Blog

The approach of the tax year end is an ideal time to review tax situations and lifetime financial plans. So, what should you be thinking about at this time of year?

Individual Savings Accounts (ISA)

The current annual subscription limit of £10,680 p.a. into a stocks and shares ISA doesn’t sound that much but with regular savings this can build to a sizeable savings pot. Make arrangements to use the £11,280 2012/13 allowance as early as possible in the new tax year – to maximise the benefits throughout the tax year.

Investments for children/grandchildren

National Savings Children’s Bonus Bonds are still available for children under age 16. The limit is £3,000 for each child, currently 2.5% AER compound guaranteed over the first 5 years, then a fixed rate notified at each 5th anniversary to age 21 and a final bonus on the 21st birthday; they are tax-free even if the funds are provided by the child’s parents.

Capital Gains Tax – utilising the annual exempt amount

Make full use of the annual exempt amount by realising capital gains where appropriate - £10,600 in 2011/12 and remaining at this level in 2012/13.

Pensions – Reduction in the lifetime allowance and Fixed protection

The lifetime allowance on pension savings is to reduce from £1.8m to £1.5m from 6th April 2012. Individual retirement plans should therefore be reviewed to decide if it is appropriate to apply for fixed protection, thus preserving a £1.8m lifetime allowance and the opportunity to take a larger tax-free sum. This has to be balanced against the requirement that in order to qualify for fixed protection there can be no further contributions or benefit accrual after 5 April 2012.
 
Estate planning - maximising the use of exemptions and reliefs:

Where appropriate, use the £3,000 annual exemption (and any unused exemption carried forward from 2010/11). Note that gift aid payments can be carried back to 2010/11 if taxable income in 2011/12 has reduced and would fall within a lower tax band.

Most importantly, remember...

Lifetime financial planning is a continuous ‘looking forward’ process, so think about whether you have a suitable financial plan in place, so that any tax planning is undertaken within the right context.