Amazingly we have already had a month of 2020, before we know it the daffodils will be in bloom and the lawn will need cutting. That also means that 5^th April is just around the corner – for those not in the know that is tax-year end. It’s not an exciting date like 25^th December or your Birthday, but it is a very important date in the world of finance.

Tax-year end is a deadline to make many decisions and use allowance that give you a financial benefit. These allowances do not roll over to the next tax year so if you miss the deadline you lose your benefit. As we still have up to a couple months for you to ensure you make the most of your opportunities I will give you a brief rundown of the main considerations.

Pensions

Most people pay in to a pension and if they are employed then their employer pays in too. However if affordable you can pay in, and receive tax relief, on payments up to 100% of your income up to £40,000. Even a non-earner can contribute £3,600 at a net cost of £2,880. Obviously you benefit from building a bigger retirement fund but this action can also reduce your income tax bill, restore lost personal allowances and even help you avoid the child benefit tax charge.

If you use up your full allowance in the current tax year you also have the ability to look back at the last 3 years contributions and “carry forward” any unused allowances to the current year.

A non-working spouse can still contribute up to £3,600 to their own pension and receive 20% tax relief on those contributions.

Investments

The main consideration would be have you used your annual ISA allowance, this stands at £20,000 per person and can be split between both Cash ISAs and investment ISAs. ISAs are very tax efficient, no income or capital gains tax to worry about and never a need to include them on your tax return.

Children can also have a junior ISA and you can contribute up to £4,368 in this tax-year. It has all the same tax benefits as an adult ISA and becomes the child’s when they turn 18.

You have an allowance to offset against Capital Gains, this can be very useful if you have “non ISA” investments that have grown in the year it would make good sense to sell some of your portfolio to realise a gain within the £12,000 current allowance level and then invest back immediately in to a different fund within your portfolio. If you have not used your ISA allowance you could invest back in to an ISA – this is know as “Bed and ISA”.

Tax

If your estate is worth more than £325,000 and you have liquid assets that you are confident you will never need yourself then you should consider gifting within your annual allowances. These are the details you need to know –

You can give away £3,000 worth of gifts each tax year without them being added to the value of your estate. This is known as your ‘annual exemption’.

You can carry any unused annual exemption forward to the next year – but only for one year.

Each year, you can also give away:

• wedding or civil ceremony gifts of up to £1,000 per person (£2,500 for a grandchild or great-grandchild, £5,000 for a child)
• normal gifts out of your income, for example Christmas or birthday presents – you must be able to maintain your standard of living after making the gift
• payments to help with another person’s living costs, such as an elderly relative or a child under 18
• gifts to charities and political parties

There are other more niche things you might be able to utilise to your advantage and I would recommend that you have a chat with an Independent Adviser. If you want to chat to me then drop me a line – richard@cervellofp.co.uk