• Make sure you use your tax allowances before April

    3rd January 2017

    With the tax year-end fast approaching, there’s still time to make use of your 2016–17 tax allowances. Here are some ways in which savers, investors and workers could save themselves some tax.

    TAX-EFFICIENT SAVINGS AND INVESTMENTS

    With this year’s ISA allowance standing at a generous figure of £15,240 it’s worth thinking about topping up your savings if you can. There’s no tax to pay on interest earned in a cash ISA. With a stocks and shares ISA there’s no capital gains to pay and no tax to pay on dividend income. For Junior ISAs the tax-free allowance is £4,080.

    PENSION PLANS

    For the tax year 2016–17 you can get tax relief on pension contributions of up to 100% of your earnings or a £40,000 annual allowance, whichever is lower. (However, if in this tax year you
    start to take money from your defined contribution pension, then the annual allowance may reduce to £10,000 and to £4,000 from 2017–18).

    CAPITAL GAINS TAX

    Your 2016–17 exemption for capital gains is £11,100. As assets can be transferred tax-free between spouses, you could consider transferring investments to ensure that both annual tax exemptions are fully utilised if you’re planning to realise gains.

    INHERITANCE TAX

    The 2016–17 Inheritance Tax threshold is £325,000 per person, doubling to £650,000 for a married couple. Above this nil rate band, tax is payable at 40%, though the main residence nil-rate band will be phased in from April 2017. With house prices remaining high, more estates are passing the threshold, so it makes sense to consider ways of mitigating IHT during your lifetime.

    You can make gifts of up to £3,000 per annum (in total, not per recipient) plus any number of gifts up to £250 per other recipient during each financial year. Before the wedding day, each parent of a bride or groom can give up to £5,000; grandparents or other relatives can give up to £2,500 and any well-wisher can give £1,000. Further gifts can be made from your surplus income, although conditions apply.

    Tax planning can be a complicated matter; everyone’s circumstances are unique and you should seek professional advice. Not all IHT planning is regulated by the Financial Conduct Authority.