Tax Year End Planning

As we approach the end of the 2019/2020 tax year, now is a good time to consider whether you have made the best use of your ISA and pension allowances this year – you may well want to forward this email to your colleagues so that they can consider the content too.

ISA Allowance

Individuals can invest £20,000 into an ISA in this tax year. This can be split across the four types of ISAs but cannot exceed the £20,000 limit. You do not pay tax on interest, income or capital gains from ISA investments so it is worthwhile making the most of the allowance wherever possible. Investing in a Stocks & Shares ISA will provide the potential to achieve inflation-beating growth, so your money is working harder for you than it would in a cash environment. It’s important to treat these as medium to long-term investments so, although you can access your investment at any time, consideration should be given to your investment timeframe.

Pension Allowance

Investing in a pension has multiple benefits. Firstly, pension contributions receive tax relief. If you are a UK resident under 75, you can still pay into a pension and receive tax relief, even if you’ve finished working. The amount you can pay in a tax year is the greater of: a gross contribution of £3600 or 100% of your earnings, subject to the annual allowance which is £40,000 for most people. (Restrictions apply to those who have withdrawn taxable income from their personal pensions and are still earning). If you are paying into your pension via salary exchange, the key advantage comes in the form of lower National Insurance Contributions. If your employer matches your contribution, your pension will receive an additional boost. Your pension fund then has the potential to achieve inflation-beating growth as it is invested in funds identified as appropriate for your attitude to risk, capacity for loss and investment time horizon. Anything left in your pension when you die can be passed to loved ones, usually free of inheritance tax (and tax free in some cases). The lifetime allowance for pension contributions is £1,055,000 so tax charges could be payable if this is exceeded.

Any pension contributions are inaccessible until age 55, at which point a 25% tax-free lump sum is usually available with the remaining 75% available as taxable income. This should be a key consideration when deciding to make pension contributions.

Speak to Richmond House

If you would like to make the most of your ISA or pension allowance this year, please contact Richmond House on 0333 241 3350 and we can look at your specific circumstances and advise you on the best course of action.

Based upon our understanding of current legislation. Investments can fall as well as rise and you may not get back the amount invested. This is for information only and does not constitute a personal recommendation. No action should be taken on this email alone and advice should be sought before any decisions are made.

Wendy Devlin
Office direct dial: 01438 345740
Mobile: 07811 029251