Welcome Relief For Investors

The old joke about death and taxes being the only constants in life will probably ring particularly true to many people when it comes time to fill in tax returns.  The good news is that there are various forms of relief available to savers and investors, so a little judicious advance planning can go a long way to minimising the amount of tax payable.  Here is a quick run-down of some of the various forms of relief currently available.

Tax relief on interest income Basic-rate taxpayers can now earn up to £1000 interest income tax free, while higher-rate taxpayers can earn up to £500 interest income tax free.

Property allowance While not, strictly speaking, a savings or investment allowance, it may be worth noting that it is now possible for individuals to earn an income of up to £1000 on property without paying tax on it.  This is separate from the long-established “rent-a-room” scheme.  This could potentially make it more interesting for people to use their property to generate a small income in some way, although those investigating the AirBnB route may wish to check where their mortgage provider stands on this.

Trading allowance On a similar note, it is now possible to earn up to £1000 income from trading without paying tax on it.  This may be of interest to anyone with skills they are interested in monetising in a small way.

Dividend income allowance Currently investors can receive up to £5000 of dividend income without paying tax on it.  This is due to reduce to £2000 in the 2018/2019 tax year.

Capital gains tax relief Individual investors can make a profit of up to £11.3K on the sale of investments before capital gains tax becomes payable.  Depending on their personal situation, investors may be able to make use of the fact that transfers of assets between spouses and civil partners are exempt from taxation and hence dividing an asset between two halves of a partnership can make use of both allowances.

Individual savings allowances It can be easy to forget about the familiar, so here's a quick reminder to make the most of your ISA.  There have been a few additions to the ISA stable over recent years, one of which (the Help to Buy ISA) has ceased to be offered, so for the sake of completeness, here is a quick run down of the ISAs currently on offer as of 2017/2018 and the relevant allowances. Adults aged 18 or over can save a total of £20K into ISAs.  They can choose to put all of it into a Cash ISA, a Stocks and Shares ISA or an Innovative Finance ISA or they can choose to mix and match between the different forms.  Lifetime ISAs have special rules around them and savers can only deposit up to £4000 each year, which comes out of their total ISA allowance, in other words, they would only have £16K to deposit in other forms of ISA.

Niche forms of tax relief Certain investors may be interested in some, more niche, forms of tax relief such as Enterprise Investment Schemes, Venture Capital Trusts and Business Property Relief (this last is one which may be helpful for people looking at estate planning).  Those interested in these options are highly recommended to get specialist advice since these areas can be higher risk.

Overall Investments are generally best looked at as a whole with tax relief just being one factor to consider.  If an investment is fundamentally wrong for your particular situation, then the fact that attracts tax relief is unlikely to make it right and vice versa.  If, however, there are two similar investments to consider, then the question of tax relief may well factor into your calculations as to which one to choose. For Investments we act as introducers only