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Maximising your ISA and Pension Allowances – Time is Ticking

The end of the tax year is swiftly approaching on 5 April. With less than a month left in the 2019/20 tax year, and annual relief allowances to consider, now is the time to ensure you’re taking advantage of all possible avenues to help save on tax.

This does not constitute advice and advice should be sought in all instances before acting on it. The Financial Conduct Authority does not regulate tax advice. 

The key to saving tax is to maximise your allowances for both ISAs and pensions.

ISA Allowance

For the 2019/20 tax year, the Individual Savings Account allowance is £20,000.

You can put it all into one type of account, or you can spread it across the four available options:
●      Cash ISA
●      Stocks and shares ISA
●      Innovative Finance ISA
●      Lifetime ISA (maximum of £4,000/year)

On top of the four main ISAs, there’s also a Junior ISA which is a long-term savings account (available as cash ISA or stocks and shares ISA) for under 18s.

The 2019/20 allowance is £4,368 per child and contributing into an account for your child does not count against your individual allowance. Once your child hits 16 they can contribute themselves and at 18 they can begin withdrawals if they choose.

Things to remember about your ISA

You’re allowed to utilise one of each type of ISA per year – for example, you can’t have two cash ISAs – but if you’re not sure if or how you should split your funds, an adviser can help explain the benefits of each type and recommend a distribution plan.

It’s important to remember not to exceed your allowance to avoid an unexpected tax bill. And if you have a flexible ISA (and your terms allow for it), you have the ability to withdraw and reinvest the same amount of money back into your account within the same tax year without any consequences.

Most critically, your ISA allowance is annual. You cannot roll over any unused portion to the next year, likewise, you can’t borrow any from previous years.

Pension contributions

Everyone is allowed up to £40,000 worth of pension contributions each year (£40,000 or 100% of your income, whichever is less). Unfortunately, with the introduction of the tapered annual allowance, many high-earning doctors and dentists find themselves faced with a reduced allowance.

For every £2 over £150,000 your total income (including employer pension contributions) is, your allowance is reduced by £1, with a guarantee of at least £10,000 minimum. If your income does not exceed £110,000 (total excluding both employer and employee pension contributions), then you needn’t worry about this. 

Unlike ISA allowances, pension contribution allowances can be carried forward so you can use any unused portion (up to £40,000 from each year!) from up to three years previously (as long as you had a pension plan).

Be mindful of exactly how much you and your employer is contributing so you won’t face an unexpected tax bill for exceeding your limit.

Calculations involved in tapered allowances are quite complicated. As such, we always advise working with a financial expert to ensure no mistakes are made.

Work with professionals

Saving money and tax is of utmost importance and with the end of the tax year approaching, a financial adviser can help you make the most of all your allowances.

Don’t hesitate to reach out to us so we can help you save the most money possible and avoid any negative consequences as a high-earner.

Want to maximise your tax savings this year?
Investments | Financial Planning | Retirement | Save Tax | Protection |

Dental & Medical Financial Services have been helping doctors and dentists to build and protect their wealth, whilst saving tax for over 25 years.
Call Darren to discuss your options.

Tel: 01403 780 770


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