Savings and Pensions – Timely Tax Planning Reminders!

Wednesday, February 22nd, 2017

At Copia Wealth & Tax, we like to provide a holistic approach to our clients rather than just be an accounts and tax return “sausage machine”. So here are few timely tax planning reminders in advance of the end of the tax year, which apply to your savings and pensions.

Don’t forget about your 2016/7 ISA Allowance

The current ISA allowance is £15,240, rising to £20,000 for 2017/18. Remember that there is no longer a 50% restriction on the amount that you can invest in a cash ISA; the £15,240 annual limit covers all ISA investments which could be in shares, bonds, cash or certain other investments. Whilst Cash ISA rates are quite poor right now, you could always take a bit more risk with shares and bonds instead.

Remember to maximise your pension contributions

The current annual pension limit remains at £40,000. In addition, unused relief from the previous three tax years may be utilised once the current £40,000 limit has been used. However, any unused relief from 2013/14 will lapse on 6 April 2017.

If, for example, you have £10,000 unused allowance from 2013/14 you would need to make pension contributions of at least £50,000 by 5 April 2017 to avoid losing your 2013/14 relief. Remember also that pension savings continue to qualify for higher rate tax relief and may help to reduce your payments on account.

Pensions are now the best route to extracting profits from your business to reduce your corporation tax bill and provide you with a bigger pot to draw from as you get older, remembering from 55 you can take 25% of your pot tax free.

Reminder about Lifetime ISA (“LISA”) from April 2017

From April 2017, adults under the age of 40 will be able to open a Lifetime ISA (LISA) and pay in up to £4,000 each tax year. They will be able to continue making contributions up to the age of 50. The government will add a 25% bonus to these contributions. This means that individuals who save the maximum will receive a £1,000 bonus each year from the Government.

These tax-free funds, can be used to help buy a first home worth up to £450,000 at any time from 12 months after first saving into the account. So why not encourage your children to start building up a deposit for their first home with a Government bonus thrown in?

Over the longer term, these LISA funds can be withdrawn from age 60 tax-free for any purpose. If LISA savers do make withdrawals before age 60 for other purposes, a 25% charge will apply to the amount of withdrawal effectively returning the bonus element of the fund to the Government. That said, LISA holders can always access their savings should they become terminally ill.

Can we help with your tax planning?

If you would like to discuss your individual tax planning requirements or just make a confidential no obligation enquiry, call us here at Copia Wealth & Tax, Wolverhampton today on 01902 783172 or alternatively click HERE to contact us for a chat – we’re here to help!