It is only February and 2018 has hardly started โ but the end of the current tax year is coming into view. April 6, when the 2018/19 tax year begins is still two months away, but to make the most of your tax allowances, itโs best to start planning early.
Weโve prepared a 3-part essential guide to cover whatโs changed in 2018/19, and what will stay the same. In the first part of this series, we look at savings.
Personal Savings Allowance
The Personal Savings Allowance (PSA) was introduced for the current tax year. It cuts the tax you pay on income from savings in banks, building societies, NS&I products and credit unions. It makes savings a little more rewarding โ although current returns on savings are often so low, you may struggle to reach your PSA.
Basic rateย (20%) taxpayers who earn up to ยฃ46,350 in the 2018/19 tax year, have a ยฃ1000 PSA. This means they can earnย up to ยฃ1,000 of savings income before paying any tax on it.
Higher rateย (40%) taxpayers who will earn between ยฃ46,351 and ยฃ150,000 have a ยฃ500 PSA.
Additional rate (45%) taxpayers who earn above ยฃ150,000 are not eligible for aย PSA, and will pay tax on all their savings income.ย
ISAs
There are several types of ISA, as Individual Savings Accounts are better known. They have become a firm favourite with savers, as they protect the interest your savings earn from the taxman.
The ISA allowance, the amount you can invest in an ISA each year is unchanged โ but it is worth remembering just what it is.
Whether you invest in a Cash ISA, or a Stocks and Shares ISA (also known as an Equity ISAs)ย or a combination of both, the limit for the 2018/19 tax year is ยฃ20,000.
The Help to Buy ISA isย aimed atย people looking to get on the property ladder. You pay in ยฃ1,200 in the first month and ยฃ200 a month afterwards, up to ยฃ12,000.ย The government adds ยฃ1 for each ยฃ4 saved when you buy a property. You could get a ยฃ3,000 government bonus.
But remember the Help to Buy ISA money counts as a Cash ISA. You need to stay within the ยฃ20,000 total if you invest in other ISAs as well as a Help to Buy ISA.
Thereโs a similar restriction if you have a Lifetime ISA. You can put in up to ยฃ4,000 each year until you reach 50 and the government adds a 25% bonus, up to a maximum of ยฃ1,000 annually. That ยฃ4,000 a year limit is part of your ยฃ20,000 ISA allowance.
Junior ISAs
Junior ISAs or JISAs are tax-free savings accounts for children, replacing the old Child Trust Funds.
Parents and guardians can open a Cash or Stocks and Shares JISAย for a child under 16, but anyone can pay money into it. The limit forย the 2017/18 tax year is ยฃ4,128, and it rises to ยฃ4,260 for 2018/19.
What should you do about your savings in 2018/19?
You may need to make sure that your savings are working hard for you, and with a new tax year to plan for, it might be time to look at your other current financial arrangements as well. Youโll be able to seeย some of the ways that the Continuum team can help you in our Client Brochure
Then, for the professional advice you need about all your financial arrangements, talk to us at Continuum. Call us now on 0345 643 0770, or email us at info@staging.mycontinuum.flywheelsites.com
Watch out for part two of our guide, next week, with important news about your pension.
The value of investments can fall as well as rise. You may get back less than you invested.
Tax treatment varies according to individual circumstances and is subject to change.
The Financial Conduct Authority does not regulate tax advice.
