With just a few days to go before the end of the tax year on April 5, here are our tips on how to make the most of your allowances.

Individual Savings Accounts (ISA)

Make the most of your ISA allowance for this tax year (2015/16). You are allowed to put £15,240 into cash, stocks and shares, or a mixture of the two. Although you will have a further £15,240 allowance in the new tax year, you can’t carry this year’s allowance forward—so you use it or lose it.

The advantage of an ISA is that all the money you invest in it can grow free of income or capital gains tax. It’s a useful way of building up a nest egg for the future, but it is not the best place for emergency savings—they are better put in a deposit account which allows instant access to your money.

 

Capital Gains Tax (CGT)

Capital Gains Tax is paid when you sell an asset or share on which you have made a profit or gain.

The CGT rate for higher and top-rate taxpayers is 28% and for basic-rate taxpayers is 18%. However, you are allowed to make a certain amount of profit before you are taxed and for the current tax year this figure is £11,100.

This means you don’t pay any CGT if the profit you make from selling an asset is worth less than £11,100. For a couple, the combined allowance is £22,200.

Many people forget to make the most of their CGT allowance but if you hold shares outside an ISA it could be worth selling them before the end of the tax year. This will enable you to realise your gain and make the most of your CGT allowance for this tax year. It expires at the end of each tax year and can’t be carried forward.

 

Inheritance tax

Inheritance tax (IHT) is paid on the value of your estate after you die. It is a tax that has to be paid if someone dies leaving an estate worth more than £325,000. The tax is charged at 40% above that threshold, and one way to reduce the potential bill is to give money away while you are still alive.

For example, you can give away up to £3,000 in gifts each tax year and can make small gifts of up to £250 to as many people as you like.

You can give a tax-free gift for a wedding or civil partnership of up to £5,000 to a child, £2,500 to a grandchild or great-grandchild, and £1,000 to anyone else.

If you are married, you can make the most of your IHT allowance by writing a will which passes on your assets to your spouse or civil partner. This doubles the amount the surviving partner can leave behind tax-free.

Tax is a specialist area and it is always advisable to seek professional advice, especially if you are likely to leave a large estate. Make sure you also enroll an expert like a solicitor to help you write your will.

 

Pension contributions

Don’t forget to make a pension contribution, either through your employer’s scheme or a personal pension.

The rules allow you to make contributions of up to 100% of your earnings in the current tax year and receive tax relief. This is up to a threshold of £40,000 annually.

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