A few tax changes to take advantage of

I am writing this article on the 6th April; the start of the new tax year. All the last minute tax planning has been completed and if it’s not done by now – it’s too late! Some of the changes in the last budget have now ‘gone live’ and we move forward with the new rules. Here are a few of the more interesting changes:

Personal Savings Allowance

All basic and higher rate tax payers now benefit from a tax free allowance on earnings from savings. Basic rate tax payers can earn up to £1,000 of savings interest without paying tax. Higher rate tax payers have a £500 allowance. This relates to the money you have ‘on deposit’ in bank and building society savings accounts. What it means is a basic rate tax payer earning interest of 1.5% on their savings will pay no tax on the interest as long as they have no more than c.£66,000 in the account.

Dividend Tax Free Allowance

Shareholders can now earn £5,000 in dividends per tax year, with no liability to tax. No tax will be deducted at source, and any dividends over that amount will be taxed at 7.5% for basic rate taxpayers and 32.5% for higher rate taxpayers. This will have an impact on people holding shares, as well as business owners who use dividends as a form of remuneration.

Personal Allowance

The personal allowance, above which you will start paying income tax is now £11,000. Higher rate tax payers will be those earning over £43,000.

Capital Gains Tax

A fall from 20% to 10% for basic rate tax payers and a similar 10% reduction to 18%  for higher rate tax payers. However note that if you are selling an ‘investment property’ the old rates still apply.

ISA’s

There are now numerous versions of ISA’s – ISA’s for general savings, for youngsters, for future house purchase, for retirement to mention just a few. I will cover this another time, but in the majority of cases ISA allowances are worth using as another way to accumulate wealth in a tax efficient manner. Because Cash ISA rates are lower than some ‘interest paying current accounts’ at the moment and with the personal savings allowance changes mentioned above, there is a dichotomy which needs exploring further which I will do next month.

Please be aware that none of the above constitutes financial advice. We recommend that you consider your existing investments and/or pensions and any new money you are thinking of investing and then take advice.

Author: Phil James, Grosvenor Consultancy Ltd

There are advantages and disadvantages to using all of these strategies and they depend on individual circumstances so don’t take action without seeking competent advice. Tax rules, rates and allowances are all subject to change. The Financial Conduct Authority does not regulate tax advice and some forms of offshore investments. The value of investments and the income from them can fall as well as rise and you may not get back the full amount you invested.

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