‘In this world nothing can be said to be certain, except death and taxes.’ – so said Benjamin Franklin in 1789 in a letter to his friend and fellow pioneer in the study of electricity, French scientist Jean-Baptist Leroy.
Well, in the world of taxes, there’s also another certainty – and that is that April 6th always heralds the start of a new tax year here in the UK – don’t get me started on the reason for the 6th April – that’s another story for another day!
So what does the new tax year mean for us – what should we do, if anything, and how can we plan going forward. Well, as always, the advice with tax is know what you are entitled to and make sure you either claim it or make use of it because if you don’t – and here’s another certainty – no one’s going to tell you or give it to you!
The first thing to do is to check that your tax code is correct and that you are paying the right amount of tax. You can calculate this by going to the website www.gov.uk and clicking on the money and tax section – and whilst you are at it make sure you are claiming the right amount of personal allowance – you’ll be amazed just how many people aren’t.
Look at where your money is and where it is invested – when was the last time, for example, you looked at the rate of interest your bank or building society is paying you on your savings accounts. If the answer to this question is some while ago then there are almost certainly better rates out there for your savings – a quick look in the money sections of the weekend newspapers will give you some ideas, as will a quick search on Google.
Make sure you make the most of your tax free allowances across the year – in particular for ISAs and capital gains. Both allowances will increase from 6th April meaning you can now invest up to £15,240 in a tax free ISA and you can make capital gains on your investments of up to £11,100 without the need to pay capital gains tax.
Do you want to help your grandchildren in later life? Then why not consider opening a junior ISA for them. This acts in the same way as a grown up ISA would for yourself and allows you to pay in a tax free lump sum of up to £4,080 each year – all interest is then credited tax free. This is a very good and tax efficient way to maybe help them get through university, or help you mitigate your inheritance tax bills by gifting money to them over a period of time.
If you are married and are lucky enough to be a higher rate tax payer then ask yourself is your spouse in the same position as you? If not, then you might want to consider transferring some of your income generating assets into the name of your spouse to make full use of their personal tax allowance. After all there is no point you paying higher rate tax on investment income if you don’t need to!
And check that your will is up to date and in order and that your inheritance tax position is as organised as it can be. It may not seem a massive sum, but you are allowed to ‘gift’ a maximum of £3,000 each year free of inheritance tax from your estate. Any gifts over this amount will be subject to the ’seven’ year rule – meaning that inheritance tax can still be payable should you die within a seven year period from making the gift.
Tax really is taxing – if in doubt as always – seek specialist advice!
by Aidan Sawley