Martin Lewis warns of deadline for penalty-free LISA withdrawal
When you subscribe we will use the information you provide to send you these newsletters.Sometimes they’ll include recommendations for other related newsletters or services we offer.Our Privacy Notice explains more about how we use your data, and your rights.You can unsubscribe at any time.
The 2020 to 2021 tax year will end on April 5, 2021, making way for the 2021 to 2022 tax year. The start of the new fiscal year sees a number of tax breaks and allowances refresh, so it’s important to take full advantage of this year’s available savings before they’re gone forever. Here are some key allowances and savings to be aware of as the 2020 to 2021 tax year draws to a close.
For the 2020 to 2021 tax year, the maximum amount which can be saved tax-free is £20,000.
This means from April 6, 2021, the tax year will refresh and any unused allowance from last year will be lost.
Although the tax-free allowance for ISAs is £20,000 for 2020 to 2021, some ISAs such as the Lifetime ISA have an annual limit of £4,000.
Samuel Leach, CEO of Samuel and Co Trading, told Express.co.uk: “Each tax year (April 6 to April 5) there is a limited amount of money you can put into ISAs that is tax-free.
“This tax year the ISA allowance is £20,000. So, if you have a lump sum you are looking to save it is best to make the most of the allowance this year before it resets, after which you will have a new £20,000 allowance that you can put towards your ISA (tax-free) in the new tax year.
“As you save year on year within the allowance, the money you accumulate in your ISA from your savings will also be tax free.
“So even though you are limited each tax year, this sum can considerably build up over a period of time and is tax free.
“You can put your savings towards a Stocks and Shares ISA which enables you to invest into the stock market or you opt for a Cash ISA that will pay a percentage return which can be a variable or fixed rate.
“You can also withdraw your money for free and whenever you like from ISAs (as long as you are now in a fixed term savings rate in which case you would forfeit some of the savings accumulated).”
Capital Gains Tax
Capital Gains Tax only has to be paid on gains above the tax-free allowance.
This is called the Annual Exempt Amount and the tax-free allowance for Capital Gains is £12,300 and £6,150 for trusts.
Martin Lewis urgently warns you ‘should be thinking ‘about your ISAs [VIDEO]
Inheritance Tax: Britons urged to act as probate length & costs rise [INSIGHT]
Inheritance tax: Benefits change could lead to ‘harsh’ bills [ANALYSIS]
Anthony Morrow, co-founder of low-cost financial advice platform OpenMoney, said: “If you’ve got any assets outside an ISA, you’ll have to pay tax on any returns they make or profits if you sell them.
“Luckily, though, everyone gets a capital gains tax (CGT) allowance (it’s £12,300 in the current tax year) and you only have to pay tax on anything above this amount.”
A non-taxpayer can transfer a proportion of their personal allowance to their spouse or civil partner in some circumstances.
The higher-earning partner needs to be a basic 20 percent rate taxpayer to be eligible for the tax break.
Changes to the personal allowance can be backdated to include any tax year since April 5, 2016 that someone was eligible for Marriage Allowance.
Mr Morrow added: “If you’re married or civil partnered and one of you is a high earner while the other isn’t, you can transfer the high earner’s assets into the low earner’s name to benefit from their unused personal allowance (worth £12,500) and capital gains tax allowance (worth £12,300). This could save you a bundle in tax.
“You can also use the marriage allowance to transfer £1,250 of your personal allowance to your spouse or civil partner where one of you is a non-taxpayer and the other a basic-rate taxpayer.
“This can save you £250 in income tax, and you can backdate it for three years.”
Source: Read Full Article