Tax year half-time review

Now we’re in the second half of the 2019-20 tax year, it’s a good time to review your finances and ensure you are on track to maximise your tax allowances before the strike of midnight on 5 April 2020.

Whilst we may agree that paying tax for the important services we all rely on, such as education and healthcare, is the right thing to do, no one needs to end up paying more than their fair share.

Each year, the government announces the tax allowances and exemptions that we are entitled to and it makes sense to maximise their use in meeting our individual financial goals. 

How advice can help

Most of us face being taxed on our income, our capital gains and in some circumstances, the value of our estate when we die. Taxation can be complicated, and the rules, reliefs, exemptions and allowances often change, so it is worth seeking advice to be clear how taxes work and the most efficient way to arrange your finances.

Many people can easily find themselves paying too much tax. That’s why it’s important that your financial position is regularly reviewed to ensure that you don’t miss out on opportunities that could reduce your tax liability. Here are a few areas not to overlook as the tax year ticks by:

Your pension

It’s important to review your pension contributions to make sure you stay on track to achieve your retirement objectives. One of the key attractions of paying into a pension is the valuable tax relief available, but pensions can be complex. We can help ensure that you maximise your allowable contribution limits and to ensure that when the time comes to take your pension, you do so in as tax-efficient a way as possible.

Tax-efficient options

ISAs make good financial sense, which is why around 42% of adults in England have one1. They represent a tax-efficient way of saving or investing, with cash, and stocks and shares options available. Junior ISAs are available too.

Instead of investing lump sums into their ISA, some people choose to invest smaller amounts regularly, when affordable. If you’re planning to save into your ISA this tax year, don’t leave it too late and miss out; remember you can’t carry any unused allowance over to the next tax year, so timing is important.

Keep an eye on your investments

A good discipline is to factor in regular portfolio reviews to see how your investments have performed over the last six months or so – are your investments aligned with your objectives and risk profile, have your circumstances changed?

We will always consider your tax position when deciding where you should put any money that you want to invest for the future. We can explain how Capital Gains Tax (CGT) works, and how best to use your annual personal exemption. We will also take into consideration the tax-free Dividend Allowance and be able to explain how dividend income over that level is taxed. 

Inheritance Tax

Many people are concerned that on their death, their families will be faced with a sizeable bill for Inheritance Tax (IHT). However, with careful planning it’s possible to reduce the level of tax payable. We can explain how you can use your annual IHT allowances to make gifts each year. If you wish to give away more substantial sums during your lifetime, we will be able to explain how you can do this tax efficiently. If you survive for seven years after making the gift, it will be outside of your estate for IHT.

Planning your wealth for the future

Tax planning involves taking sensible steps to reduce the amount of tax you pay, whilst still achieving your core financial goals. Working with us can help you put in place the right plans for your future to safeguard your wealth. If you have any questions or would like to discuss the best options for your individual circumstances, please do get in touch.

The value of your investments can go down as well as up, so you could get back less than you invested. A pension is a long-term investment. Tax advice which contains no investment element is not regulated by the Financial Conduct Authority.

1HMRC April 2019