Blackstone Wealth Management in the West Midlands usually looks to crystallise sufficient capital gains in clients’ investment portfolios to utilise their capital gains tax (CGT) allowance in late March and use some of the proceeds to make their ISA contribution for the new tax year. However, recent stock market declines have necessitated a different strategy for some of their clients. Managing Director Craig Burgess says: “This year most clients have some losses and rather than create the cash for ISAs in late March, we will do this in the new tax year. For a client who has already crystallised gains within their allowance, any capital losses that arise in the same tax year must be offset against any capital gains for that tax year; this is compulsory. Unfortunately, this may mean that an individual’s annual exempt amount for that tax year is wasted. If instead we wait and sell down in the new tax year then we immediately crystallise the loss, effectively increasing the capital gains tax allowance by the amount of the loss.
From 6 April 2016, most UK adults have been able to earn up to £1,000 interest per year on their savings without paying tax – and Mattioli Woods is keen to ensure that as many clients as possible benefit. George Houston, Senior Technical and Development Manager, says: “The workings of the allowance can prove to be tricky. For example, someone who only just slips into the higher rate tax band will see their tax-free personal savings allowance reduce from £1,000 to £500 and it may be possible to restructure their affairs to drop their taxable income below the higher rate threshold and maximise use of this tax privilege.” Pension contributions, charitable donations and transferring income-producing assets between spouses can help clients to retain the full allowance.
Rowley Turton in Leicester is advising clients to use their ISA allowance with a lump sum contribution at the start of the new tax year: this way, cash ISA savers earn an extra year’s tax-free interest and investors shelter their money from income and capital gains tax one year earlier. Director Scott Gallacher says: “Whilst many people leave their ISA contribution to the last minute, you’d be better off making this at the start of the tax year. We’ve done this for a number of years either as part of a start-of-tax-year review or by way of a letter sent to the relevant clients in April. We advocate lump sum investing; generally, trying to time the market by way of phasing is a losing move as the markets trend upwards.”
Berkshire-based Fund Management is urging clients to make the most of tax-privileged investment allowances while they are still available. Owner Ian Head says: “Who’s to say that today’s tax saving schemes will still be available in March 2017? It’s fairly rare that tax planning at the beginning of the tax year has put a client at a disadvantage.” He is encouraging pension clients to look at venture capital trusts and enterprise investment schemes as part of their retirement planning. “These schemes offer an attractive alternative with tax relief of up to 30% on investment. With equity markets far from their April 2015 high, it could be argued that the risk of investment in this type of scheme is now lower.”