SWT Wealth Management
Advertising feature: Why is April the 5th each year such an important date? It marks the end of the tax year and you have up until this date each year to utilise valuable personal allowances that if not used, cannot be carried forward to the next tax year.
You have an ISA allowance of £20,000 each tax year, that you can fund either into cash or stocks and shares, or a mixture of them both subject to the maximum annual allowance. Any interest or gains made on an ISA are free from income, dividend, and capital gains tax.
Consider boosting your pension before the end of the tax year. The more income tax you pay, the greater the tax relief on pension contributions. If you’re a basic rate taxpayer, for every £100 you pay in, the taxman will top it up to £125. If you’re a higher or additional rate taxpayer you can claim back up to an additional 20%, or 25% on top of the 20% basic rate tax relief, through your annual tax return.
The standard annual allowance is £40,000, in the tax year 2021-2022, although personal pension contributions will be limited to 100% of UK Relative Earnings if this is lower than £40,000. The Annual Allowance is reduced if your total adjusted income exceeds £240,000 or you have taken pension income from your pension using a flexible method previously. You may also be able to carry forward any unused annual allowance from the three previous tax years, as long as you were a member of a registered pension scheme for the years you wish to maximise contributions for. Being proactive now means you can make the most of allowances and other opportunities that could help you build up a fund you can use to create an income in retirement.
If you earn £100,000 or more, your tax-free personal income allowance falls by £1 for every £2 you earn over £100,000. Therefore, if you earn £125,140 or more, you will not receive a tax-free personal allowance at all. The additional rate income tax (45%) is also charged on earnings of over £150,000. Making pension contributions could reduce this liability.
If your spouse is a lower or non-taxpayer and not using all of their personal income allowance. It may be possible for them to transfer 10% of their personal allowance to their partner as long as their partner is not a higher or additional rate taxpayer. This could save up to £251 a year in tax.
You also have a capital gains tax allowance (CGT) of £12,300 for the current tax year 2021-22. You can sell shares, investments, property, and other assets without having to pay any tax on the first £12,300 of the gain.
If you are planning to sell shares/assets in the current tax year and they are going to make more than £12,300 in gains, you could sell some before the 5th of April and some after, thus spreading the gain over two tax years and using the CGT allowance for both years. Remember you do not pay CGT on pension funds, ISAs, or your main residence.
The value of an investment with St James’s Place will be directly linked to the performance of the funds you select, and the value can therefore go down as well as up. You may get back less than you invested.
The levels and basis of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.
SWT Wealth Management is an Appointed Representative of and represents only St. James’s Place Wealth Management plc (which is authorised and regulated by the Financial Conduct Authority) for the purpose of advising solely on the Group’s wealth management products and services, more details of which are set out on the Group’s website www.sjp.co.uk/products.
To find out ways we can help visit: www.swtwealth.co.uk or contact us on 029 2252 0168 or 07946183512