Make the most of your annual exemptions

We are getting closer to the end of the tax year and so it is time to think about your annual exemptions and how you can get the most out of them.   

The annual exemption of £3,000 can be gifted, free of Inheritance Tax, to an individual of your choice each tax year. This allowance is per person, so couples could give away £6,000 to the same individual if they so wish. This allowance can be carried forward one year, so if you forgot to give this last year you will now have £6,000 each that you can give this year. It is only possible to carry forward one year though, so either use it or lose it.

You can make small gifts of £250 per person, free of Inheritance Tax, to as many people as you want to, or can afford to! This cannot be part of a larger gift, otherwise it becomes taxable.

You can give gifts that are “out of your normal expenditure” free of Inheritance Tax. This can be interpreted differently, so be careful. This gifting strategy has no monetary limit but gifts must be made in a pattern, must form part of your normal expenditure, be from income (not capital) and leave you with sufficient income to maintain your normal standard of living.

Don’t forget about your Capital Gains Tax allowance – you can make and withdraw £11,100 of gains on your investments before you are taxed. If you need to access investments but want to avoid the tax, make sure you are using up this allowance each tax year. If possible, hold your assets jointly so that you get two allowances when you access the funds.

And finally, always try to use your ISA allowances. This year you can invest £15,240 in ISAs, increasing to £20,000 in the next tax year. This is a “use it or lose it” allowance, so be sure not to waste it. Cash withdrawals from an ISA are completey free of Capital Gains Tax or Income Tax. You can still invest in the same funds, most of the time, so what is the point in not doing it?

There are many more ways to mitigate tax, either through gifting or allowances, so if you want any further information on this, or anything else, please call our offices and someone will be able to help.

Important – Use it or lose it!

The end of the Tax year (5th April) is fast approaching. If you are thinking of taking advantage of a particular allowance then NOW is the time to act before its too late.

If you need information on the following:

• NISA investments  • Capital Gains Tax Allowances  • Enterprise Investment Scheme Tax Credits  • Venture Capital Tax Credits  • Pension Contributions for Higher Rate Income Tax Relief

Please contact your adviser.
Telephone: 01793 881602    Email: