In this post…
- Individual Savings Account (ISA)
- Annual Allowance
- LTA/LSA/LSDBA
- High Income Child Benefit Charge
- Capital Gains Tax
- Income Tax allowances
- Higher Earners
Individual Savings Account (“ISA”)
The ISA allowance is unchanged, at £20,000 per person. This is the maximum annual subscription amount to all types of ISA, including Cash ISA, Stocks and Shares ISA, and Lifetime ISA.
Transfers between ISA providers do not count towards this allowance, as long as the transfer is carried out by the ISA manager/provider in line with HMRC rules.
Annual Allowance
The Annual Allowance is unchanged, at £60,000 per person (including tax relief).
This is the maximum annual pension contribution amount from all sources, including personal contributions, employer contributions, and tax relief.
In reality, many people are constrained by other pension contribution limits, such as the requirement to not contribute more than your “relevant earnings” (which includes earned income but excludes income such as pension income, rental income, and dividend income).
And others are able to pay in more than the Annual Allowance, by making use of “carry forward” rules.
Book a free initial meeting with one of our advisers if you are unsure how much you can pay into a pension plan.
LTA/LSA/LSDBA
Respectively, the Lifetime Allowance (“LTA“), the Lump Sum Allowance (“LSA“), and the Lump Sum and Death Benefits Allowance (“LSDBA“).
The LSA and LSDBA were brought in as partial replacements for the LTA, which Jeremy Hunt abolished last tax year.
The LSDBA is £1,073,100 and the LSA is £268,275 (one-quarter of the LSDBA).
These allowances will not be relevant to most people, but they will be extremely relevant to some people.
The new allowances can particularly impact:
- Death benefits from personal pension plans.
- How much tax-free cash can be taken from a pension plan.
Book a free initial meeting with one of our advisers if you might be affected by either of these new allowances.
High Income Child Benefit Charge
The High Income Child Benefit Charge affects people who earn over the threshold and receive (or whose partner receives) Child Benefit.
The Charge is £1 for every £2 earned over the threshold, until the Child Benefit effectively reduces to £0 (which depends on the number of children you claim for).
The threshold has increased from £50,000 to £60,000.
Book a free initial meeting with one of our advisers if you want to reduce your Child Benefit Charge by making a tax-efficient pension contribution.
Capital Gains Tax
The amount of tax-free investment gains has reduced to just £3,000 per person. This was £6,000 until last tax year, and £12,000 in the tax year before.
Income Tax allowances
The Personal Allowance (the amount of income which can be earned tax-free) is still £12,570.
The Basic Rate Tax Band (the amount of income which can be earned at the basic rates of tax (8.75% for dividend income and 20% for all other income) is still £37,700.
The Personal Savings Allowance (the amount of interest which can be earned tax-free) is still £1,000 for non-taxpayers and basic rate taxpayers, or £500 for higher-rate taxpayers, or £0 otherwise.
The Dividend Allowance has reduced to just £500. This was £1,000 until last tax year, and £2,000 in the tax year before.
Book a free initial meeting with one of our advisers if you want to protect taxable gains, interest, or dividends.
Higher Earners
Those earning £100,000 or more will start to lose their Personal Allowance at a rate of £2 for every £1 earned over £100,000 – a threshold which has not changed for many years.
Those earning over £125,140 will lose their full Personal Allowance and will start to pay the additional rates of tax (39.35% for dividend income and 45% for all other income). This threshold is unchanged since last tax year.
Book a free initial meeting with one of our advisers if you want to protect your Personal Allowance and/or pay less 45% income tax by making a tax-efficient pension contribution.
