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Decision time

23 March 2016

Time is running out to make the most of tax-saving and investment opportunities by 5 April.

Last week’s Budget may have extended the supposed deadline for higher rates of tax relief on pension contributions, but there are no second chances for the tax-saving and investment opportunities that expire on 5 April.

With only a few days to go until the end of the tax year, there are a number of actions to consider before it’s too late – actions that could help secure your financial future.

  • The Chancellor sent a strong message about the importance of ISAs in the future personal savings landscape, announcing an encouraging boost in the annual allowance to £20,000, and the introduction of the Lifetime ISA, from April 2017. There is still time to make use of this year’s allowance of £15,240. The introduction of the new Personal Savings Allowance on 6 April adds to doubts about the wisdom of using up this valuable allowance with cash savings. The alternative is a Stocks & Shares ISA.
  • Additional rate taxpayers saving into a pension should make the most of this year’s £40,000 allowance before new restrictions come into force from 6 April. Retirement savers should also review whether they have any unused annual pension allowances from the previous three tax years that could be carried forward and invested by 5 April. Don’t forget also that it’s possible to pay up to £2,880 each tax year into a pension for a non-earning spouse, or child; that sum will be increased to £3,600 through basic rate tax relief.
  • The Treasury received over £5.5 billion in Capital Gains Tax last year, more than it claimed in Inheritance Tax. Making the maximum possible use of your annual exemption of £11,100 can help reduce any future liability. Remember that spouses can transfer assets between them without triggering a capital gain, potentially doubling the gains that can be made tax-free.
  • Your annual gifting exemption of £3,000 can be carried over from the previous tax year, but if you don’t use last year’s exemption by 5 April, it will be lost. Those with estate planning needs, or those who simply want to give a helping hand to other generations of the family, have the opportunity to gift up to £6,000 (or £12,000 for a couple) that will be immediately outside your estate for purposes of Inheritance Tax.
  • It is unclear whether the Junior ISA limit will also be raised significantly from April 2017, but in this tax year you’ve still got time to make contributions of up to £4,080 per child, helping younger generations by giving them that crucial financial head start.

 

The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested. An investment in a Stocks & Shares ISA will not provide the same security of capital associated with a Cash ISA. The favourable tax treatment of ISAs may not be maintained in the future and is subject to changes in legislation.

The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.

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