In a few short weeks it will be the end of the tax year 2011-2012 (on 5 April). If you are in a position to allocate some money to savings and investments, make sure you act now before time runs out. Here are some ways to keep you family’s hard earned cash out of the hands of the tax man.
Maximise Junior ISA allowance
Your child is eligible to have a Junior ISA if he/she:
- Is resident in the UK
- Born on or after 3 January 2011
- Born before September 2002 and is under 18
- Born between these dates and was not eligible for a Child Trust Fund
For the current tax year you can pay in up to £3,600. The plan must be set up by a parent or guardian, but investments can be made by friends or family.
If you do not invest in the current tax year, the year effectively drops off; you are not able to roll it over into next year. In 2012-2013, your child will have a new allowance – also £3,600.
Your child will receive all benefits from the ISA tax-free from age 18, irrespective of how much interest or growth it attracts.
Maximise your own ISA allowance
You are eligible for an ISA if you are:
- Over 18
- Resident in the UK
Maximum investment into a Stocks and Shares ISA is £10,680. You can invest up to £5,340 in a ‘Cash ISA’, but you need to reduce the Stocks and Shares element accordingly. Again your allowance cannot be rolled over into next year.
If neither you or your partner has contributed to any type of ISA this tax year, you have an unused allowance of £21,360 between you which you can shield from HMRC.
Next year’s allowance is set to be £11,280.
Maximise your child’s pension contributions
You can pay up to £3,600 into your child’s pension fund before 5 April, and because you will receive basic rate tax relief, this will only actually cost you £2,880.
Maximise your own pension contributions
You can pay 100% of your earned income into a pension plan this tax year (up to a maximum of £50,000). If you are a higher rate tax payer, you will receive 40% tax relief on your contributions.
If you do not have any earned income, you can still contribute £3,600 per year (£2,880 net of basic rate tax relief) to your own personal pension.
And then next year it all starts again.
Henrietta Oxlade is an Independent Financial Planner with Radcliffe & Newlands and MyFamilyClub’s in-house finance sage! She has been advising individual clients since March 1988, which is why many of her clients consider her part of the family. If you want to contact Henrietta, email us on [email protected] and we’ll put you in touch.