saving into a pension will be reduced from £1.8 million to £1.5 million. Previously, anyone earning below £130,000 per annum could save 100 per cent of their salary into a pension subject to an "annual allowance", of £255,000 (2010-11). However, the allowance was altered to an annual allowance of 100% of gross earnings but capped at a maximum of £50,000 - for all earners. However, this pension contribution limit can be used to top-up any previous allowance, which has not been used in the last three tax years. You can also spread your maximum annual investment limit across various pension providers.
Payments into a pension receive 20 per cent tax relief directly and higher-rate taxpayers can claim back extra relief through self-assessment. This means a £100.00 contribution will cost a basic rate tax payer just £80.00 and a higher-rate tax payer just £60.00, with the balance being topped up by the Government. Non-tax payers can also invest up to £2,880 a year into a pension, which becomes £3,600 with tax relief – so if you have a non-earning spouse it may be worth additionally capitalising on their allowance.
Inheritance Tax: Each tax year you can make a range of gifts and other potentially exempt transfers. These can help reduce the eventual Inheritance Tax (IHT) burden on your estate.
These are just some of the areas in which we can give you timely, practical and effective advice. At Welbeck we are financial planning and wealth management experts, completely focused on helping you make the most of your financial security.
Talk to us today to arrange to sit down with your adviser or let us know the name of a colleague or friend who may benefit from our services. Act now to ensure that these allowances are not lost.
To discuss these points further and arrange a meeting either speak to your adviser, contact us on 0207 7762135 or email email@example.com. If it’s been a while since we have spoken to you, please call us to book your financial review and let us update you on what has changed.
** Please note that Trust and Tax planning are not subject to regulation by the Financial Services Authority **
For further information and pictures contact Nick Evans on 07776 212000 or email firstname.lastname@example.org