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How to prepare for the new tax year

You could lose certain allowances after 5 April


The 2013-14 tax year ends on 5 April 2014. Some important allowances and tax reliefs will be lost if you don’t use them. Others can be carried over to the new tax year, 2014-15.

Isa deadline looms

The most important tax deadline for many people is the end of the Isa year for 2013-14. Once this has passed, any new money paid into an Isa is set against the 2014-15 allowance. 

For 2013-14, the overall Isa limit is £11,520, of which £5,760 can be saved in a cash Isa. Alternatively, you can decide to use your full £11,520 in a stocks and shares Isa. 

Go further: Best Rate cash Isas – Find out which cash Isas are offering the best interest rates  

Most Isa providers will accept last-minute applications to open a 2013-14 Isa if you don’t already have one, or top-up deposits if you have not yet paid in the maximum amount. 

Postal applications received by 5 April 2014 may qualify, but the risk of delay or disqualification on a technicality means that an online or telephone Isa application is far more appropriate if you have left things to the last minute. 

Stocks and Shares Isa providers, such as Barclays stockbrokers, M&G Investments and Hargreaves Lansdown are on standby for applications as late as the evening of 5 April, although only for online or telephone applications. In all cases, you should contact your broker to check deadlines and application procedures.

Cash Isas can be opened at the last minute too, although the deadline for most of these is slightly earlier. Rates vary significantly, so you need to check what your provider is offering and how long you want to have your money tied up for (Cash Isas range from instant access to 5-year fixed-rate accounts).

Capital gains tax allowance  

In the 2013-14 tax year, you can make capital gains of up to £10,900 tax-free. After 5 April 2014, the new 2014-15 allowance of £11,000 applies. Unused CGT allowance cannot be carried forward, although capital losses made in the year can be – to be set against future capital gains.   

Go further: Capital gains tax explained – how much you pay and how this is calculated 

Pension contributions – annual allowance 

In 2013-14, you can make up to £50,000 a year pension contributions and receive tax relief on this. For 2014-15, the limit falls to £40,000. 

If you fail to meet the deadline, you have three years to carry forward unused allowance. There are qualifying conditions for this, however, including a requirement to have earned at least the sum you want to pay into a scheme.

Inheritance tax   

Another allowance that can be carried forward is the £3,000 tax-free annual limit on gifts for IHT. If you have made less than this in the 2013-14 tax year, you can add the remainder to your 2014-15 allowance. These gifts are not counted against your £325,000 nil-rate band. 

Go further: Inheritance tax explained – tax-free gifts you can make

More on this…

Please note that the information in this article is for information purposes only and does not constitute advice. Please refer to the particular terms & conditions of a provider before committing to any financial products.

Categories: Money, Savings & Isas

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