We’re well into February now, so it really isn’t that long until the new tax year starts on April 6.
This means that now is a good time to look at some of the available tax allowances, and top them up for the current 2018/19 accounting year.
The current Individual Savings Account – or ISA – allowance is £20,000 for 2018/19 (frozen from the previous year), which can be spread across the four types of ISA: a cash ISA, an investment ISA, an innovative finance ISA, and a lifetime ISA. Any remaining allowance not used by April 5 cannot be carried over – so it’s a case of either use it or lose it.
The ISA allowance for 2019/20 will remain at £20,000. The threshold for how much can be paid into junior ISAs, however, is increasing in 2019/20 to £4,368 (up from £4,260 in 2018/19).
The current annual pension contributions limit remains at £40,000. In addition, unused relief from the previous three tax years may be used once you have paid in the maximum £40,000 limit for this financial year.
Pension savings qualify for higher rate tax relief and may help to reduce your payments on account, so if you are able to make more payments into your pension, now would be the time.
For high earners the limit can be reduced depending on total income and careful thought is needed if you fall into this category.
The current Capital Gains Tax allowance is £11,700 – this is how much gain can be made from selling assets before paying tax. In 2019/20, this is going up to £12,000.
If you do not use this allowance you lose it as it cannot be carried forward to the next tax year.
If you separated permanently from your spouse during this tax year, and assets need to be transferred between you, it might pay to do so before April 5. This is because assets passing between spouses are exempt from Capital Gains Tax during the financial year that the permanent separation took place.
There are a number of other allowances that, if they apply to you, will also help reduce the amount of tax you pay. These include:
End of year tax planning is an important part of managing your tax affairs and minimising your tax liability. If you’d like any help with accounting or taxation issues, please get in touch with the team at Optimum Professional Services.