Be that Bird
Happy New Tax Year! As I’m sure you know, the new tax year started on the 6th April and with that, the chance to make as much early use of your 2021/22 allowances. Getting your money to work in a tax-efficient manner at the beginning of the Tax Year always makes sense (see the bit on compound interest below), and whether you have a lump sum to invest, or you want to start making regular contributions, be the bird that catches the worm this year!
To remind you, these are the current allowances you can use up.
ISA’s
You can invest up to £20,000 as an individual into your ISA account each year, with all proceeds being free of Income and Capital Gains Tax. For a married couple that is £40,000 that can be invested in a tax-free environment each year.
JUNIOR ISA (JISA)
The Junior Stocks and Shares ISA limit is £9,000 per year. If you have a child who is 16 or 17, there is a quirk which means not only do they have the £9,000 JISA allowance, but they can also use the £20,000 Cash ISA allowance. So that’s up to £29,000 a year that can be put away over 2 years.
PENSION ANNUAL ALLOWANCE
If your total earnings do not exceed £240,000 p/a, you can invest up to £40,000 this tax year into your pension, and you will get tax relief at your highest rate against the contribution. This will reduce by £1 for every £2 of your income above £240,000, with the minimum allowance being £4,000 per annum.
It can get a little complicated so have a look here for some more detail.
OTHER “NEW TAX YEAR” IDEAS
Not exactly the most fun you’re going to have of a night, but while we’re spring cleaning the planning closet and getting our “birds in a row”, when last did you review your Protection Policies? An imperative part of planning is ensuring that you and your family are adequately covered. Not only does this mean that your loved ones will be taken care of if the unthinkable should happen, but that you’ll be able to rest assured knowing that it is all in hand. If you have any existing policies, make sure that they are written into a Trust to get any proceeds paid outside of your Estate on death.
So, don’t put this off, and as it’s much easier to do this together, give us a call and let us review your needs and help you look at what you may already have in place.
THAT LITTLE THING CALLED COMPOUND INTEREST…
As mentioned above, the earlier you start saving the better – just from a time point of view – obviously the longer you save a regular amount the more you will have at the end. But it’s not just how much you save, the key can be the interest or growth that you receive, and the fact that you then start to accumulate growth on not only the amount you’ve invested but the growth you’ve received. Growth received on growth, or compound interest, will over the long term, make a big difference as to how much your savings are worth in the future.
So, if you have cash sitting on deposit which you are not looking to access over the next few years, please let us know and take advantage of being at the front of the queue.
The information in this blog is for your general information and use and is not intended to address your particular requirements. Specifically, the information does not constitute any form of advice or recommendation by Carrington Wealth Management and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. It is important to remember that the value of your investments can go down as well as up, and you may not get back the amount you invested. Past performance is not necessarily a guide to future performance. Please contact us for appropriate independent advice, which should be obtained before making any such decisions.
