Make The Most of Your 2014/15 Tax Allowances

tax allowances


The end of the tax year is but a few weeks away. Which means the accountancy world is pretty darn busy!

Why does this matter to you, you might ask? Well, when we move into a new tax year, your tax allowances start afresh. So, to cut a long story short, you need to ensure you make the most your allowances for 2014/2015.


Isa allowance

ISAs, or Individual Savings Accounts, are a simple way of reducing your tax outgoings; especially the Instant Access ones, which allow you to withdraw money without affecting the interest rate. In 2014/15 the allowance has been £15,000 into a single ISA. Any interest you make on that £15,000 is free from income tax, capital gains tax and higher dividend tax. Although rates are at such a level you won’t be saving thousands per year, it’s still worth getting gains where you can.

It makes a difference when you look at it longterm however. ISAs have been around since 1999 and the allowance has varied over this time, but according to Money Supermarket it’s estimated that you’d have saved £5,000 in tax if you saved the maximum each year. So 15 years of saving and a £5,000 effective return might not seem amazing but the rates are better than most traditional savings accounts and it’s less risky than other investments.

The moral of the story: if you’ve got money in a current account or other savings account, put as much as you can up to £15,000 in an ISA. Remember, couples can save £30,000 each year split across two ISAs.

Capital gains tax allowance

Capital Gains Tax might sound complicated but at heart it’s very simple. You can buy something, usually term an asset, and then sell it on for a profit. It could be a house, a piece of art, or something more abstract like shares. You don’t have to pay CGT on your main home but you will on other properties, for example buy-to-let houses. The allowance 2014/15 was £11,000 and if your capital gains, or profits on assets, exceed that allowance you’ll end up paying a hefty 28% tax.

The best way to avoid a big tax payout is to make sure you use up you allowance by selling off or ‘disposing of’ any assets that you can this year without exceeding the allowance. Split any selling off over two years and you minimise your bill. Simple.

Take advantage of your two allowances if you’re married or in a civil partnership by transferring assets to your partner’s name and getting a £22,000 buffer.

Inheritance tax allowance

Inheritance has been in sharp focus this year. If you’re lucky or unlucky enough to have assets over £325,000, usually called your estate, you’ll need to pay inheritance tax at a rate of 40%. The way many people ‘get round’ or legally minimise their inheritance tax bill is by giving away some of their assets. As with everything else, there are certain limits per year on this kind of gifting, some of which are:

  • You can give £250 to as many people as you like
  • You can give up to £55,000 to a spouse or civil partner
  • You won’t pay inheritance tax on wedding gifts to children up to the value of £5,000

For full details of the gifts, visit HMRC’s inheritance tax pages.

For more advice speak to our specialist tax accountants in Manchester and Salford.


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