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Are you making the most of your tax allowances?

 

With the end of the 2018/19 tax year just around the corner on 5th April 2019, it may be worth thinking about getting your finances in order and make the most of the governments tax breaks. We share our top tips to plan for the end of the tax year to help you make your money work harder for you:

Maximise your ISA allowance

 ISA’s are a good way to keep savings and investments from income and capital gains tax. The maximum amount that could be saved during the current 2018/19 Tax Year is £20,000.

By contributing as much as you can into an ISA each tax year, you could build up a large pot of tax-sheltered cash over time.

None of these allowances can be carried over to the following year so it’s a case of ‘use them or lose them’.

 

End of Tax Year and Capital Gains Tax Allowance

You will pay no tax on the first £11,700 profit you make from selling investments that are not an ISA or pension – this is your capital gains tax allowance.

If you’re married it may be worth transferring assets between you in order to reduce your tax bill, as both partners have the same allowance.

 

Give to your loved ones for inheritance tax efficiency

It’s also worth considering  whether you have used your Inheritance Gifting exemption. You can give away £3,000 of gifts each tax year without them being added to the value of your estate.

If you are thinking of giving a gift, make sure you can afford to do so, and that it’s in accordance with any other inheritance or estate planning you have in place.

 

Use your dividend allowance

 The tax-free dividend allowance means that you could take £2,000 of dividends without paying any income tax, regardless of any non-dividend income you may have.

If you are a shareholder or company director or if you are an investor who earns dividends outside a stocks and shares ISA, it may be worth taking advantage of this allowance before the current tax year ends.

 

Review your pension arrangements

A pension pot may be an effective way to invest your money for your future because you receive tax relief on the payments you make into your pension pot.

The government will add 25% to any contributions you make to your pension, up to a certain limit which is based on your earnings for the year, and this is capped at £40,000. Remember, any contributions you make will reduce your taxable income and have a direct effect on the eventual size of your retirement fund.

 

Use it or lose it

The current tax year ends on the 5th April 2019 and although some of these tax allowances can be carried forward to future years, there are ones that can’t- for example your ISA allowance and capital gains tax allowance.

If you still haven’t taken the time to review your finances and take advantage of these exemptions, it’s not too late.

 

If you would like any advice on how to make the most of your tax planning, get in touch and our experienced advisers will be delighted to help.

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