tax

Each year, UK taxpayers waste billions of pounds by paying tax unnecessarily or failing to claim tax relief that was due to them. With the advent of the 2017–18 tax year, it’s worth spending time thinking about the tax allowances that are available on savings and investments, and aiming to put them to good use during the year.

Personal allowance

This is the amount of income you can earn or receive in a year without paying tax and, for 2017–18, is £11,500.

ISAs

From 6 April 2017, the annual overall ISA allowance rose to £20,000. The tax-efficient ISA range now includes the Lifetime ISA with an annual contribution limit of £4,000 designed to help those under 40 save for a first home, or build up savings to age 60. It offers a 25% bonus from the government on contributions made until age 50. When it comes to saving for a child, the tax-free annual limit for a Junior ISA is £4,128. It’s worth remembering that there is no Capital Gains Tax to pay when you sell shares or units held in an ISA.

Dividends

For the 2017–18 tax year, the first £5,000 you receive in non- ISA dividends is also tax-free. Personal savings For a basic-rate taxpayer, the first £1,000 of savings interest received is tax-free. For higherrate taxpayers, the threshold is £500.

Capital gains tax (CGT) allowance

The allowance has increased, meaning gains under £11,300 are tax-free. Married couples and civil partners who own assets jointly can claim a double allowance of £22,600.

Pensions

The higher your tax rate, the more tax relief you could receive. You can get tax relief on private pension contributions up to 100% of your relevant earnings, and the standard annual allowance on which tax relief is available is £40,000, tapering to £10,000 for the highest earners.

Gifts that are automatically free from Inheritance Tax

Each financial year you can make gifts of up £3,000 (in total, not per recipient). Gifts of £250 to any number of people are exempt. Each parent of a bride or groom can give up to £5,000; grandparents or other relatives can give up to £2,500 and any well-wisher can give £1,000. Gifts to registered charities and political parties are also exempt. ν

Tax treatment depends on individual circumstances. Tax treatment, rates and allowances are subject to change. The value of pensions and the income they produce can fall as well as rise. You may get back less than you invested.