Happy new year!

“But Ian,” I hear you cry, “It’s April – the new year started months ago”. Quite correct, it did indeed, but for very obscure historic reasons the UK’s tax year starts on 6 April.  As  such, this is the first working day of the New Tax Year.  So I reiterate: Happy New (Tax) Year!

For anyone looking after their finances in the UK, this means that a few things will have reset with the start of the New Tax Year.  As a starter for 10, here are some things that you can now think about:

• Individual Savings Accounts – these are the most obvious, as you get an allowance of £20,000 each tax year which must be either used or lost.  Money placed into an Individual Savings Account (ISA) can then generally grow  free of income tax on interest and dividends and capital gains tax on growth, as long as the account is investing solely into ISA-qualifying assets.
• Junior ISAs – children also get a JISA allowance from birth to age 18.  This is currently £9,000 per child, and the tax benefits are largely the same as an adult ISA, with the expectation that when the child turns 18 the account will convert from a JISA into a regular ISA.  Incidentally, children aged 16 and over also have access to the full £20,000 ISA allowance, though they can only access cash ISAs with this part of their allowance.  This means that for a limited time, children have an annual ISA allowance of £29,000.
• Capital Gains Allowance – any gains you have realised from existing investments are first checked against  your remaining CGT allowance, currently £3,000 a year.  As we are at the start of a New Tax Year, this likely means that almost everyone has the full £3,000 available to use.  Again, this allowance is lost if not used in a given tax year.
• Pensions – pensions are no longer as firmly linked to the tax year because of the advent of Carry  Forward Allowance, but the New Tax Year still represents a new Annual Allowance for your pensions.  By default this  is £60,000 gross per person, but this figure quickly gets complicated for very high earners, even without the additional complexity  of Carry Forward.  Still, if you have been diligently paying in to your pension as much as you can in recent years, this new allowance might be of  interest to you.
• Venture Capital Trusts & Enterprise Investment Schemes – I am definitely straying off the beaten path with these, but they are relevant to the New Tax Year because the contribution allowance is  linked to the tax year of application.  VCTs allow for up to £200,000 per tax year, while EISs allow up to £1 million, so it’s a fairly rare person who hits the limits for these types of investment.  They’re also much higher risk than most people are willing to accept, but I  include them in this because they can still be appealing, especially given the preferential tax treatment.

I’ve not mentioned the personal savings allowance or the dividend allowance because for most people these are ongoing considerations for their savings and shares rather than transactional.  But these have also reset.

New Tax Year Conclusion

The urgency of the end of the tax year is behind us, but that doesn’t mean there aren’t things to think about.  If you’d like to get started on streamlining your finances and taking advantage of some of the allowances the New Tax Year brings, feel free to get in touch.