myNLPFM

Happy New Tax Year

After a busy few weeks for our advisers, Saturday 6 April marked the start of a new tax year.

Here are some of the key tax changes from a financial planning perspective:

  • The personal allowance is now £12,500 per annum.
  • The threshold at which higher-rate tax kicks in has also increased to £37,500.
  • Therefore, the higher-rate tax band will apply once income exceeds £50,000 per annum.
  • The annual capital gains tax exempt amount for individuals now stands at £12,000 per annum. Trusts get half this limit.
  • The lifetime allowance limit has increased to £1,055,000. Pension savings above this limit will be subject to pension tax charges.
  • The Junior Individual Savings Account limit has increased to £4,368 per annum.

An essential part of our service which our clients value is helping them stay on top of these changes and ensuring their affairs are managed as tax-efficiently as possible.

Looking at the changes, our view is that given the generous uplifts in thresholds from an income tax point of view, now may be the time to deliberately generate more income from portfolios and we will be considering such planning for our clients. This could be done by increasing income from taxable sources such as pensions and Investment Bonds.

At the same time, certain rules remain unchanged and require careful planning, such as

  • The additional-rate threshold also stays unchanged at £150,000, bringing even more clients into the top tax rate of 45%.
  • If your income exceeds £100,000 per annum, your personal allowance will reduce by £1 for every £2 of income above the £100,000 limit.
  • The National Insurance contribution thresholds have been increased by nearly 8%, so the upper earnings limit for employees and the upper profits threshold for the self-employed is rising to £50,000.
  • Individuals with earnings in excess of £110,000 gross per annum need to keep an eye on Tapering rules in terms of pension contributions.

It is never too early in the tax year to check and plan and we will be reviewing our clients’ affairs and considering suitable planning at regular reviews.  However, please do not hesitate to get in touch if you would like a review now.