Skip to content

Don’t waste your tax-efficient savings

The 2012/13 tax year ends on 5 April. There isn’t much time left to ensure that you’ve taken full advantage of this year’s savings and investment allowances. Here are some of the things you might want to consider before 5 April:

Individual Savings Accounts (ISAs)

ISAs allow you to invest your money in a tax-efficient way and, while the amount invested does not attract tax relief, any income and gains on the investment are tax-free. The total amount that can be invested into an ISA for 2012/13 is £11,280, of which a maximum £5,640 can be invested as cash. The remainder can be invested into stocks and shares.

The ISA allowances increase on 6 April for the 2013/14 tax year. You will be able to invest a total of £11,520 in an ISA, of which the cash subscription limit will be £5,760.

Junior ISAs have also been available since November 2011 to those aged under 18 who do not hold a Child Trust Fund. The total Junior ISA limit for 2012/13 is £3,600, which can be invested into a cash ISA account, stocks and shares, or a combination of the two. Anybody can pay into the Junior ISA and the money belongs to the child. The child cannot take it out until they turn 18, at which point the junior ISA will automatically become a full ISA.

Pension contributions

To encourage saving for retirement, the Government allows individuals tax relief on investments up to £3,600 per year (gross) into a personal or stakeholder pension scheme or 100 per cent of your earnings – whichever is the greater. This is capped, however, at the annual allowance.

For the 2012/13 and 2013/14 tax years, the annual allowance is £50,000, with the Government announcing this will decrease to £40,000 for 2014/15.

The lifetime allowance is the maximum amount of pension savings you can build up throughout your life that can benefit from tax relief. The lifetime allowance for the 2012/13 and 2013/14 tax years is £1.5 million. This will also fall for 2014/15, to £1.25 million.

Please talk to us to discuss the tax relief available for this tax year, or to plan for the next.