How would you feel if you realised you’d been giving the taxman more money than you needed to? With the tax year ending on April 5 2017, this is a reality many savers are now facing.
It’s why we’ve created this simple checklist to help you maximise your returns before it’s too late.
1. Use your £15,240 ISA allowance
Your savings can grow tax-free with an Individual Savings Account (ISA). By making the most of your annual allowance, which is £15,240 this year, you won’t pay any income tax above the basic rate and all capital gains will be tax free.
The annual allowance will jump to £20,000 from April; make sure you use as much of this as possible as it can’t be carried over.
The UK could save millions by transferring savings from instant access accounts, where they are at risk of being overtaxed, into an ISA. What savers need to be mindful of is returns; with the Bank of England keeping interest rates at 0.25% it is difficult to get inflation-beating rates with cash accounts.
Although investors can optimise their savings with a stocks and shares ISA, many are still keeping their money in cash. The UK lost out on a potential £4.1billion in 2015 by refusing to switch.
2. Maximise your capital gains
This year £11,100 is exempt from capital gains tax. If you don’t use this exemption, you’ll lose it. You can gift assets to your spouse or civil partner so they can make the most of their exemption too.
If you have any assets that have fallen in value, you may be able to offset these losses against your current gains.
3. Make your life easy and transfer
It’s not easy to keep track if you’ve used a different ISA provider each year. Transferring your ISA into one place makes it easier to keep on top of your investments and doesn’t impact your annual allowance.
It’s important to balance the amount you can save against any tax, management fees and potential returns. Take advantage of the ISA allowance and ensure the cost of your provider suits your needs.
Moneyfarm are not tax advisors and tax treatment is dependent on an individual’s personal circumstances. If you are unsure if an ISA is the right choice for you, please seek independent financial advice.
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