Most of us are looking to save money wherever we can in these uncertain financial times and, with tax rises likely come the new tax year, it pays to make sure you are making the most of annual allowances, reliefs and exemptions.
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Personal income tax
For all but the highest earners, workers who are taxed on their income benefit from a tax-free personal allowance. This currently stands at £6,475 for most working people but rises to £9,490 for those over 65 and £9,640 for over-75s.
By transferring income-producing assets (such as savings or investments) to your spouse or civil partner, you can ensure that both are using their full personal allowance and such transfers are usually exempt from inheritance and capital gains tax. It is also possible to move assets into non-income producing investments like single premium bonds so it's worth checking with an Independent Financial Advisor.
Top up your ISA
An Individual Savings Account (ISA) allows you to pay money into a tax-free cash or stocks and shares account. This year, the annual allowance per person stands at £10,200, of which anything up to 50 per cent can be invested in a cash ISA. Since it is not possible to carry over your yearly allowance into the new tax year, it makes sense to top up any ISAs you may already hold to ensure you are getting the full tax-free amount.
Capital gains tax
Each year, every individual is allowed a profit of £10,100 from selling investments before Capital Gains Tax is paid. Any profits made above this amount are taxed at 18 per cent, or 28 per cent if you pay a higher income tax rate, so it is worth checking to see if you can sell assets to take advantage of this tax-free allowance.
Married couples and registered civil partners who have made no previous gifts are able to give £12,000 away between them without incurring inheritance tax this year. You could perhaps invest the money in a single premium bond as a trust fund for children or grandchildren.
If you are paying into a pension from a taxed income, you can obtain tax relief and even those paying a higher rate of tax can claim back via self assessment. This is the last year that those earning £130,000 or less can pay in up to their full earnings and get the full tax relief, so it is worth making some extra one-off payments into your pension before the tax year ends to ensure you are making the most of this tax relief.
Venture Capital Trusts
Venture Capital Trusts buy stakes in new UK businesses - as a result, investors are given considerable tax concessions to compensate for the risk. In fact, 30 per cent is available in income tax relief and any future dividends are tax-free. However, savers must keep their shares for at least five years to see the tax benefits but Venture Capital Trusts have proved to be far less risky than was originally expected.