Money moves to make before the end of the tax year



It is approaching the end of the tax year, and there are some last-minute money moves you can be doing to make the most of your 19/20 allowances.
Money moves to make before the end of the tax year

Many people leave major financial decisions to this time of year, so, if you do find yourself in the highly fortunate position to have cash to invest, these are the moves that should be on your radar.

1. Use your ISA allowance

When thinking about financial planning, we always look at how you can be tax efficient with what you have. An ISA is up there. You can currently invest up to £20,000 per year into your ISA with any gains made in the fund being CGT and income tax-free, unlike a straight savings account (more on this to follow).

It can be a wise move to invest money you have saved in your current accounts into an interest-giving or stocks and shares ISA (depending on your needs). This allows the funds to grow in a tax-efficient way, there are also different types of investing within an ISA so you can choose the right structure for your goals.

Most are instant access if you need to use the funds, however if you are investing in stocks & shares you need to view this as a long-term investment.

See also ‘if you have children’ below.

2. Get to know your personal savings allowance

Launched in April 2016, the Personal Savings Allowance (PSA) allows basic rate taxpayers to earn up to £1,000 per year in interest outside of an ISA before paying income tax. While higher-rate taxpayers can earn up to £500 in interest tax-free.

This is great for giving quick access ‘rainy day’ funds that give some return on your money. Check out the best buys for the highest interest-giving savings accounts, and don’t be scared to switch after the initial higher interest rate stops.

3. Consider increasing your pension contribution

Increasing your pension contribution is one of the most tax-efficient ways to save for later life. As it’s paid pre-tax any pension contributions reduce your net income and income tax payable. Meaning if you are a basic rate taxpayer for every £1,000 invested in your pension, in real terms you are only paying in £800.

4. Split your capital gains

Everyone has a capital gains tax allowance of £12,000, meaning if you sell or dispose of assets such as property (not your main residence), stocks and shares, or valuables over £6,000 you don’t have to pay any tax on gains up to £12,000.

However, if your assets are of high value, to help reduce your CGT you could look to sell a proportion of the property this tax year and the reminder next. For example, with shares.

If you are married, you can benefit from their unused allowance by placing part of the assets in their name to reduce CGT liability.

5. Reduce your inheritance tax bill

If you’re thinking about estate planning and looking to gift loved ones money, now is the time to do it. You can gift up to £3,000 in each tax year without being liable for inheritance tax. You can also carry over the exemption from one tax year to increase this to £6,000.

This helps to reduce your IHT liability on death on any assets over the given £325,000 nil rate band. Anything above this gets taxed at 40%.

If you have children:

1. Set up a junior ISA

You can invest up to £4,368 per year in a Junior ISA until the age of 18.

Junior ISA’s are often used as saving methods for University or house deposit and any money can be accessed at 18. Like with a traditional ISA, the money accumulated grows free of income tax and capital gains tax. By investing now you can benefit from this year’s allowance.

2. Keep your child benefit

Your child benefit reduces if you or your partner earn over £50,000 per year, reducing 1% for every £100 earned over £50,000. Meaning if you earn over £60,000 per annum you lose all your child benefits.

If you can afford it, it can be worthwhile to look at ways to reduce your income below the tapered allowance. Investing instead into your pension, so you can still claim some, or part of child benefit whilst using the money in a tax-efficient way to save for the future.

It’s also worth noting that if you don’t qualify for the benefit to still claim as this helps towards your National Insurance contributions. This is particularly important if you are taking time off work to care for children to ensure you don’t miss out on state pension benefits.

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