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Mortgage Planning

Tax Year End Checklist (Part 2)

ISA Allowance

Everybody has an ISA allowance of £20 000 per year. An ISA is basically just a ‘wrapper’ that can hold an asset, normally cash or stocks and shares. As described above, you can earn a certain amount in savings interest each year before being liable to tax via the Personal Savings Allowance and Starting Rate Band.

Therefore, depending on how much you have in Cash Savings, you may want to consider investing in a Stocks & Shares ISA. That way you are protected against dividend tax and capital gains tax.

Dividend Allowance

Everybody is entitled to receive up to £1,000 per year of dividends tax-free. This is due to half again to £500 for tax year 24/25. This is particularly useful for if you own shares (outside of an ISA) or are a director of a company.

If you own a company, consider appointing your spouse as a director to make use of their dividend allowance also.

Capital Gains Allowance

If you make a gain/profit on an investment (or second property) you pay capital gain tax. Everybody has a capital gains tax allowance of £6000 per year, set to decrease to £3000 in 24/25.

If your spouse is on a lower tax bracket to yourself, it may be feasible to transfer ownership of said shares/property to them before selling

You can also sell taxable investments and reinvest them tax efficiently. For example, you could sell an investment and reinvest the proceeds in a stocks and shares ISA. This uses your capital gains tax allowance and ensures that any gains in the future are tax-free.

Pension Carry Forward Allowance

On top of the annual allowance of £60k, you can carry forward any unused pension allowance from the previous three tax years. The annual allowance for the previous 3 tax years was £40k, so in theory a £180k lump sum contribution could be made.

Tax Advantaged Venture Capital Schemes:

The Enterprise Investment Scheme (EIS), Venture Capital Trust Scheme (VCT) and Seed Enterprise Investment Scheme (SEIS) aim to help unquoted companies attract equity investment by offering investors a range of tax incentives including tax relief and capital gains exemptions.

Don’t invest unless you’re prepared to lose all the money you invest. EIS’, VCTs and SEIS’ are high-risk investments. You may not be able to access your money easily and are unlikely to be protected if something goes wrong.

HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.

The value of investments and any income from them can fall as well as rise, and you may not get back the original amount invested.

Approved by The Openwork Partnership on 04/03/2024

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