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ANNUAL ALLOWANCES – A CHECKLIST FOR THE TAX YEAR-END

With the tax year-end fast approaching, it’s time to make the most of your annual allowances.

Annual Allowance Checklist

Use your ISA allowance

Think about topping up your tax-efficient savings. The maximum amount that can be saved into an ISA this tax year is £15,240, increasing to £20,000 from April. For Junior ISAs, the tax-free allowance is currently £4,080, increasing to £4,128 from April.

Keep your pension arrangements under review

The amount you can pay into a pension in this tax year is a gross contribution of £3,600 or 100% of your earnings, subject to the annual allowance. The current annual allowance is £40,000 (unless you’ve taken money from your defined contribution pension, then the annual allowance may reduce to 10,000). You can carry forward any unused allowance from the previous three tax years. From April 2016, if you have any ‘adjusted income’ of over £150,000 including the value of any pension contributions, the £40,000 annual allowance is reduced by £1 for every £2 that your income exceeds£150,000, up to a maximum reduction of £30,000. For those who have already flexibly accessed their pension, the Money Purchase Annual Allowance will be limited to £4,000, as of April 2017. This is designed to limit beneficiaries from gaining double pension relief. You can also pay into a pension for a nonearning spouse or child. Pay in £2,880 a year and thanks to basic rate tax relief it will be topped up to £3,600.

Make use of your Inheritance Tax allowances

Each financial year you can make gifts of up to £3,000 (in total, not per recipient) and if you don’t use this in one tax year, you can carry it over to the next year, which means you could give away £6,000. Gifts of up to £250 per person per tax year to any number of people are exempt. Each parent of a bride or groom can give up to £5,000; grandparents or other relatives can give up to £2,500 and any well-wisher can give £1,000. Gifts to registered charities and political parties are also exempt. You can also make gifts out of surplus income; however, conditions apply.

Consider your Capital Gains Tax position

The annual allowance is £11,100. Husbands and wives and civil partners might want to transfer an asset into joint names so that both parties can make use of their tax-free allowance so that up to £22,200 of any gain can be tax-free.

Tax treatment depends on individual circumstances. Tax treatment, rates and allowances are subject to change. If you’re making plans for your retirement and would like some professional advice, then please get in touch.

The value of pensions and the income they produce can fall as well as rise. You may get back less than you invested.

Clearwater Financial Planning Limited is an Appointed Representative of Intrinsic Financial Planning Limited, and Intrinsic Mortgage Planning limited which is authorised and regulated by the Financial Conduct Authority.

Intrinsic Financial Planning Limited and Intrinsic Mortgage Planning Limited, are entered on the FCA Register (http://www.fca.org.uk/register/) under reference 440703 and 440718

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Registered Office - 56 Fore Street, Kingsbridge, Devon, TQ7 1NY