It is unusual for us to report that the Chancellor has not meddled further with savings and pensions in his Spring Budget held on the 8 March. We have become accustomed to regular change but there was very little to report this time round. We can probably expect Phillip Hammond to do his meddling in the Autumn Budget in November.
Tax Year End Reminder
The end of the tax year is approaching fast, remember 5 April is the last day of this current tax year.
Below are some of the points you should consider and act on if necessary, by 5 April:
• If your pension benefits were worth over £1.25m in total on 5 April 2014, you have until 5 April 2017 to claim individual protection.
• If you reached state pension age before 6 April 2016, 5 April is the deadline for making Class 3A voluntary contributions to top up your state pension.
• 5 April is the last day for making pension contributions to bring forward up to £50,000 of unused annual allowance from 2013/14.
• If you have started to draw a flexible income from your pension arrangements, the maximum further tax-efficient pension contribution you can make will fall from £10,000 to £4,000 on 6 April.
• Invest up to £3,600 into a pension for your children or grandchildren.
Investment and Savings
• One of the most tax efficient ways of saving is via an Individual Savings Account (ISA). The investment limit for the current year (2016/17) is £15,240 per person;
• Invest up to £4,080 into a Junior ISA for your children or grandchildren.
If you do not utilise your ISA allowance, it is lost as it cannot be carried forward into the new tax year.
• The personal allowance reduces when taxable income exceeds £100,000 p.a. and disappears when it reaches £120,000. The result is a tax charge of up to 60% on the excess over £100,000. Avoid this result by reducing taxable income through pension contributions.
• From April 2018, the total amount of dividends that company directors and shareholders can receive tax-free will fall from £5,000 to £2,000. Where possible you should maximise your allowance for the 2016/17 tax year.
• Your annual capital gains tax exemption of £11,100 per person will be lost on 5 April
• Transfers of assets between spouses will not trigger a CGT (or income tax charge). In 2016/17, generally chargeable gains are taxed at 10% or 20% where the gains after deducting losses exceed the individual’s annual CGT exemption. (£11,100 2016/17).
• A non-tax paying spouse can transfer 10% of their personal allowance to their spouse provided the recipient spouse is not a higher rate taxpayer.
Each individual is entitled to a £3,000 annual exemption. It may be possible to carry forward any unused annual exemption from the previous tax year so for somebody who has made no gifts, they can make gifts of £6,000 within their annual exemptions now.
If you didn’t know, Good Friday is on 14 April and Easter Monday on 17 April, even better news is that this is followed by May Bank Holiday on 1 May.
So, if Thursday, 13 April is your last day in work and you book holidays until Tuesday 2 May, you will only be using nine days of holiday for 18 days off work in total. Now that’s tempting!
As always, please get in touch if you have any questions or need help with any aspect of your financial planning.