The end of the tax year is approaching (5th April 2012) but there is still time to fill your ISA allowance(s), as well as your Personal Pension allowance for the 2011/12 tax year.  It's also not too early to be thinking about your 2012/13 allowances. See below for some top tips as to how you can save tax.

ISAs:

• The allowance for a Cash ISA is £5,340. Or, you can invest the full £10,680 into a Stocks and Shares ISA.
• Remember, you can only have one Cash ISA and one Stocks and Shares ISA in any tax year.
• With such poor cash rates available and whilst we are experiencing such high inflation rates, the stocks and shares option is currently the preferred option for many people.
• If you are disappointed by the returns currently available from cash accounts, did you know that you can transfer Cash ISAs into Equity ISAs? (But not vice versa.)
• Did you know that the current ISA allowance of £10,680 will increase to £11,280 for 2012/13? This  can be split between cash and equities or purely put in equities.
• For couples, this means that £43,920 can be sheltered in ISAs over the next two months.
• Junior ISAs were launched in November 2011, aimed at children under age 18 who do not already have a Child Trust Fund.  Up to £3,600 can be invested each year tax efficiently on behalf of a child (by parents, grandparents, other other relatives or friends).  There are other rules to consider, so do get in touch if this is of interest.

 Pensions:

• The personal pension Annual Allowance for the 2011/12 tax year is the greater of £3,600 or 100% of earnings, up to a maximum of £50,000.
• Almost anyone in the UK under 75 years of age can pay up to £3,600 into a pension scheme each year and qualify for tax relief, even if they do not pay tax. A spouse, civil partner or parent could make the contribution on behalf of a spouse, civil partner or child.  Most pension contributions in this case are are paid after deducting 20% tax, so to put £3,600 into your pension you would currently pay £2,880 and HMRC would contribute £720.
• If you earn more than £3,600, you can pay up to the whole of your earnings into a pension scheme, but the tax relief is capped by the annual allowance.
• Anti-forestalling legislation has been removed, so top earners can contribute up to the annual allowance limit £50,000 and get full tax relief at their highest rate of tax.
• Using 'Carry Forward' high earners and business owners can contribute up to £200,000 tax efficiently into a pension, using unused allowances of the last 3 years.  Click here for an example of Carry Forward and further reading.
• In order to get tax relief this year at your highest rate, it is important to make contributions prior to 5th April.
• For people earning over £100,000, there is an opportunity to make pension contributions to get back your lost personal allowance.
• The maximum you can hold in tax favoured pension schemes is £1.8 million in 2011/12. This limit is to be reduced to £1.5 million from 6 April 2012. However, there are transitional rules which will protect the £1.8 million lifetime limit for those who have been funding their pension on the basis of that higher limit
• Applications for this fixed protection must be made to HMRC before 6 April 2012 and you will then generally not be able to make any further contributions into your pension.  If you are affected by this issue, please contact Wealth Matters as we can assist in this area.
• Contracting out of the State Second Pension (S2P): The option of contracting out of S2P will be abolished with effect from 6 April 2012 for most employees, i.e. those not in defined benefit schemes.

Inheritance Tax Planning (IHT):

• You can give away gifts worth up to £3,000 in each tax year and these gifts will be exempt from IHT when you die.
• You can carry forward any unused part of the £3,000 exemption to the following year and it is in addition to the exemption in the current tax year, so you can gift £6000 in this case, before 6th April 2012.
• Remember that regular gifts out of excess income can also be exempt.
  

Capital Gains Tax (CGT):

• Each year an individual has an annual exemption to gains that are free of tax. This year it is £10,600. An individual can realise total net capital gains (gains less losses) of up to £10,600 from 6 April 2011 to 5 April 2012 without incurring a CGT liability.
• The exemption is an annual allowance and cannot be carried forward.
• Spouses can also gift assets to each other without incurring a CGT charge.

Check list:

• Have you used this year’s individual savings account (ISA) allowance before 6 April 2012?
• Consider the Junior ISA (JISA) also if you wish to save for your children.
• Have you used your annual inheritance tax allowances?
  
• Have you used your annual capital gains tax exempt amount by making any available disposals before 6 April 2012?
• Are you investing enough into your pension to be able to retire earlier?
• Can you utilise the merits of "Carry Forward" to pay more than the annual allowance and save lots of tax?

If you would like to make a last minute investment into your ISA, Personal Pension, or you would like to speak to us about saving on Inheritance Tax or Capital Gains Tax, please contact your adviser at Wealth Matters as soon as possible, ideally before 23rd March.

Should you wish to chat through your options, please feel free to contact us on 01582 720511 or email:  This e-mail address is being protected from spambots. You need JavaScript enabled to view it

You can download a Simple Guide to End of Year Tax Planning and a Simple Guide to ISAs from our website by clicking here.