Happy New Tax Year!

16th Apr 2019


Happy New Tax Year!

The tax year was originally introduced by Her Majesty’s Treasury in 1752, as a temporary measure (with a subsequent change in 1800 to 6th April), in order to ensure against losing revenue.

However, we prefer to focus on this as a valuable window which provides a set period during which several tax and savings allowances are available. We see it as a great opportunity to help our clients with their financial planning.

The new tax year has only recently begun and ends in just under 12 months.

While a number of us work to deadlines, rather than wait until 5th April 2020, and delay potential investment growth for 12 months, why don’t you consider using your allowances now?

We’ve set out a few examples below:


  • The allowance remains at £20,000 per individual.
  • There is no capital gains tax on growth within an ISA.
  • At PMN, we see them as being another form of saving for retirement.
  • Unlike pensions, where the income is taxed, the income (or withdrawals) from the ISA are tax free.

Pension Contributions

  • The rules around pension contributions have become very complicated.
  • Take specialist advice to check your annual allowance.
  • Do not make any contribution if you have protected your Lifetime Allowance, or it will be lost.
  • But if contributions are possible, they can qualify for tax relief at your marginal rate.
  • You can carry forward unused annual allowances from three previous tax years.
  • This could mean scope for a significant contribution of up to £160,000.
  • Remember if total income exceeds £125,000, the personal allowance is lost.
  • Making a pension contribution could mean that you recover this, thus achieving effective tax relief.

Capital Gains Tax Exemption

  • This has increased to £12,000 from 6th April 2019.
  • In other words, realised gains up to the is level are not liable to capital gains tax.
  • Up until the last calendar year, investors could have made significant gains.
  • Using the exemption early, will allow you to take advantage of these.
  • If you don’t use it in a tax year, it cannot be carried forward, so will be lost.
  • If you have a collective account, you could use the exemption to fund your ISA early.

Personal Allowance

  • This has increased to £12,500.
  • If you have no other taxable income, you could make a taxable withdrawal from your pension.
  • If this was within your personal allowance, then it would be tax free.

Dividend Tax Allowance

  • Dividends up to £2,000 in the tax year, are tax free.
  • Where suitable PMN advises clients to establish a portfolio of collective funds.
  • For married couples, with a yield of 2%, a portfolio of £200,000 could be set up.
  • The total dividend income would be within the allowance, if not used elsewhere.

Claiming the Marriage Allowance

  • This is a simple way of reducing a married couple’s income tax bill and is available if certain conditions are met.
  • The marriage allowance lets you transfer £1,250  of personal allowance from the non / low earner to their partner.
  • It can reduce their annual tax bill by up to £250 (for the 2019/20 tax year).
  • You can backdate a claim to any tax year since 6 April 2016.
  • Some retired couples have retirement plans skewed to pension income from one of the couple.
  • As an example, if a client has a personal pension, phasing tax free cash in conjunction with this increase in their personal allowance can generate £18,333 before any income tax is payable (by crystallising £18,333 you withdraw £13,750 of tax free income and £4,583 of tax free cash)
  • PMN can advise you if you qualify for this, and whether it is appropriate.

Annual Gifts Exemption

  • An individual can make a gift of £3,000 each tax year.
  • Why not make this gift early in the tax year, so the beneficiary has more time to enjoy it?

Combined Allowances = Tax-free Income

  • By combining the various allowances, through holistic financial planning, it is possible to generate a significant tax free income:


Income (£)

Personal allowance (using pension income)


Marriage allowance (as above)


Capital Gains Tax exemption (disposal from investment portfolio)


Distributions from equity based investments (dividend allowance)


Interest from cash deposits (using basic rate tax payer savings allowance)


Personal savings allowance (via a withdrawal from an offshore bond)




Plan Ahead

  • Yes, there are nearly 12 months left in the tax year, and if you make money you pay tax, but there are several allowances and by planning early, they can be optimised.
  • The end of the tax year doesn’t need to be a deadline, rather it presents a brilliant opportunity to implement some valuable tax efficient financial planning – which is exactly the role PMN plays.


Financial planning is dependent on individual circumstances, objectives, levels of acceptable risk, and tax rates at the same time. No actions should be implemented without taking advice from PMN.



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