5 tax-smart tips to use before 5th April
Friday, March 4, 2016
From making the most of tax-free savings to cutting an Inheritance Tax bill, there's still time before the end of the tax year to make the most of your allowances and exemptions
If you're keen to reduce your tax payments (who isn't?) and make your financial goals work harder, one of the best things you can do is make the most of your tax breaks. There's still time to do that before the tax year ends on 5 April …
1. Save tax the NISA way
If you have any money you can put away, make the most of your NISA allowance - currently £15,240 for the 2015/2016 tax year - before 6 April. Any money earned within a NISA is free from income and capital gains tax, and if you don't use your tax-free allowance for the year, you lose it. Don't forget Junior ISAs and Child Trust Funds (CTFs) too - the 2015/16 allowance for these is £4,080.i
Find out which ISA could be the right one for you here.
2. Make your retirement savings work for you
Your pension is tax efficient too - you can get tax relief on up to £40,000 invested into it this tax year (this will be reduced in the 2016/17 year for those with higher incomes)ii. You may also be able to take advantage of any unused annual allowances from the previous three tax years, so currently from 2012/2013 tax year onwards.
Find out how an ISA could help boost your pension here.
3. Additional Friendly Society Tax-Free Allowance
Did you know that ISAs and pensions are not the only tax-free ways to save, you could also consider Tax Exempt Savings Plans which are unique to Friendly Societies like Foresters. They provide an additional tax free savings allowance of up to £300 per year by saving an affordable £25 a month.
Find out more about Foresters Tax Exempt Savings Plan.
4. Give it away
Every tax year, you're entitled to give away up to £3,000 - and you can also use last year's allowance if you didn't use it. So if you're part of a couple and you didn't use your allowance last year, you could give away up to £12,000 now, and a further £6,000 on 6 April, potentially saving £7,200 of Inheritance Tax (IHT).iii This can be divided into as many individual gifts as you like. A useful tip is to send a dated covering letter with a cheque or a balance transfer explaining that this is a gift so that there is a record of it.
Find out more about inheritance tax rules.
5. A capital idea
If you're thinking of selling any assets (anything from antiques to stocks and shares) and haven't already used your £11,100 Capital Gains Tax allowance, it might be worth doing it now so you don't eat into your 2016/2017 allowance. You can take advantage of up to £11,100 of gains without having to pay Capital Gains Tax on it.iv
Get more tax-savvy with our guide.
This blog is intended to provide information, not financial advice, to help you make an informed decision about savings and investments. We do not offer financial advice. You should contact a financial adviser if you want financial advice. You may have to pay a fee for this advice.
Tax rules may change in the future and depend on individual circumstances.
i Gov.uk – Tax and Tax Credit Rates and Thresholds for 2015-16
ii Money Advice Service – Tax relief on pension contributions
iii Gov.uk – Inheritance Tax – Gifts
iv Gov.uk – Capital Gains Tax – Allowances