TAX-FREE SAVINGS ACCOUNTS

The ISA (Individual Savings Account) is the most commonly used tax-free savings plan. From the

6th of April 2017 the limit that one can put into ISAs in this tax year is £20,000. There are various ISA choices which one can use but the total in the year cannot exceed the £20,000.

YOUR ISA MENU

A. The “old fashioned” simple ISA – can be invested in cash or stocks and shares. Good for anyone.

B. Junior ISA – only for those under 18. Anyone can pay into it for the person concerned,  e.g. grandparents. The maximum annual contribution is £4,080.

C. Help to Buy ISA – Only of real use for someone looking to save specifically to buy their first property. Anyone over 16 can start one, but the bonus from the Government is only added when the person actually buys their first property. If monies are taken from the Help to Buy ISA for other than purchasing the person’s own first home, no Government bonus is added to the monies withdrawn. The maximum that can be saved in the Help to Buy ISA is £1200 initially and £200 per month thereafter up to a maximum of £12,000. The Government bonus added is 25% up to a maximum of £3000.

D. Innovative Finance ISA – High risk. You lend your money through websites regulated by the FCA (Financial Conduct Authority). These are known as peer-to-peer lending platforms or “crowd-lending”. The expected return is approximately double the rates offered by Cash ISA providers. For more information go to MoneySavingExpert.com – “Peer to Peer Lending”

E. The new Lifetime ISA (Lisa) launched 6 April 2017. This is only available for those aged 18 to 40. It is complicated but generally it would suit someone saving for buying their first property or as an alternative to a pension – particularly for someone who is self-employed. The maximum you can put in is £4,000 per annum. The Government will add a 25% bonus each year. The Lisa can be invested in cash, or stocks and shares. Note: The 25% Government bonus is added annually to what you put in, but monies cannot be withdrawn before age 60 unless it is being used for buying a first home. After age 60 it can be used for any purpose. Withdrawals for any purpose other than the home purchase before age 60 are subject to a 25% penalty. The Government will only add its annual 25% bonus for monies put into the Lisa up to age 50.

Note:

Lisa's are not yet broadly available as many providers consider them too complicated. Search the Internet if you want to know what choices there are.

ENJOYING ACCESS TO ONE’S PENSION SAVINGS

Over the last couple of years we have assisted many clients to access their pensions – either for lump sums to help family members or other projects, or to set up a regular income to supplement their current income.

The minimum age for accessing pension benefits currently is 55. Most people will be able to take 25% of the pension fund value as a tax-free cash lump sum. You can also access more of the pension but money taken this way is taxable and may affect your ability to add money to a pension in the future. Please contact us if you wish to find out what options are available to you with your pensions.

WELCOME TO THE NEW TAX YEAR!

TAX NOTES FOR 2017/18 from the Budget

Personal Allowance £11,500 (reduced for those with incomes over £100,000)

20% Rate Tax Band £33,500 (adding in the Personal Allowance of £11,500 means that your income would need to be in excess of £45,000 before the 40% tax rate would start to be charged)

Annual ISA Allowance £20,000 (up from £15,400 last year)

Lifetime Pension Allowance £1 million

Inheritance Tax Nil Rate Band £325,000 (same as last year)

Annual Pension Allowance £40,000 (reduced for those with incomes over £100,000)

Rent-A-Room Allowance £7,000 per annum tax free (same as last year)

National Living Wage £7.50 per hour (up from £7.20 per hour last year)

INHERITANCE TAX CHANGES

Announced last year, from April 2017 there will be additional Inheritance Tax relief for those passing

residential property down to their children. This will be in addition to the £325,000 Inheritance

Tax relief for each individual. This will be an extra £100,000 in 2017/18 and will increase over the

coming years until it reaches £175,000 in 2020/21. While this is good news for many, the details

are rather complex so it is worth some study. It is called the Residence Nil Rate Band (RNRB). Go to

www.gov.uk/guidance/inheritance-tax-residence-nil-rate-band for more information.

MORTGAGE OPTIONS FOR THE MORE MATURE OF US!

There are more and more mortgage options for those of us getting older.

These include normal residential mortgage options as well as the useful Lifetime Mortgage options. These can open doors to many who otherwise have felt caught in a mortgage trap which they could not escape from due to age or income limitations. Do contact us if you would like to find out what might be available for you.

PENSION FREEDOM CONSEQUENCES

You can take your pension benefits from age 55, but be aware that taking the benefits early could restrict how much you could then continue to contribute into a pension.

Contact us for more details.

Also, if you have built up substantial pension benefits over the years, be aware that there is a Pension Lifetime Allowance. Pension savings made in excess of that could result in having to pay charges. Contact us if you have questions about this.

PENSION FREEDOM

You can take your pension benefits from age 55, but be aware that taking the benefits early could restrict how much you could then continue to contribute into a pension.

Contact us for more details.

Also, if you have built up substantial pension benefits over the years, be aware that there is a Pension Lifetime Allowance. Pension savings made in excess of that could result in having to pay charges. Contact us if you have questions about this.