Kim Williams APFS
- Financial Planning Director and Financial Planner at Kreston Reeves Financial Planning Services Limited
- +44 (0)330 124 1399
- Email Kim[email protected]
Suggested:Result oneResult 2Result 3
Sorry, there are no results for this search.View all people
6 April is around the corner – do you need to review your personal finances?
Use of tax and other allowance
If you are married or in a civil partnership then it is possible to transfer assets tax free to benefit from the use of tax-free allowances or unused lower rate tax bands.
Gift Aid Donation
If you are thinking of donating to charity you could save tax at the same time. GADs extend both the Basic Rate tax band and Higher Rate tax band by the amount you donate plus 20% and can even be treated as if they were made in the previous tax year.
It is important that you make the appropriate gift aid declaration and obtain evidence of this in order to make a claim on your self-assessment tax return.
In the same way as a GAD; pension contributions can reduce your tax liability by increasing the tax thresholds. An £800 pension contribution could cost a higher rate taxpayer £600 due to the way the tax relief is applied.
Generally, the maximum pension contribution, on which tax relief can be claimed in a tax year, is £40,000 gross – this includes personal, employer and third-party contributions. This is reduced where:
If you do not have any earned income, and you are under age 75, you are able to add £3,600 (gross equivalent) to a pension plan and receive basic income tax relief at source.
The maximum sum which can be saved in a pension scheme over your lifetime without incurring tax charges is £1,073,100 – this amount is set to increase with CPI each tax year and with inflation so low at the moment we will see an increase to £1,078,900 from 6th April 2021. If all of your pension funds are in excess of this amount (excluding your state pension) you may suffer a tax charge of between 25% and 55%. It may be possible to apply to HMRC for protection if you meet certain criteria.
Defined benefit or final salary pensions are included as part of this calculation, as well as any pensions in payment. We would recommend you seek independent financial advice in this respect.
It is important to speak with a Financial Adviser before any pension planning is undertaken.
As a final point, you may wish to consider tax efficient investments. Here are a few tax reducing investments that you could make:
– Enterprise Investment Scheme (EIS)
– Seed Enterprise Investment Scheme (SEIS)
– Venture Capital Trusts (VCT)
Where making such investments are appropriate to your circumstances you could get up to 50% Income Tax relief on the investment made (SEIS) as well as the benefit of tax-free gains and the possible use of Capital Gains Tax deferral relief if you have sold other investments in the correct time period.
Like with pension planning, speaking with an Independent Financial Adviser ahead of taking any investment steps is recommended.
Contact us for assistance with your personal finances before the end of the tax year.
The content of this article is for information only and does not constitute formal financial advice. This material is for general information only and does not constitute investment, tax, legal or other forms of advice. You should not rely on this information to make, or refrain from making any decisions. Always obtain independent, professional advice for your own particular situation.
Share this article
Our complimentary newsletters and event invitations are designed to provide you with regular updates, insight and guidance.
You can unsubscribe from our email communications at any time by emailing [email protected] or by clicking the 'unsubscribe' link found on all our email newsletters and event invitations.