The world is still spinning: a quick update following tax year end
Published: 8th April 2020
Things have been quite different recently but certain things stay the same – a recent example being the start of the tax year on the 6th April.
This time of year often brings financial changes for individuals and business and we all know you’ve got enough of that on your plate as it is! So, we wanted to share with you some of the key updates that could affect you:
ISA limits – they remain unchanged at £20,000 for 2020/21. We work with all our clients to manage their overall tax strategy and taking advantage of this amount will form part of that plan.
Junior ISA limits – there has been a huge change here in that the limit has more than doubled from £4,368 to £9,000. Only parents can open these accounts to put money aside for their children, however anyone can contribute once the account is active. We know many of you will be focused on the immediate future at the moment but the desire to save for education costs, hobbies or future homes is one that remains steady. If you took full advantage of the allowance from a child’s birth to their 18th birthday you could build a pot of approximately £240,000 (this assumes a 4% growth in markets each year). Just think of the difference that could make!
Tapered annual allowance – The two tapered annual allowance thresholds (threshold and adjusted), used to calculate allowable pension contributions, have each been raised by £90,000. This means that from 2020/21 the ‘threshold income’ will be £200,000, so individuals with income below this level will not be affected by the tapered annual allowance. The annual allowance will only begin to taper down for individuals who also have an ‘adjusted income’ above £240,000. Previously, threshold income was £110,000 while adjusted income was £150,000.
For those on the very highest incomes, the minimum level to which the annual allowance can taper down has reduced from £10,000 to £4,000 from April 2020.
This reduction will only affect individuals with total income (including pension accrual) over £300,000 and shred a further £6,000 per year from the annual allowance for those currently at the sharp end of the existing taper rules.
Capital Gains allowance – Every year you can take advantage of your capital gains tax allowance, in 2020/21 you can make £12,300 before you start paying capital gains tax, up from £12,000 previously.
A brief but important update for you there. As we’ve repeatedly said in recent weeks ‘this too shall pass’ – in the meantime why not use this time to consider your financial set up and prioritise what goals are important to you and those you love. The recent changes could be just what you need to move forward with those goals.
If you have any questions or would like to chat about anything relating to your financial plans just get in touch – we’re here to help.