The Tax Planning Year End and Future Changes
As is traditional at this time of year, the end of the tax year reminds us that certain planning actions should be reviewed. Despite a great amount of forward planning, inevitably people tend to consider utilising their ISA allowance at the last moment.
Individual savings accounts (ISAs) provide a very rare opportunity for UK investors to shelter their money from the taxman. By way of a reminder you pay no tax on any capital gains or income earned and you do not have to declare your ISA’s existence on your tax return.
At present, you can invest up to £15,240 in the 2015/16 tax year, and you can choose to invest this in cash, stocks and shares, or a combination of the two. Stocks and shares ISA’s tend to offer much greater investment potential, but inevitably the experience tends to be more volatile, so investors must be prepared to withstand a degree of fluctuation in their investment.
Cash ISA’s tend to offer a greater degree of security but with interest rates being so low the returns tend to be somewhat unexciting. Moreover, it is worth bearing in mind that from 06 April most UK adults will benefit from the new Personal Savings Allowance of £1,000.
In simple terms this will mean interest of £1,000 can be earned without having to account for tax. Indeed from 06 April interest will in any event be paid gross. To put this change into context based on current interest rates, basic rate tax payers could invest up to around £70,000 in an easy access account and still be within the threshold (not guaranteed). If interest rates increased then the figures would reduce accordingly.
Higher rate tax payers receive only a £500 Savings allowance, whilst additional rate tax payers would receive no allowance. This will mean that individuals will need to consider the respective merits of cash ISA’s going forward.
Stocks & Shares ISA’s however will still remain compelling tax planning tools. They offer the potential for huge investment diversification, and can be inherited by one spouse from another in the event that one dies. They offer tax free income, and new changes have allowed Inheritance Tax ISA’s to emerge where depending on the underlying nature of the ISA assets they may also be deemed to be outside your estate for IHT purposes. Finally we have also recently seen the emergence of Help to Buy ISA’s targeted at first time buyers, which offer particular tax incentives.
If you would like help to seek out the most tax efficient investment opportunities and take advantage of the various planning vehicles available please contact either Shaun Bell or Stuart Read at Sabre Financial on 01548-856444 or via email at
Please be mindful that everyone’s individual circumstances are different and the above article is simply general guidance. You should seek appropriate advice about your personal situation before taking any action.
Sabre Financial is a trading title of Sabre Financial Planning Ltd. Sabre Financial Planning Ltd is authorised and regulated by the Financial Conduct Authority.
By Sabre Financial | Wednesday, March 30, 2016