Tax-free savings: too good to be true?

The award winning wealth management and investment experts Killik & Co have opened a new space on Devonshire Road – House of Killik Chiswick. The Chiswick Calendar is pleased to share their guest blogs on how best to plan and save to acquire the wealth to achieve your goals.

Killik & Co won “Best Discretionary / Advisory Wealth Manager’ in the 2023 FT Investors Chronicle Awards.”


Tax-free savings: too good to be true?

As we approach the end of the tax year, many of our clients are asking how to make the most of tax-free savings, and with rising living costs chipping away at family budgets, and a general election looming, these conversations have never been more important.

In this article Phil Sole, Relationship Manager at House of Killik Chiswick, shares various options for tax-efficiency that savers should consider before 5 April 2024.

Make the most of this year’s allowances for investments

As we approach the end of the tax year, we’re encouraging all our clients to make use of the allowances they have available to them, particularly any that are “use it or lose it”. Over the last few years, we’ve seen increasing pressure on taxable allowances, some of which are decreasing year on year.

For example, the Capital Gains Tax allowance was previously £12,000, then came down to £6,000 this year, and will drop to £3,000 next year. Reductions have also been made to the dividend tax allowance on income produced from investments, which was previously £2,000, is now down to £1,000 and will drop to £500 on 6th April 2024.

With this in mind, it is important to consider getting investments held in a taxable wrapper into something more tax efficient, so the long-term tax drag on your investments isn’t too significant.

Wrap your investments in ISAs and save for your children with JISAs

A key tax wrapper we talk about at Killik & Co is the Individual Savings Account (ISA). The current allowance is £20,000 per person per year, and this means you can put £20,000 of savings or investments into the wrapper, which will grow free from any further Income Tax or Capital Gains Tax.

This is a powerful investment vehicle, particularly for families where parents will have a £20,000 allowance each. Further to this, each child is entitled to hold a Junior ISA (JISA) with an allowance of £9,000 per child per year.

It is worth noting that these allowances are at historically high levels, so use your ISA or JISA allowance before the 5 April, or it will be gone.

Contribute to pensions and Junior SIPPs

Pensions probably offer the most tax-efficient allowances available, and are subject to the Annual Allowance, which is the maximum you can save into a pension. Over the course of this year, the Annual Allowance has increased quite generously from £40,000 to £60,000.

The benefit of pension contributions is the tax relief you receive on making that contribution. For example, a basic rate taxpayer making a pension contribution can claim 20% tax relief, which works out to up to £12,000 tax relief on £60,000 of pension contributions.

The benefit then increases to £24,000 for higher rate taxpayers, which means the net contribution would only need to be £36,000 to have the benefit of £60,000 inside the pension wrapper. Similar to the ISA, the pension can grow free of Income Tax or Capital Gains Tax whilst it’s invested, making pensions a great way of saving for retirement.

It’s also worth considering the wider family, as you can contribute up to £3,600 per year into a Junior SIPP (under 18 YOA) for someone who isn’t earning. So, a contribution of £3,600 would only require a net contribution of £2,880, providing the benefit of £720 tax relief per individual.

Check your pension carry forward allowance

Many Chiswick locals have enquired about whether they have any unused pension allowance in the current tax year. To help with these queries, it is important to know your total employee and employer pension contributions in the current tax year (which can usually be found on your payslip).

‘Carry forward annual allowance’ enables you to make use of unused annual allowances from the three previous tax years and, if affordable, is a tax-efficient way to save for your retirement.

Don’t miss out on tax-efficient savings

While tax-free savings allowances can seem too good to be true, there are some complexities to consider.  Please do pop into House of Killik Chiswick if you wish to better understand what the options are for you and your family.

For more information visit House of Killik Chiswick at 13 Devonshire Road, or email, chiswick@killik.com.

Please be aware that as with all investments, your capital is at risk, you may not receive back the same amount that you invest, and past performance is not an indication of future performance. Tax treatment depends on individual circumstances and may be subject to change.


If you have any questions about this article, or wish to discuss your financial circumstances, please do not hesitate to contact Relationship Manager, Phil Sole and House & Community Coordinator, Emma Walker.

We welcome all Chiswick residents to House of Killik, no appointment necessary.  Pop in for a chat and a coffee at 13 Devonshire Road – we look forward to meeting you soon.


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