“Coming together is a beginning. Keeping together is progress.
Working together is success."
Henry Ford (1863 – 1947)
Many tax efficient opportunities tend to have a limited shelf life, commonly within each tax year. Understanding them before the tax year ends can help make a valuable difference and contribute to achieving your goals and objectives.
Throughout the year COURTIERS works closely with high net worth individuals, families and businesses to identify investment opportunities and manage any risk.
Here are some of the measures and actions which are particularly important to consider as we approach the end of the current 2016/17 tax year and the beginning of the new 2017/18 tax year:
Annual Individual Savings Account (ISA) Allowance
ISAs are perhaps the most commonly known annual savings and investments vehicle which can be taken advantage of each tax year. The current 2016/17 tax year ISA allowance is £15,240 which can be invested within a Cash ISA, Stocks & Shares ISA, or a combination of both.
Although the ISA allowance will be increasing from the 2017/18 tax year to a total of £20,000 per individual, if the current 2016/17 ISA allowance is not fully used up, savings and investments into these cannot be backdated.
Annual Capital Gains Tax (CGT) Allowance
Each tax year the Government provides individuals with a way of realising capital gains on investments up to a certain limit (currently £11,100 per person), without triggering any Capital Gains Tax.
The limit is likely to be increasing from April 6th 2017. However as with the ISA, if the 2016/17 CGT allowance is not used up within the current tax year, it cannot be carried forward to help to mitigate tax on gains in the future. Only the annual CGT exemption in place at the time, will be available.
Annual gifts exempt from Inheritance Tax (IHT)
Each tax year £3,000 can be given away by an individual. In addition, it is possible to carry forward any unused part of the £3,000 exemption to the following tax year. For married couples/civil partners who have not made gifts in this or the previous tax year this could enable £12,000 to pass free of tax now, with a further £6,000 on 6th April 2017.
There is also an exemption on Small Gifts of up to £250 to any number of individuals free of tax within the tax year.
Read more about gifts exempt from IHT
There is still scope for pension contributions before the end of the tax year and valuable tax relief can be claimed, up to your highest marginal rate, for the current tax year ending 5th April 2017.
There are also many additional pension planning opportunities which can be taken advantage of such as:
“Carrying Forward” previous years’ unused allowances and
Pension contributions for higher earners, which can reduce income and regain the personal allowance, saving a considerable amount of tax.
Lifetime Allowance - Individual Protection 2014
One area which has a specific deadline of 5th April 2017 is for https://www.gov.uk/government/publications/pensions-individual-protection-2014
Since it was introduced in 2006, the Government has steadily changed the total amount that can be saved into a UK pension without triggering an extra tax charge (“Lifetime Allowance”) from the highest £1,800,000 (2010/11) to £1,000,000 for the 2016/17 tax year.
Individual Protection 2014 allows someone whose pension rights were valued over £1.25 million (as at 5th April 2014) to protect those rights, subject to an overall maximum of £1.5 million, despite the Standard LTA now being £1,000,000.
There are however a number of conditions, restrictions and potentially other more suitable options available, depending on your individual needs and circumstances.
Financial Planning is an ongoing process of defining and fine tuning strategies to help achieve your life’s short, medium and long term goals and objectives. Ensuring any plans remain relevant and effective is important, especially when changes in personal circumstances or government legislation may arise. Tax treatment depends on individual circumstances and may be subject to change in the future.
While the above offers a summary, as with most areas in financial planning, tax efficient wealth management is generally complex in nature. Speaking with your Courtiers Adviser is the wisest step towards ensuring you are maximising any opportunities available.
Often is the case; if you don't use it, you lose it. The end of each tax year is very much an important consideration for our clients and there are certain actions we can take to help ensure they don't miss out.
Sagar Dholiwar BA (Hons), APFS
Chartered Financial Planner
Warning – the views expressed by Courtiers in this summary and any video and video transcripts, are reached from our own research. Courtiers cannot accept responsibility for any decisions taken as a result of reading this document, watching the featured video or reading the video transcript and investors are recommended to take independent professional advice before effecting transactions. The price of stocks, shares and funds, and the income from them, may fall as well as rise. Past performance is not necessarily a guide to future returns.
We do not endorse nor accept responsibility for the content of any website not operated by Courtiers which you may visit by following a link from this article.