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Tax wealth check - Start planning your returns

ISA returns of the year
Don’t forget to take full advantage of your Individual Savings Account (ISA) allowance before the end of this financial year. Individuals can save up to £11,520 in an ISA during this financial year and not pay tax on the income received from the investment. A financial year runs from 6 April until 5 April the following year. An ISA can be made up of an investment in cash, or longer term investments like stocks and shares or insurance.

Take it to the max
Taking your pension contributions to the maximum will enable you to build up a sum of money in a tax-efficient way for use later in life. Up to age 75, you get tax relief on contributions of up to 100 per cent of your earnings each year, subject to an upper 'annual allowance.
Savings above the annual allowance are subject to a tax charge.You can currently take benefits from age 55. When this option to take benefits becomes available, you do not have to be in retirement to make use of them. You can also take up to 25 per cent of your fund as a tax-free cash lump sum.

Tax breaks
If you are a parent or grandparent consider using the full tax breaks of the Junior ISA. Contributions can be up to £3,600 each year by parents and other friends and family. The money grows free of income tax and capital gains tax (CGT) and is locked away until the child reaches 18.
Money given by grandparents will escape inheritance tax (IHT), provided the donor survives for seven years after making the gift.

It’s good to give
If one spouse pays a higher rate of tax than the other, then the couple could pay less tax by putting savings and investments into the name of the lower earner or at least into joint names.

Paying too much tax
Those with more than one source of income, more than one job and multiple pensions are most at risk of paying too much tax. This also applies to pensioners as well as those in work. H M Revenue & Customs now assume that individuals are claiming their personal tax allowance elsewhere so a pensioner with more than one pension may not be receiving any tax allowance at all, let alone the higher allowances for those aged over 75.

Claiming back tax
Even “non” taxpayers and low earners can make tax savings. Non-taxpayers can ask to receive interest gross (without tax deducted) by filling in form IR 85 available from banks and building societies. Those who have been paying tax unnecessarily can also claim back tax deducted from their savings over the past five years.
Tax-efficient donations
Making donations in cash is rarely the best way to help a good cause. Give through a tax-efficient scheme such as a deed of covenant, Gift Aid or payroll giving and the charity can then reclaim basic rate tax relief. Good causes benefit more by receiving donations in this tax-efficient way. Higher-rate taxpayers also receive an added benefit as they can claim the higher rate relief for themselves.

Don’t miss the deadline
Some 9m taxpayers are required to fill in a self-assessment tax return each year by the deadline of January 31 after the end of the tax year, on April 5, to which the return relates. It is estimated that in the region of 450,000 individuals miss the deadline or fail to pay their tax on time. Penalties start at £100 for missing the deadline and rise for failing to keep adequate records.

It’s a matter of trust
Ensure that the proceeds of life insurance payments go directly to your heirs rather than forming part of your estate. Life insurers have standard forms that can be completed which is one way to reduce a potential IHT liability. Otherwise the proceeds could be taxed at 40 per cent, if the estate in the current tax year is worth more than £325,000 per person, or £650,000 for married couples and members of civil partnerships.

Going for growth
The new 18 per cent CGT rate will make growth investments far more attractive than those that pay income. Assets that can generate mainly capital growth, instead of income, include some unit and investment trusts, shares and property. The other advantage of opting for growth is that relatively few people make any use of the current annual £10,900 CGT allowance. Stocks and shares moved into an ISA fall outside of the scope of CGT and will not reduce the annual exemption.


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Levels and bases of, and reliefs from, taxation are subject to change.