End of year tax planning

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As the financial year draws to a close on 5th April there is much tax planning to be done for those who may not have taken advantage of the tax breaks available to them throughout  the year.

Individual Savings Account (ISA)

Any UK resident aged 18 or over (16 for cash ISAs) can invest in an ISA. There is no upper age limit and your tax-efficient savings can be withdrawn whenever you need them.

The amount you can invest into an ISA each tax year is decided by the government, this tax year the allowance is £11,280.

Junior ISAs are also available and are expected to become a popular way for family and friends to build up tax-efficient savings and investments to help with the cost of university, provide a deposit for a house or simply give children a great start in life.  There is an allowance of £3,600 per child per tax year, which will rise in line with inflation. The account is held in the child’s name and a parent or guardian can open and manage the account, with anyone contributing up to the annual limit.

Venture Capital Trusts (VCT)

VCTs are listed companies, run by a fund manager, which invest in small businesses.

There are attractive tax breaks available to encourage the provision of private equity capital for small expanding companies and capital gains for investors.

The maximum investment into a VCT is £200,000 per tax year and the investment must be held for five years to retain the tax relief, which is offered at 30%.

This type of investment is not for everyone as it does carry risk.

Enterprise Investment Schemes (EIS) 

EIS’s allow direct investment in small businesses. To encourage this, the government offers 30 per cent income tax relief.  Eventual gains are exempt from capital gains tax and EIS’s are eligible for business property relief for inheritance tax purposes. Investors can put £1m into an EIS per tax year, with the ability to carry back a £500,000 tax allowance from the previous year, and the investment only has to be held for a minimum of three years.

Whether you need advice on which ISA to invest in, or whether VCT’s or EIS’s are suitable for you, the financial planners at Mark Hughes and Associates are here to assist.

Make your appointment in good time for the end of the tax year to ensure tax efficient financial planning.

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