The end (of the year) is nigh
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What do the phrases, ‘Bed and spouse’ and, ‘use it or lose it’ mean to you? You will be aware that we are nearing the end of the tax year. ‘Bed and spouse’ is about using Capital Gains Tax allowances and ‘Use it or lose it’ is about your annual gift allowance.
This year will be particularly busy for financial planners due to the imminent changes to a number of tax rates and rules.
Within the wide range of tax efficient investments ranging from Individual Savings Accounts to Venture Capital Trusts, passing through Enterprise Investment Schemes, Enterprise Zone Property Trusts and a whole host of different types of pension scheme, which is best for you?
In addition, should you sell some or perhaps all of your investments now, or wait until after 6th April?
The answer to all of these questions, and many more besides, will depend on your own particular circumstances, objectives and priorities.
You will recall one of my recent articles in which I was discussing the benefits of keeping as much of your investment returns as possible.
Paying as little tax as possible forms part of that strategy.
Taking this theme one step further, why don’t you ask the Taxman to invest as much as possible into your portfolio?
Individuals having saved a load of tax may even feel that they are in a position to take advantage of the annual gift exemption and give away £3,000 to whomever they wish, with absolutely no tax consequences.
To many, receiving a £3,000 gift at Easter may be more welcome than some overpriced chocolate!
It may even work out cheaper to you in the long run. As ever, I am not going to give any specific advice here but you really should be seeking the advice of a good financial planner this year more than ever due to the numerous changes taking place very soon.
The changes in Capital Gains Tax will leave some of you better off in the future, however, many will be worse off.
The removal of Taper relief for capital gains will mean that some potential gains currently falling within the annual exemption and not being subject to tax may, after 6th April become partially taxable at 18%.
Is there going to be a reduction is the rate of Income Tax from 22% to 20%, or is there going to be an increase from 10% to 20%?
Well, both are correct!
This will mean 20% taxpayers paying into their pension from 6th April will get less for their money.
Those of you receiving 40% tax relief will still be able to reclaim the additional relief but you will have to pay more at the time of investment.
From 6th April, you will be able to pay an extra £200 into your ISA as the annual allowance is increasing to £7,200. There will be other changes to ISA rules.
At the moment, you may feel life was far simpler when ‘Bed and Spouse’ and ‘Use it or lose it’ meant something rather different!