FINANCIAL ADVICE CENTRE NEWS
Your Spring Newsletter 2020
Your Adviser Discusses
These are indeed interesting times we are living through. Albeit it is the Coronavirus that is dominating all thinking at the moment, there will come a time when our sole focus widens and it is helpful to be aware of the some of the relevant changes that were made in the last Budget. Below is a an overview of the recent announcements and opportunities for 2020/21.
Budget overview new tax year and opportunities for 2020/21
There were no changes to the income tax thresholds, Inheritance tax, and minor changes to capital gains tax and your tax efficient allowances such as Isa’s and pensions.
As such, the changes for this tax year were received positively by us and the adviser community. Below I share some generic advice that relates to this to ensure you stay well informed and continue to maintain a tax efficient investment strategy, utilising the full extent of the allowances available.
ISA allowance for tax year 2020/21
The current allowance for the new tax year 2020/21 remains at £20,000 per person. You may have cash Isa’s or surplus cash funds that could be used to invest. With markets low at the moment this can be viewed by many as a potential to ‘buy in’ to the market at perceived lower rates, while investing in a tax efficient plan wrapper, which the Isa allows. If this is the case please contact me to discuss the options available to you and if appropriate to your current situation.
A £90,000 increase to the tapered annual allowance threshold was announced. This could remove funding restrictions for many high earners and those with income over £300,000 could see their tapered annual allowance reduced to £4,000.
With no changes to pension tax benefits proposed there is an ongoing opportunity to contribute into a pension and receive the tax benefits this wrapper has to offer. Tax relief can be obtained at your highest rate ie a £10,000 contribution will be grossed up to £12,500 for a basic rate tax payer and a further £2,500 rebate from HMRC for higher rate tax payers. For retired clients and those no longer working, a maximum of £2,880 can be contributed grossed up to £3,600 each tax year until aged 75.
There are no changes to the standard annual allowance (AA), which remains at £40,000, as well as the money purchase AA which stays at £4,000. The Lifetime allowance increased in line with CPI to £1,073,100.
All pensions we set up are now considered outside of your estate for inheritance tax purposes. They can be used for part of your estate and legacy planning through the government’s ‘pension freedoms’. Please feel free to contact me to talk this through in more detail and make a recommendation for your own circumstances.
Capital Gains Tax
The annual capital gains tax allowance was increased to £12,300 for individuals and to £6,150 for trustees in the 2020/21 tax year.
As expected, the Inheritance Tax (IHT) nil rate band will remain frozen at £325,000 until April 2021. And the Residents Nil Rate Band (RNRB) will increase from £150,000 to £175,000 from April 2020, delivering on the Government's commitment to allow some couples to leave an IHT-free inheritance of up to £1,000,000 to future generations.
We continue to use these figures in the IHT tax planning we do for many clients alongside HMRC recognised tax planning products such as Venture Capital Trusts, Enterprise Investment Scheme and Alternative Investment Market IHT portfolios. Many of which we have covered in previous newsletters.
To find out more about Inheritance and Legacy planning please call so we can relate this to your personal circumstances.
Junior Isa (JISA) limit increases to £9,000
As expected, the Individual Savings Account (ISA) annual subscription limit remains unchanged at £20,000. However, in a positive move for young savers, the annual subscription limit for Junior ISAs and Child Trust Funds will be increased from £4,368 to £9,000.
The range of ISAs available remains unchanged, with the exception of the Help to Buy ISA, which closed to new investors in November 2019.
Financial advice for all your family
We are able to extend the financial advice you receive to all of your family. Whether you are considering gifting; making legacy plans or setting up a trust for the future, it is important to look at the family wealth holistically. We are here to help you by making recommendations as to how this can best be achieved.