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The end of the financial year looms – but it’s not too late to do some clever 2019 tax planning. There are several key things to consider before the 5th April deadline comes around; indeed, as the old adage states, it’s time to ‘use it, or lose it’!

In this blog we’ll be focusing on several allowances that are available during each tax year; it’s highly recommended to ensure that you make the most of each one, as there’s only a limited time left in order to do so!

2019 Tax Planning: ISA Allowance

The ISA allowance is presently set at £20,000 and it is free from both capital gains and income tax. This allowance does not carry over from tax year to tax year, meaning that if you don’t use yours by 5th April, it will be lost.

In addition, you could consider the following ISAs:

  • Help to Buy ISA: this will only be available until 30th November 2019, so it’s worth thinking about this early. After this date new savers will not be able to open an account (but if the accounts are already active they will remain open). A maximum of £3,000 can be contributed per year, and the government will provide a 25 contribution on top (up to a maximum value of £3,000).
  • Lifetime ISA: a maximum of £4,000 can be contributed per annum. The government will add a bonus of 25 – up to £1,000 per year.
  • Junior ISA: this is for children under 18, and you have until 5th April to make a contribution of up to £4,260.

Don’t forget about the personal savings allowance, either. This is a tax-free allowance for interest payments, and is set at £1,000 for basic-rate taxpayers and £500 for higher-rate tax payers (it does not apply for additional-rate taxpayers, though).

2019 Tax Planning: Pension Contribution Allowance

There are generous tax reliefs available for pension contributions, meaning that it’s often one of the best ways to invest income to use later in life. Investments in a pension (up to a certain limit, see below) are free from income and capital gains tax. You receive a 20 top-up from HMRC when making personal contributions and can effectively raise your basic rate band for the purposes of tax.

However, as mentioned, there are limits to the amount you can contribute to your pension without paying tax. Since the 6th April 2014, the maximum allowance is £40,000 per annum – though there is the possibility of bringing forward unused allowance from the preceding three years. From 6th April 2016, further restrictions were imposed on those earning over £150,000 per annum: the tax relief such persons can claim is limited by £1 for every £2 over £150,000 (this is a sliding scale until the lower limit of £10,000 is reached).

In addition, it is worth remembering that:

  • Even if you do not receive any income, you can contribute £3,600 (gross) into a pension. This can be a useful mechanism for grandparents or parents wishing to pass wealth to another generation.
  • If you run an owner-managed company or are an employee, the company is able to make contributions on your behalf by way of salary sacrifice. Salary sacrifice brings with it a useful reduction in tax liabilities (both income and corporation tax, if applicable) and national insurance contributions.

2019 Tax Planning: Tax-Free Gift Allowance

Within each tax year you are permitted to make a variety of financial gifts on a tax-free basis. These kinds of gifts leave your estate immediately and will not impact on a future inheritance tax bill.

Eligible gifts include, but are not limited to:

  • Gifts of up to £3,000 each tax year (these can be carried over from one year only to the next, for a maximum total of £6,000).
  • Wedding gifts (up to £5,000 for a child; £2,500 for a grandchild/great-grandchild; £1,000 to anyone else).
  • Gifts to your spouse or civil partner (provided that the UK is their permanent residence).
  • Unlimited payments if these are: individual gifts of up to £250 per person; payments towards the living costs of an ex-spouse, elderly dependant or child; and gifts that are funded by surplus income, if it will not affect your standard of living.

This blog provides a general overview and does not constitute professional financial advice. If you wish to commence intensive 2019 tax planning, please get in touch with a qualified adviser without delay. IBISS & Co’s experienced team of accountants and chartered tax consultants are waiting for your call.

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