So, the new tax year is with us, it’s Springtime and, although the General Election might be causing uncertainty and speculation about what the future might hold for us all, it’s a good time to be spring-cleaning your personal finances.
The start of the new tax year is always a great time to start making the most of the changes in legislation and tax reliefs that work to our advantage.
The ISA allowance has increased to £15,240 per adult and £4,080 per child, meaning more opportunity for hugely tax-efficient investments. For the first time, it’s now possible to transfer a Child Trust Fund into a Junior ISA. If you have a child born between 1 September 2002 and 3 January 2011, chances are you have a child trust fund in their name. However the investment options for these funds are limited compared to the options for Junior ISAs – which are essentially the same as for any adult ISA. As you have a defined timeframe to work to i.e. until your child is 18 (at which point, be aware that your newly adult son or daughter will be able to access the money in their own right), so this can shape the risk profile that’s appropriate if you choose to invest for growth in a Stocks & Shares Junior ISA.
But the most significant changes relate to pensions, and the increased choice there now is for how to take your pension benefits. Anyone with a “money purchase schemes” (basically any scheme that’s not an employer Final Salary scheme) is no longer forced into buying an annuity with their pension pot. An annuity is a guaranteed income payable for the rest of your life, so it will continue to be a suitable option for people who want certainty over their future income. Alternatively you can access the cash in your pension pot through a process called Drawdown, or you can take it all as a lump sum. The tax treatment of each option is complex and given how important it is to get it right – as it will affect your income and therefore your standard of living for the rest of your life – it’s so important to get proper advice from a Financial Planner.
The government have offered “guidance” to everyone, but be aware that “guidance” is not the same as “advice”. “Guidance” is information about the options available to you – and then you have to make the decisions. “Advice” is a clear recommendation that takes account of your personal circumstances, your tax status, the amount of income you really need to meet your monthly expenditure, as well as your future goals and your intentions for passing on your estate to future beneficiaries.
Taking the time to work closely with a Financial Planner to ensure you make the right decisions that suit you personally could be the best time you ever spend.
To receive a complimentary guide covering Wealth Management, Retirement Planning or Inheritance Tax Planning, please contact Amanda Redman on 07801 045587, email [email protected] or visit www.amandaredmanfp.co.uk
Remember that the value of a Stocks & Shares ISA can fall as well as rise, and you may get back less than the amount invested. An investment in a Stocks & Shares ISA will not provide the security of capital associated with a cash ISA.
The favourable tax treatment given to ISAs and Pensions may not be maintained in the future as they are subject to changes in legislation.