As we approach the end of another fiscal year on 5th April, now is a good time to review your financial planning to ensure you have organised your affairs in the most tax efficient manner.

We have put together a checklist of some things you might wish to consider:

#1 Have you taken advantage of the Individual Savings Account (ISA) allowance? It is important to use this valuable allowance each year to reduce any potential income or capital gains tax (CGT). This can be in a Cash ISA, invested in a Stocks & Shares ISA, or split between the two in any combination. The benefits are many: there is no capital gains tax to pay when you sell shares or units held in an ISA, there is no tax to pay on interest or dividends earned. Each person has their own annual ISA allowance of £20,000 so a married couple could put up to £40,000 between them into ISAs this tax year (before 6 April).

#2 If you have children have you taken advantage of Junior ISAs? Junior ISAs (that replaced Child Trust Funds (CTF)) can be a good long-term savings option for children where the savings grow tax free. In the tax year 2018/19, the Junior ISA allowance is £4,260. Children holding a Child Trust Fund can have £4,260 invested in that in 2018/19, or if they wish to use a Junior ISA instead they must close the CTF and transfer the funds to a Junior ISA first.

#3 For investments outside of an ISA, you should consider crystallising any capital gains to make use of your “annual exempt amount”, which is currently £11,700 for 2018/19. Capital gains tax on investments (except on investment properties) is charged at 10% on your total taxable gains if the gains, when added to your income, fall completely within the basic rate tax band, and 20% if they exceed the basic rate band. So taking advantage of the annual exempt amount makes sense to help prevent a large CGT bill when an asset is sold in the future. Married couples who own assets jointly can claim a double allowance of £23,400. Married couples can also make use of the spouse’s allowance by transferring assets between them before selling them as long as the transfers represent genuine unconditional gifts from one to the other.

#4 Can you transfer assets for tax benefits? Consider transferring savings and investments to your spouse if they pay a lower rate of tax than you do. Complex rules apply, but if appropriate to your particular situation, it could provide benefits for income tax, capital gains tax and even inheritance tax.

#5 Top up your pension – Personal contributions to pension schemes attract tax relief at up to your highest rate which makes saving in a pension an attractive idea, and with new pension freedoms announced, access to your pension pot is no longer as restrictive as it was. For pension contributions to be applied against your 2018/19 income, you must pay on or before 5 April 2018. There is a basic annual allowance cap on pension savings of £40,000 for the 2018/19 tax year. (This is reduced by £1 for every £2 that adjusted income exceeds £150,000 subject to a minimum allowance of £10,000). Personal contributions receive tax relief up to 100% of your earnings and if you do not have any earnings you can still contribute £3,600pa gross.

#6 Use your annual IHT gift exemption For inheritance tax (IHT) planning you could consider using your annual gift exemption of £3000 per person. Also if you did not fully utilise this allowance in the last tax year you can carry it forward one year as long as the current year’s allowance is also fully used, meaning a couple could potentially gift £12000 now, saving £4800 in IHT. You can also give up to £250 a year to as many people as you want (but not to those who have benefited from any larger gift) in the same tax year.

#7 Consider gifting  – Charities can reclaim tax on any donations made by individuals, whether large or small, regular or one-off – provided the conditions for the tax relief are satisfied. Gift Aid donations are regarded as having basic rate tax (20%) deducted by the donor. If you are in a higher tax bracket, you can claim back the difference between the basic and higher rate of income tax on any Gift Aid donations. You can do this on your Self-Assessment form. Do consider who is making the gift. If one spouse is a higher rate tax payer and the other is a basic rate, or non-taxpayer, then make the gift in the higher rate taxpayers name, to claim the tax difference back.

#8 Marriage allowance – Lets you transfer up to 10% (£1,185 for 18/19 tax year) of your Personal Allowance to your husband, wife or civil partner. This can reduce their tax by up to £238 every tax year (6 April to 5 April the next year).

To benefit as a couple, you need to earn less than your partner and have an income of £11,850 or less. Your partner’s income must be between £11,851 and £46,350 (£43,430 in Scotland) for you to be eligible. You can backdate your claim to include any tax year since 5 April 2015 that you were eligible for Marriage Allowance.

We hope you find this checklist useful.

*The Financial Conduct Authority does not regulate Tax Advice

Ready to talk?

If you’ve been wondering what you need to do next with your financial planning, or want to know more about getting the most out of your finances for retirement planning, investing or estate planning, please talk to us.

Stay in touch

Sign up for our regular updates.

You voluntarily choose to provide personal details to us via this website. Personal information will be treated as confidential by us and held in accordance with the Data Protection Act 1998. You agree that such personal information may be used to provide you with details of services and products in writing, by email or by telephone.