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Your tax efficiency list
Make the most of your money for the future
Steps that could help you improve your tax efficiency.
Have I used my ISA allowance?
From April 2024 the rules changed so you can pay into multiple ISAs (Individual Savings Accounts) of the same type in each tax year. Savings or investments held inside an ISA are free of income tax and capital gains tax (CGT) up to the following allowance.
For the current tax year the allowance is:
- up to £20,000 in personal ISAs
- up to £9,000 in a junior ISA.
You may want to consider making as much use of this allowance as you can before the end of the tax year on 05 April 2027.
Do I need to consider Inheritance Tax (IHT) planning?
IHT is the tax payable when someone dies.
IHT may become payable if the value of a deceased person’s estate and the combined total of any capital gifts they made exceed the allowances.
The value of an estate includes all worldwide property, possessions, investments and savings and all capital gifts made in the 7 years before death.
Each individual has a Nil Rate Band of £325,000 that does not attract IHT.
If the deceased owned a property that is being passed to direct descendants, then they may be able to claim up to £175,000 Residence Nil Rate Band (RNRB) on top of the NRB.
The amount of NRB may be affected if an individual gifts money and assets during their lifetime.
You should consider estate planning during your lifetime by writing a will, using gifting or setting a trust. The rules can be complicated, and you should make sure you receive legal and financial advice to make sure any plan of action does not affect you adversely.
Does Capital Gains Tax affect me?
Capital Gains Tax (CGT) is the amount you pay on any profit you make when you come to sell an asset, such as a second home, shares or a piece of artwork.
How much you can earn before paying CGT was cut to £3,000 from April 2024, so more people may have to pay on their profits.
CGT on residential property sales was reduced from 28% to 24% following the Spring Budget.
“The rules are complex and rates differ for basic rate and higher-rate tax payers, and by property and non-property assets, plus reduced allowances means financial planning will become more important for many of us.
Some may use ISAs to give a tax efficient solution when protecting gains on investments, but it’s important to choose the step that’s right for you.”
Makala Green, Personal Wealth Adviser.
Could I be paying more into my pension to save tax?
Higher earners in Scotland face greater tax liabilities than people elsewhere in the UK. But this means they could gain a greater tax benefit from saving into a pension.
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Lloyds and Lloyds Wealth are trading names of Lloyds Wealth Management Limited. Registered office: 25 Gresham Street, London EC2V 7HN. Registered in England and Wales No. 11722983. Authorised and regulated by the Financial Conduct Authority under registration number 830170.