Well the champagne corks may not be popping, but it really is important that as we all start a new financial year that we ensure that we are maximising our tax free allowances.
Most allowances got better and if you maximised every allowable allowance and tax relief you could earn up to £43,250 tax free in this new tax year* A few of these allowances are a little obscure, but as a summary the main ones that the majority of people could utilise are:
- The amount you can earn tax-free as an employee increased to £12,500
- The dividend allowance remains at £2,000
- £1,000 personal savings allowance can be claimed by anyone who is a basic-rate tax payer
- For those who earn less than the personal allowance, you can also claim the starter savings rate of £5,000 and those earning between £12,500 and £17,500 qualify for some of this
- Marriage allowance increased to £1,250 – for couples where one partner earns less that the personal allowance (£12,500 in 2019-20) and the other partner is a basic rate tax payer. This means that the lower earner can transfer 10% of their personal allowance to their partner, meaning the higher earning partner can effectively earn £13,750 before tax. Click here for more info
- Capital Gains allowance increased to £12,000 -this is the amount of profit you can earn from selling valuable items such as shares, investment trusts etc
- ISA – the annual allowance remains at £20,000 and you do not pay any income tax on interest on the interest or when they are encashed.
- Pensions – From 6 April, the pensions lifetime allowance will increase from £1,030,000 to £1,055,000. This is still the most tax effective way to save for your future as you get tax relief on contributions going in and the ability to withdraw money tax free at retirement.
If you want to discuss any of the above, please contact us.