The new tax year – act now or pay later?

Many people, and even professional advisers, will leave tax planning to the last minute – using up ISA allowances and making pension contributions in the final few weeks of the tax year. However, as we enter the 2016/17 tax year, getting your planning done early is very much the order of the day.

There are some issues to be aware of and taking action now could make a big difference to your tax liabilities for 2016/17 and beyond.

Use your ISA early

Business owners who receive the majority of their income by way of dividends should ensure that any investments that could generate any dividend payments are sheltered in an ISA at the earliest opportunity.

You can usually utilise the “Bed & ISA” facility to help transfer any existing investments you may hold into an ISA and doing this early will mean any dividend payments occur within the ISA and will not be added to your income for the year.

This doesn’t just apply to business owners either. If you receive dividend income from your investments that exceeds £5,000 pa then using your ISA allowance early could also be of benefit.

Pension changes – don’t get caught out

There are some big changes this tax year and many people could get unwittingly caught out as a result.

The first is a reduction in the Lifetime Allowance (the total value of all your pension benefits before you pay punitive tax charges) is reducing to £1m to £1.25m. Some people will be able to protect the previous value of £1.25m through something called Fixed Protection however in order to do this, no pension contributions should be made after 6th April 2016.

The second change is a reduction in the Annual Allowance (the amount you can pay into pensions and receive tax relief) for higher earners. Those with total incomes above £150,000 will see the allowance restricted and for some people it could be as low as £10,000 compared to the standard allowance of £40,000.

This allowance includes both employer and personal contributions too so again, this is an important consideration for business owners who may make larger lump sum contributions from their business.

If the annual allowance is exceeded, then those individuals will face a tax charge at the end of the year. Therefore, it will be important to be aware of this and make any adjustments to contributions accordingly.

Failing to prepare is preparing to fail

There are plenty of changes to taxation and pension in this tax year and failing to plan for them at the earliest opportunity could lead to quite punitive consequences in terms of additional tax charges.  Planning early in this tax year is more important now that it possibly ever has been.

If you or your clients would like any help in working out the best way to plan for these changes and how to make the most of the opportunities available, feel free to get in touch.

What do our clients have to say?

I was recommended to Simon when I moved from London to Hampshire around 10 years ago. I wanted top quality financial advice across both my highly intertwined business and personal/family lives, able to be delivered often face to face without too much travel effort. My needs started with tax management advice but quickly spread to how to fund a house purchase and renovation, and then my children’s education. As I reach my mid-50s, the questions have been more to do with pension, London property and my family investment portfolio. Simon has been beside me all that way. Why? Well, professionally, because he knows his subject, is always well prepared, can explain things quickly and clearly, and is sensible and sincere in his advice. When occasionally I have questioned him toughly, he has proved his advice can withstand that. So, I have learned to trust his recommendations, which always save me time, stress and help me to be financially well prepared. On a personal level, it is always nice to see him as he is friendly, tries really hard to help and makes all his clients, however unimportant in terms of fees, feel looked after and valued. Trust him, it’ll be worth it.

James, from St Marybourne

We have used Simon for around 10 years. We started from a point where retirement was a scary thought which we could never afford. Working with Simon we put a plan together and now we feel that financially the future is much clearer. Simon is not one for fancy high risk instant results; he has always made this clear and in the process has steered us away from several ‘get rich quick’ schemes that have tempted us.

Mike, from Whitchurch

We were looking to invest a windfall for the long term in a tax-efficient way so that it could provide additional support to our disabled child in the future. Simon arranged a plan that provides for this and also combined our various pension schemes onto a consolidated platform. This enables accurate cash flow modelling that would not be possible with a variety of scattered funds. Our regular reviews have been invaluable in reducing any financial uncertainty and concern. Simon has arranged life cover offering greater value for money and with premiums paid directly from my company, effectively reducing the cost.

John, from Godalming

I have been working with Simon for a number of years now and have come to really value his financial planning advice. He first helped me to invest the money I made from selling my business and since then he has continued to advise my husband and I on all aspects of our financial and retirement planning. Simon brings a well-informed, balanced perspective to our financial decision-making that is always reassuring.

Rachel, from Richmond-Upon-Thames

We originally contacted Simon shortly after we married, as we had a diverse portfolio which was proving difficult to manage. Simon helped us to clarify our investment aims for growth and income over our working lives and into retirement, providing the information we needed to select the appropriate risk strategy for our investments. Our portfolio is now well structured and easy to manage, together with regular updates on the value. Simon meets with us at least once a year to discuss our portfolio, is always well informed, providing us with appropriate advice and information to make any decisions.

William, from Southampton