Four allowances to use by the end of the tax year
The current 2020/21 tax year will end on April 5, 2021. Using these four allowances before the deadline can help you get the most out of your money.
ISA allowance
ISAs are a popular way to save and invest. They are tax-efficient, you don’t need to pay income tax or capital gains tax on the interest or returns earned. Maximising your ISA contributions to make use of the annual allowance can reduce your tax bill. The current ISA allowance is £20,000 per tax year.
Pension annual allowance
Your pension allowance means you can usually invest up to 100 per cent of your earnings (up to a maximum of £40,000 annually) and benefit from tax relief on it. The tax relief provides an instant boost to your pension savings, making it an effective way to save for retirement. However, if you’ve already accessed your pension fund or are a high earner, your allowance may be lower.
Capital gains tax allowance
When you sell or dispose of certain assets, you may be liable for capital gains tax (CGT) on the profit made. The current CGT annual allowance of £12,300 means that most people will not have to pay this tax. However, if you’re likely to exceed the limit, spreading out the sale of assets across several tax years can make sense.
Gifting allowance
You may wish to consider using your annual gift allowance of £3,000 per person – meaning a couple can pass on £6,000 a year without any tax liability. Although you can carry this forward for one year, it is then lost if it is unused. You may have an unused gift allowance for 2019/20 which can still be used until April 5, 2021.
The above list isn’t exhaustive, other allowances may be available to you.
Contact our team to find out more about how we could help you. Call 01954 233650, email financial@gibbsdenley.co.uk or visit gibbsdenley.co.uk.
This article is for information only, and does not constitute financial advice.
Subscribe to our weekly email newsletter and get the latest business news from the Cambridge region straight to your inbox every Friday.
Read more from Gibbs Denley
Why you should involve your children in financial planning
