How much of my ISA allowance do I intend to use for this tax year and when?
For the tax year starting 6 April 2017 you can invest up to £20,000 in ISAs. This can be saved in a cash ISA or invested in a Stocks & Shares ISA or split between the two. The earlier you invest in the tax year the more time you have to benefit from the tax efficiencies and potential growth of the investment. Don’t forget you have to be at least 16 to open a cash ISA, or 18 to open a stocks & shares ISA and you must be a UK resident. Any unused allowance doesn’t get carried over, once it has gone, it’s gone and you can only hold one active cash and one active stocks and shares ISA per tax year.
While savings rates are still low across the board, cash ISAs at least earn tax-free interest. Stocks and shares ISAs benefit from no tax on the growth you receive and no tax on the interest generated from bonds. You don’t have to pay Capital Gains Tax on profits from an ISA, where normal investments outside an ISA, that earned above the £11,300 (2017/18) capital gains tax allowance, would incur 10% and 20% for higher rate taxpayers and an additional 8% for residential property gains.
Do I need to transfer any old ISAs?
If you had a fixed rate or fixed term ISA make sure you review this at the start of the tax year, where is it held, when does the fixed rate run out and get advice on whether this should be upgraded, moved or transferred. You can transfer ISAs between providers but it must be done as an ISA transfer, to maintain your ISA allowance, rather than withdrawing the money to reinvest.
You can transfer an existing cash ISA to another cash ISA with a different provider or an existing stocks and shares ISA to another stocks and shares ISA with a different provider. You can also transfer a cash ISA to a stocks and shares ISA or vice versa. If you want to transfer money you’ve invested in an ISA this current year, you must transfer all of it. For previous years, you can choose to transfer all or part of your savings.
Do I need to consider a Lifetime ISA? Do I understand them?
From April 2017, the new Lifetime ISA will be available. Anyone over 18 and under 40 on 6th April 2017, will be able to save up to £4,000 a year up to the age of 50 for either a home or retirement. The Government will then add 25% of the contributions made within a year at the end of that year. You can take out money at any time, but if you do so before you’re 60 and it’s not for a home, you’ll lose the state bonus and any interest earned. Plus, you’ll pay a 5% charge. Funds can be used to buy a first home (up to £450,000) with the state bonus at any time from 12 months after account opening.
Do I want to contribute to a Junior ISA this tax year?
This tax year you can pay up to £4,128 into a Junior ISA for each child. While this is not available until they are 18 it does accumulate interest tax free. Junior ISAs can be cash or stocks and shares based.
How much do I want to pay into my pension this tax year?
You can pay in up to £40,000 or 100% of your earnings whichever is lower for the 2017/18 tax year, as long as you your taxable income is less than £110,000. If you earn over £110,000 the rules are slightly different so make sure you speak to a financial adviser to review your individual needs.
Do I know if I am on track to reach my retirement goal?
Even if your retirement seems a long way off you should have a retirement plan so that you achieve your desired income levels. It’s best to check this regularly to make sure you are on track so reviewing it at the start of a tax year is the perfect time. Book in to see your financial adviser at the start of a tax year so you can make any necessary changes early on.
Am I effectively planning to minimise Inheritance Tax liability?
Do you want to make any gifts this year to help mitigate inheritance tax? You can pass gifts to your spouse or civil partner at any time and for anything you own, free of tax. Each year you can give gifts of up to £3000 or £6000 if you are a couple to other people, also free of tax. If you miss a year, the allowance can be combined with the following year but for that year only. You can give gifts of £5000 to children when they get married, £2,500 to grandchildren and up to £1000 to anyone else. If you are getting married you can give a gift of £2,500 to your bridegroom, bride or civil partner and finally you can give gifts of up to £250 multiple times for events like birthdays and Christmas but a gift is limited to £250 per individual per tax year. If the gifts are not exempt then providing you survive for 7 years after the gifts have been given, they can pass to the beneficiary without being classed a part of your estate and potentially with less or no tax to be paid.
Are my estate planning documents up-to-date?
Do you need to review your will? Have there been any changes recently that may need to be reflected? Do you need to consider a power of attorney for any reason?
If you would like to discuss any of the considerations above, please speak to one of our friendly team to book a free initial financial review or an on-going review with your existing adviser if you are already a client. Reviewing actions at the start of the tax year can help ensure you are capitalising on your tax-efficiencies as much as possible. Call us on 0333 456 0333 or email firstname.lastname@example.org.
Stocks and shares investments can go up and down and you may get back less than invested, always take advice before investing. The way in which tax charges (or tax relief, as appropriate) are applied depends upon individual circumstances and may be subject to change in the future. ISA and pension eligibility depend upon individual circumstances. This document is solely for information purposes and nothing in this document is intended to constitute advice or a recommendation. You should not make any investment decisions based upon its content. The Financial Conduct Authority does not regulate tax, will and estate planning.