ANALYSIS
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IncomeTax and Capital GainsTax (CGT) when
they are cashed in. Every adult can invest up to
£11,520 in a stocks and shares ISA, holding
shares, bonds or pooled funds such as unit
trusts, or up to £5,760 in a cash ISA, during the
tax year, which ends on 6April.The money can
be taken out whenever you like and there is no
CGT to pay on any pro ts, no further tax
liability on any income received – and no need
to declare ISAs on your tax return. Junior ISAs,
under which up to £3,720 can be saved on
behalf of children aged under 18, have the same
tax reliefs, but with the restriction that the
funds cannot be withdrawn until the child
reaches the age of 18 and that ownership of the
fund will pass to them at that date.
Sophisticated investors may also wish to
consider another potential source of tax-free
income –Venture CapitalTrusts (VCTs). Up to
£200,000 a year can be invested inVCTs to
earn IncomeTax relief at 30% of the sum
invested, provided the investment is held for at
least ve years. Dividends paid byVCTs can be
tax-free and any pro ts CGT-free. However, it
is important to understand that small and
start-up companies that qualify forVCT tax
incentives are high-risk investments.
Other tax-planning options to consider
include making sure both partners in a couple
gain some bene t from their personal allowance
of £9,440 and CGT allowance of £10,900 –
although this will entail transferring ownership
of assets to the lower-taxed partner.
This brief overview cannot describe all the
rules and restrictions of our notoriously
complex personal tax system. If you would like
further information, contact your St. James’s
Place Partner. Remember that ISA tax breaks
and others mentioned are annual allowances.
That means you cannot go back to utilise those
you failed to take up in earlier years. So, when it
comes to year-end tax planning, it really is a
case of use it or lose it.
All limits and allowances quoted relate to tax year 2013/14
Ian Cowie
writes for the
Sunday Times
and was head
of personal finance at Telegraph Media Group for five
years. He was named Consumer Affairs Journalist of the
Year in the London Press Club Awards 2012. You can
follow him on Twitter @iancowie.
Marginal tax rates
applicable tomany
people are higher
than headline tax
rates
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