Advisers reveal tax year-end client conversations

Advisers reveal tax year-end client conversations

Isa rate deals are everywhere at the moment but there’s more to the tax year-end according to several financial advisers, including some canny ways of making the most of pensions and tax planning.

Greg Heath, managing director at Derbyshire Booth Financial Management, stated that using the £15,000 Isa allowance is the main thing he has been talking to clients about ahead of the April deadline, along with similar advice for any capital gains made.

“The funds we run have seen substantial gains this last two years, so consolidating those gains by encashing funds and using the capital gains tax allowance is a no brainer.”

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Santander research showed 74 per cent, or around 37.4m of the wider population, are either mistaken about or unaware of this year’s annual allowance, which increased from £5,760 to £15,000 last July.

The survey, conducted by Opinium Research with more than 2,000 adults last month, also found that when extrapolated to the total UK adult population, around 14m people are planning to make deposits and account applications between now and 5 April.

However, the average amount savers expect to deposit this tax year is £4,210 - just 28 per cent of the maximum allowance, with only 8 per cent utilising their entire £15,000 allowance in cash.

Inheritance tax is the other issue that always comes to the fore at this time of year, with parents and grandparents taking the opportunity to make gifts to children or grandchildren with tax benefits.

Mr Heath explained: “Grandparents contributing to a stakeholder pension fund for grandchildren means they can make a payment of £2,880 and HMRC will kindly add £720 as tax relief to the fund.

“The best bit is this is treated as an expense for IHT to the estate and there are no limits to how many grandchildren you can do it for.

“The peace of mind my clients get is it offer future financial security for the grandkids, they cannot touch it until aged 55 minimum - hence no wild parties in Ibiza aged 18 - it bypasses the parents altogether and it reduces the estate for IHT reasons.”

Andrew Whiteley, director at Proviso Chartered Financial Planners, told FTAdviser that he has recently had several planning meetings with clients already in drawdown about the future taxation of death benefits and the potential IHT efficiency of pension drawdown funds pre age 75.

“Whereas maximising income extraction was historically seen as the most effective way to ultimately preserve capital, the new rules have turned that theory on its head and we are now looking at shifting income generation to other assets within their portfolios.

“In particular unwrapped investments, where we can take capital growth out tax efficiently using annual allowances as well as stripping out any interest and dividend income, thereby limiting the growth on non-IHT efficient assets and leaving the now IHT efficient pension fund to grow unencumbered.”

Keri Carter, managing director at Broadway Financial Planning, said that for most of her clients, Isa allowances are utilised at the beginning of the tax year in order to maximise tax shelters during the course of the year, leaving only a small number of stragglers to accommodate at this point in the year.