PERSONAL FINANCE
Capital Gains Tax Annual Allowance
Aside from the longer-term growth potential, one of the advantages of an investment portfolio that invests in the stocks and shares (either directly, or through investment funds) is that some holdings can be sold each year to utilise your annual CGT allowance, rather than leaving any gains to accumulate and – as in the example above – be taxed heavily on the eventual sale. For example, a gain of £54,500 could be cleared completely over a 5 year period even if the annual exemption remains at £10,900. This could save around £15,000 for a higher rate taxpayer
Pensions Pensions can also be highly efficient from a taxation
perspective. Company owners, for example, are often well-advised to make pension contributions as part of an overall financial planning strategy. Any payments will reduce top-line profit (and transfer these pre-tax earnings into your own name), but also reduce your dependence on the eventual sale of the business to fund your retirement income.
All growth on pension fund assets is free of capital gains and income tax* which, as we’ve seen, is not an insignificant benefit for the long-term investor. Unfortunately, unlike the ISA allowance which generally goes up over time, the annual pensions allowance has fallen significantly since 2011, and is set to fall again in April. Is it worth considering increasing your funding now?
* Withholding tax on UK dividend income cannot be reclaimed.
If you’re interested in knowing more - why not give Ian Thomas a call on 01803 839 194? Alternatively, send him an email at
ian@pilotfinancialplanning.co.uk. He’d love to hear from you!
www.pilotfinancialplanning.co.uk
pilot Financial planning is authorised and regulated by the FCA. This article is intended to provide helpful information of a general nature and does not constitute financial advice.
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