REVIEWING your finances early in the year provides sufficient time before the end of the tax year to make sure that you are fully utilising all of the tax reliefs which are available to you.
Cottons Chartered Accountants understand that everyone’s personal circumstances are different, and how important it is to plan for your financial future in order to manage the balance of saving for tomorrow, alongside making sure you have accessible cash for your lifestyle purposes.
The Personal Savings Allowance was first introduced in April 2016. Basic rate taxpayers (earning up to £33,500), are able to earn up to £1,000 of savings income tax free, with this being reduced to £500 for higher rate taxpayers (earning between £33,500-£150,000). Those who earn more than £150,000 will not qualify for any savings allowance.
This now means that the majority of people will not pay any tax on their savings income. This includes interest from bank and building society accounts, and National Savings and Investments (NS&I).
You do not need to do anything to claim your personal savings allowance. Details related to your savings income should be included on your personal tax return. Basic rate and higher rate taxpayers can save up to £200 in tax from the allowance if utilised in full.
Individual Savings Accounts (ISAs) allow you to save up to £20,000 per year and for the funds to grow tax free whilst held inside a tax wrapper.
Each tax year you can put funds into one type of ISA. Each of the different types of ISAs carry a different type of risk and choosing which to utilise very much depends on the the goals of the individuals using them and whether they plan to draw down on funds in the near or long term future.
ISAs from previous years can be transferred to other providers and types. However, care must be taken when doing so as if not transferred correctly funds will lose their tax free status.
Enterprise Investment Scheme (EIS) and Seed Investment Scheme (SEIS) are tax schemes designed to encourage equity investment into early stage and innovative companies. The schemes carry generous income tax reliefs (among others) and are designed as a measure to de-risk investment for individuals.
Details related to these investments needs to be included on self assessment tax returns in order to qualify for the income tax relief.
For further information and assistance in regards to maximising your savings and taking advantage of tax reliefs call Cottons on 01604 632116 or visit www.cottonsaccountants.co.uk
