UK warned to 'not upset US' following tax row
When you subscribe we will use the information you provide to send you these newsletters.Sometimes they’ll include recommendations for other related newsletters or services we offer.Our Privacy Notice explains more about how we use your data, and your rights.You can unsubscribe at any time.
The end of the 2020/2021 tax year is fast approaching and there are many actions you need to take to ensure you do not miss out on funds and benefits you are entitled to. The UK tax year always begins on April 6 and ends on April 5 the following year. Express.co.uk has compiled a list of the best ways you can take advantage of the current tax year before it ends.
What to do before the tax year ends
Use up your ISA allowance
Each year ISA holders are entitled to save up to £20,00 in these accounts tax-free.
You are not entitled to carry this over and therefore you should try to reach this amount or as near as possible to take full advantage of this tax benefit.
First-time buyers saving into a Lifetime ISA (LISA) can only save up to £4,000 into this account each year tax-free, but you can put the remainder of the £20,000 into other ISAs.
If you do not have an ISA, any interest above £1,000 will be taxed if you are a basic-rate taxpayer, or if you are a higher rate taxpayer, you will be taxed on any interest above £500.
The ISA tax-free allowance is therefore much more generous than your personal savings allowance.
Parents are also entitled to save up to £9,000 in a Junior ISA for each of their children aged under 18.
Your children will be unable to access this money until they reach 18, but those who contribute this full amount are likely to see a return on average of 4.5 percent each year, which means it could reach £252,000 if you contribute each year of their life until they reach 18.
Furthermore, if your child does not touch this pot until they reach 50, it could be worth more than £1m by that time.
You can also pay up to £2,880 into a Junior SIPP each year, with Government tax relief automatically boosting that to £3,600.
Reduce your Inheritance Tax bill
You are entitled to gift up to £3,000 each year without incurring any Inheritance Tax.
By gifting these smaller amounts each year, you can decrease the amount of IHT you will eventually pay on your estate.
The current IHT threshold is £325,000 per person and tax is charged at 40 percent for anything above this level.
It is possible you may be able to avoid this amount if you gift £3,000 a year.
You are entitled to carry the gift allowance to the following year but can only do this once meaning your maximum allowance could only ever be £6,000 as a maximum.
You are also entitled to gift up to £250 each to as many people as you like.
Consider opening long-term ISA products
ISAs are relatively simple savings products which can cater to your individual needs.
Interest rates are currently at historic lows and therefore cash savings will likely be eroded by inflation over time.
For long-term savings accounts, you should consider a stocks and shares ISA which offers access to a broad range of funds and shares, with the possibility of higher returns.
HMRC update £500 tax credit boost rules – will benefits be affected? [INSIGHT]
Nicola Sturgeon promised to scrap council tax in 2007 manifesto [EXPLAINER]
Tax refunds deadline: How to claim back payments [ANALYSIS]
Get your tax-free personal allowance back
Most people are entitled to a tax-free personal allowance of £12,500.
When your taxable income reaches £100,000, your personal allowance is cut by £1 for every £2 of your income, which means you lose it completely once your income reaches £125,000.
Benefit from free Government money
Some pension and ISA schemes provide you with top-ups from the Government.
Personal pension contributions are topped by 20 percent from the Government.
With a Lifetime ISA, you can get up to £1,000 from the Government if you make the largest contribution amount each year.
This will equate to £33,000 from the Government if you save from aged 18 to 50.
Check you will continue to receive Child benefit
Child benefit is given to all parents, but as soon as the amount they earn exceeds £50,000 they are no longer entitled to it.
For parents with two children, they will get £1,820 a year in child benefit but will lose 10 percent of this benefit for every £1,000 they earn over this amount.
Parents who have exceeded this limit can increase their pension contributions in order to get their salary back to below £50,000 to entitle them to child benefit again.
Furthermore, parents can make charitable donations from the income above £50,000, but this will need to be declared to the HMRC.
Source: Read Full Article