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The tax year end looms into view…

The 2018/19 tax year comes to an end on Friday 5 April 2019; in this newsletter we look at some of the areas that you may need to review. This is generic information, if you wish to discuss your personal position, we would love to hear from you. It is always best to deal with these matters in good time, so please call us now.

Individual Savings Accounts

There are now five types of ISA, although this will drop to four by December: We have focused on the Standard and Junior ISAs below, if you are interested in the help to Buy, Innovative Finance or Lifetime ISAs please let us know.

Type of ISA

Age Eligibility Maximum contribution*

2018/19                     2019/20

Standard Cash/Stocks & Shares ISA

18 upwards, but 16-17 year olds may start a Cash ISA



Junior ISA (JISA)

Under age 18 without a Child Trust Fund (CTF) £4,260


* The general rule is that the maximum total annual contributions to all ISAs in 2018/19 and 2019/20 is £20,000. However, a 16 and 17 year old can benefit from maximum contributions to a standard ISA (including Help to Buy) and a JISA (ie. a maximum of £24,260 in 2017/18 and £24,380 in 2019/20).

Main tax benefits

There are four important tax benefits which are common across the different types of ISA:

  • Interest earned on cash or fixed interest securities is free of UK income tax.
  • Dividends are free of UK income tax.
  • Capital gains are free of UK capital gains tax (CGT).
  • There is nothing to report on your tax return.

Following changes made in recent years, all ISAs (other than JISAs) can effectively be inherited by a surviving spouse or civil partner.

Use it or lose it

ISA contributions operate on a simple tax year basis. If you do not contribute up to the maximum, you cannot carry forward your shortfall to future tax years. To gain the most from ISAs, you should aim to invest as much as you can afford each and every tax year.


There is a possibility that at some point tax relief on contributions will be switched to a flat rate. If you pay tax at the higher or additional rates, a move to a flat rate would mean less tax relief (probably no more than 30%), a good reason for maximising contributions under the current tax rules.

Unused allowances from earlier years

The annual allowance sets the maximum possible tax-efficient total pension contribution from all sources at £40,000 per tax year. However, the £40,000 limit is reduced if, your total income (not just earnings) plus employer pension contributions exceed £150,000. At worst, this cuts the annual allowance to a £10,000 minimum.

The scope to catch up on contributions that could have been, but were not, made, is limited to just the last three tax years. These annual allowance rules mean that a pension strategy which relies on occasional large one-off contributions is best avoided in favour of regular contributions made throughout your working life.

In some instances, if a person had not made pension payments in recent years, up to £160,000 could be paid to their pension in 2018/2019 without incurring any tax penalties. However, in practice, the actual figure will be nearly always less: determining how much less requires a detailed assessment of you and your employer’s contribution record. If you need guidance, please let us know now.

Higher automatic enrolment contributions in 2019/20

Once 5 April is passed, many employers and employees will see their pension contributions rise because of increases to the automatic enrolment contribution rates scheduled long ago.

For many employees, the increase in their auto-enrolment pension contributions will more than outweigh the savings from the Budget changes to the personal allowance and National Insurance Contributions.

Venture Capital Trusts (VCTs) and Enterprise Investment Schemes (EISs)

Increasing numbers of clients face restrictions on the amount they can contribute to pension and are exploring other investments that offer Income Tax relief. This has drawn increased attention to EIS and VCT.

The rules that apply to the investments made by VCTs and EISs were changed significantly in last year’s Finance Act. The main impact of the changes was to prevent the schemes from attempting to limit the risk by investment in low/no growth companies. With a similar goal in mind, loans to companies can no longer be made by VCTs on a secured basis.

As a brief reminder, the tax benefits of VCTs and EISs are:




Income tax credit on initial investment

30% on investments up to £200,000 per tax year 30% on investments up to £2,000,000* per tax year

Backdating of investment


1 year, up to £1 million

Minimum holding period to avoid tax relief clawback 5 years

3 years


Tax-free and often paid from capital gains, not income

Taxable (but profits usually retained, not distributed)

CGT reinvestment relief


Gains may be reinvested in an EIS up to three years after realisation or one year before. No limit

Capital gains on proceeds


Nil (except for reinvested gains)

Inheritance tax (IHT) business assets relief None

Usually available after two years’ ownership

* Basic limit £1 million. The £2 million limit requires that at least £1,000,000 is invested in “knowledge intensive” companies.

Following the 2018 changes, more than ever VCTs and EISs must be regarded as high risk investments. They should represent only a small part of a well-diversified investment portfolio.

Inheritance Tax

As the graph shows, IHT receipts have been growing steadily in recent years. This tax year’s IHT payments are projected to be £5,500 million, over double the amount raised eight years ago. The introduction of the residence nil rate band in 2017/18 has slowed the projected rate of increases, but not reversed the trend. The main reason for that is that the nil rate band has been frozen at £325,000 since April 2009. It is currently not due to increase until April 2021.

The annual opportunities

As part of your year end planning, there are three main yearly exemptions which you should consider using by 5 April:

  1. The Annual Exemption Each tax year you can give away £3,000 free of IHT. If you do not use all of the exemption in one year, you can carry forward the unused element, but only to the following tax year, when it can only be used after that year’s exemption has been exhausted.
  2. The Small Gifts Exemption You can give up to £250 outright per tax year free of IHT to as many people as you wish, so long as they do not receive any part of the £3,000 exemption.
  3. The Normal Expenditure Exemption The normal expenditure exemption is potentially the most valuable of the yearly IHT exemptions but is often ignored. Any gift is exempt from IHT provided that:
    1. you make it regularly;
    2. it is made out of income (including ISA and other tax-free income); and
    3. it does not reduce your standard of living.

There are no cash limits to the normal expenditure exemption. You can gift dividend or other investment income which would otherwise usually be reinvested, with the normal expenditure exemption covering the gift.


The end of the tax year is coming ever nearer and the time to plan is now. Please contact us immediately if you require help.

Past performance is not a reliable guide to the future. The value of investments and the income from them can go down as well as up. The value of tax reliefs depend upon individual circumstances and tax rules may change. The FCA does not regulate tax advice. This newsletter is provided strictly for general consideration only and is based on our understanding of law and HM Revenue & Customs practice as at January 2019 and the contents of the Finance (No 3) Bill 2017-19. No action must be taken or refrained from based on its contents alone. Accordingly, no responsibility can be assumed for any loss occasioned in connection with the content hereof and any such action or inaction. Professional advice is necessary for every case.

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