Making the most of your allowances

The arrival of a new tax year means a new set of allowances and limits.

Making the most of these concessions from the taxman helps make the most of your money. We look at what they are for 2018/19.

Your Personal Allowance

For the 2018/19 tax year, the personal allowance is £11,850, an increase from £11,500.

Everyone has a personal allowance, the amount of income they can earn each year without paying tax. Your Personal Allowance may be bigger if you claim Marriage Allowance or Blind Person’s Allowance. It goes down by £1 for every £2 of income above the £100,000.

Your Personal Savings Allowance (PSA)

PSA means that most savers no longer pay income tax on the interest from their savings.

Your PSA depends on your income tax band. Basic rate taxpayers have a £1,000 allowance. Higher rate taxpayers receive a £500 allowance. Additional rate taxpayers have no PSA, and must pay tax on all the interest their savings earn.

Your ISA allowance

For the 2018/19 tax year the overall ISA allowance is £20,000.

ISAs are exempt from income tax and capital gains tax, which makes them an important part of most people’s wealth strategy.

You can split your allowance across a Stocks and Shares ISA, Cash ISA, Lifetime ISA and an Innovative Finance ISA. You may also be eligible for a Help to Buy ISA and a Lifetime ISA.

Junior ISA

The annual limit for Junior ISAs for 2018/19 is £4,260, an increase from £4,128.

Junior ISAs provide a loophole for keen young savers. From the age of 16 they can have both an adult Cash ISA and a Junior ISA. They can still save £4,260 per tax year in the Junior ISA, and up to £20,000 in an adult Cash ISA.

Help to Buy ISA

The limit for Help to buy ISAs in 2018/19 is £2,400.

Help to Buy ISAs help first-time buyers save towards a mortgage deposit. For 2018/19 you can save an initial deposit of up to £1,200, and up to £200 a month.  Your Help to Buy ISA limit forms part of your overall £20,000 ISA limit.

Lifetime ISA

The limit for Help to buy ISAs in 2018/19 is £4,000.

A Lifetime ISA helps you to save for a property deposit and for retirement. They can be opened if you are 18 to 39, although you can save until you’re 50. The Lifetime ISA limit forms part of your overall £20,000 ISA limit.

Dividend allowance

For the 2018/19 tax year the dividend allowance is £2,000, reduced from £5,000.

Investors and business who receive an income from dividends will be paying more tax, at a rate of 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers. 

Pension allowance

For the 2018-19 tax-year, the pension allowance is £40,000, or the value of your whole earnings – whichever is the lower.

Lower allowances may apply if you have already started drawing a pension, or if you are a higher earner with income plus pension contributions that total above £150,000. You may also be able to carry forward any annual allowance which you haven’t used in the three previous tax years.

You may need some help to make the most of your allowances. At Continuum we would be pleased to provide it.

The value of investments can fall as well as rise and you may get back less than you invested.

Levels and basis of reliefs from taxation are subject to change and depend upon your personal circumstances.

The Financial Conduct Authority does not regulate tax advice.