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Avoid the Year-End Panic by Preparing Your Finances Early
For many people, tax planning is a necessity that often falls down their list of priorities as more pressing paperwork takes precedence over the year. Bill Ellis, Director at Central Investment, discusses how planning ahead and acting sooner rather than later can allow you to take advantage of the fresh tax year's allowances and various investment options on offer, in addition to avoiding any costly delays.
 
Now the dust has settled over the March Budget and end of the tax year, it is important that individuals start to form a plan for their finances to stand them in good stead for the year ahead. Many will need to seek professional financial advice to support this, and it would be wise to bear in mind that financial advisory and accountancy firms experience their busiest period during the run up to the end of the tax year, further highlighting the importance of scheduling financial planning meetings well in advance.
 
Ideally everyone would use their full annual pension and New Individual Savings Account (NISA) allowances each year, but due to limited savings, this isn't always possible. A NISA allows for unrestricted access to your savings but a pension will allow for you to take full advantage of the tax relief benefits on offer. Considerable thought needs to be put into which investment option is right for you.
 
There are many tax efficiency and investment schemes available, and following the Chancellor George Osborne, declaring a radical reform of pensions and NISA's, it has never been a better time to invest. It was announced in this year's March budget that every basic-rate taxpayer will have the tax on the first £1,000 of their savings abolished. This change will particularly benefit those who have had their savings affected by today's record low interest rates.
 
Under the new rules, the first £1,000 of interest will now become tax free on savings earned every year from April 2016, however this is reduced to the first £500 saved for higher rate taxpayers, and does not apply to those earning over £150,000 per annum.
 
The challenge for savers will be earning £1,000 in interest due to the low rates, which have remained at a base rate of as little as 0.50% since 2009. Many will overcome this by opting for asset backed investments including corporate bonds, commercial property and shares, because they still offer high levels of income and growth. These investments will need to be considered early this year to be viable in time for when this scheme is introduced in April next year.
 
An increasingly attractive investment option to savers are NISA's, particularly stock & shares NISA's. As of April this year, the allowance increased to £15,240, and even more flexibility was introduced. For the first time ever, savers are able to transfer their previous years' funds from stocks and shares ISAs into cash ISAs, which was not previously allowed. The saver can then shelter up to £15,240 from the tax man whilst it is invested or when an individual chooses to access the balance of the plan.
 
Despite this added flexibility, any unused NISA allowances will be lost and cannot be reclaimed after 5 April 2016. If you have not already done so, a NISA should be opened now to take full advantage of this year's growth period.
 
From April 2015 the Starting Rate Band of tax, which in some circumstances had previously resulted in the first £2,880 of savings being taxed at a rate of 10%, is to increase to £5,000, whilst the rate has been reduced to 0%. For those with a moderate pension but a higher amount of investment income, this change will be of great benefit to them if they leave enough planning time.
 
Central Investment's expert financial planners can offer clients impartial advice on the changes to pensions and ISA's, and recommend the most appropriate action to take to ensure you take advantage of the new tax year allowances.
For many people, tax planning is a necessity that often falls down their list of priorities as more pressing paperwork takes precedence over the year. Bill Ellis, Director at Central Investment, discusses how planning ahead and acting sooner rather than later can allow you to take advantage of the fresh tax year's allowances and various investment options on offer, in addition to avoiding any costly delays.
Central Investment Services (Scotland) Ltd is Authorised and Regulated by the Financial Contact Authority. Registered in Scotland No SCO54118. Registered Address: 9-13 Albert Street, Aberdeen AB25 1XX

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