Time to consider external factors
The Autumn Budget may have left a sense that nothing much had changed in the realm of personal financial planning, as no major changes to Capital Gains Tax, Inheritance Tax, Income Tax or pensions were announced. Despite this, a prime consideration needs to be how external factors, such as frozen rates and higher inflation, could impact your finances and what action you need to take before the end of the tax year to utilise any exemptions and allowances.
Your pension
The Annual Allowance remains at ÂĢ40,000 and the Lifetime Allowance remains at ÂĢ1,073,100. As these allowances havenât increased with inflation, it effectively means those saving to the maximum extent possible with tax concessions can save less in real terms each year.
Individual Savings Accounts (ISAs)
The annual ISA limit has been frozen at ÂĢ20,000 for five years. If the allowance had increased with inflation every year since 2017, it would stand at ÂĢ21,440 today, sheltering an additional ÂĢ1,440 from the taxman. JISAs celebrated their tenth birthday in November â the allowance remains at ÂĢ9,000.
Inheritance Tax (IHT)
HM Revenue and Customs (HMRC) data for April to September 2021 shows that IHT receipts totalled ÂĢ3.1bn, ÂĢ0.7bn higher than the same period in 2020. With the nil rate band and residence nil rate band frozen until April 2026 at ÂĢ325,000 and ÂĢ175,000 respectively, donât overlook the importance of effective estate planning.
Dividend Tax
Last September, the government revealed that it would increase Dividend Tax by 1.25 percentage points from 6 April 2022 to help fund health and social care. This means investors will have to pay more on any income from shares held outside ISAs and above the ÂĢ2,000 Dividend Allowance.
Variables
Itâs time to tune in to all the variables at play, affecting your finances; frozen allowances, inflation, interest rates and taxation. Talk to us for help with your individual circumstances.
