SWT Wealth Management
Advertising feature: So here we are already in tax year 2022/2023. As usual the tax year ended with the same mad rush, with people wanting to use their tax efficient allowances before they were lost. Every year we talk about how important it is to make use of some or all of the allowances that you are given each year in advance before the tax year ends. Yet virtually every year we still see the same rush at the end. Based on this, I thought I would give you a reminder well in advance of some of the valuable allowances you are given. The sooner you address them, the sooner your money could be working harder for you.
ISAs: You have an allowance of £20,000 each year that you can fund into an ISA. Either cash or stocks and shares or a mixture of them both as long as you do not exceed the full £20,000 allowance in total. Cash ISAs invest in cash deposit accounts and attract a rate of interest. The interest is not subject to income tax, no matter what your rate of income tax is. These are aimed at short term savings as they could struggle to keep pace with inflation over the longer term. Stocks and shares ISAs offer the potential for higher returns and are free from income and capital gains tax but are not capital secure. Meaning their values could go down as well as up. For this reason, these are aimed at longer term savings of 5 or more years.
Pensions: You can fund up to 100% of your earned income, capped at £40,000 per year, into a pension and receive tax relief on the money you paid in. So, if you earn £20,000 per year, you fund up to £20,000 to your pension. If you earn £45,000 per year, you can fund up to £40,000. Higher earners can potentially go back and use up some of their previous tax years allowances if they have the income and availability to support it.
What is tax relief?: If you pay into your pension through your employer, it is likely to be paid through salary sacrifice. This is where your employer deducts your pension contribution before you pay tax. You then save the tax and national insurance on the money that is going into your pension. For basic rate taxpayers each pound you pay actually then costs you 80p. If you’re a higher rate taxpayer this cost is, then reduced to 60p. If you pay into a personal pension rather than an employer one, the tax relief is added to your pension instead. Meaning if you pay basic rate tax and add £200 into your personal pension each month. The actual amount that would go in is £250 after tax relief is added. This also applies to lump sums. If you are a higher rate taxpayer, you can then claim back the other 20% via self-assessment. Remember though any monies paid into a pension cannot be accessed until age 55 and this is rising to 57 in 2028.
Business owners: Your business can pay into your pension for you. This is classed as a business expense and your business will get the tax relief and save on corporation tax. It is a very tax efficient way for business owners to extract profit from their business and build up a fund for their retirement.
Capital Gains Tax (CGT): Your annual CGT allowance is £12,300. This allows you to sell shares, property, and other assets without having to pay tax on the first £12,300 worth of gains. (Pensions, ISAs, and your main residence are exempt from CGT)
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. The value of any tax relief is 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