Income Tax relief at up to your highest marginal rate, with a maximum Annual Allowance contribution limit of £40,000 and the ability to Carry Forward unused relief from the past three years.
2019/20 will be the last opportunity for high earners to utilise available carry forward from a year when the tapered allowance did not apply. Pension savers will need to ensure that they do not fall foul of unauthorised contributions.
However, it is possible for some High Earners to reinstate their full £40,000 allowance by making use of this carry forward. The tapering of the annual allowance won’t normally apply if income less personal contributions is £110,000 or less and some of it may attract 60% tax relief too, if part of the Personal Allowance is reclaimed.
The Lifetime Allowance (maximum pension pot without additional tax) is currently £1,030,000, increasing to £1,055,000 for 2019/20.
There is usually no Inheritance Tax (IHT) on the transfer of pension plans on death.
Individual Savings Accounts (ISA)
ISAs are free from Income and Capital Gains Tax (CGT). The annual allowance will remain at £20,000 and parents and grandparents can continue to invest into Junior ISAs which per individual will increase from £4,260 to £4,368 in 2019/20.
Individuals between the ages of 18 and 40 can invest £4,000 per annum into a Lifetime ISA. Contributions into a Lifetime ISA paid before your 50th birthday will receive a 25% government bonus. The savings must be used towards purchasing your first home or can be retained until you are 60.
Enterprise Investment Schemes (EIS)
EISs attract income tax relief of 30% and unlimited CGT deferral, allowing tax free capital growth, loss relief and potential Inheritance Tax (IHT) exemption after two years. The Autumn Budget also focused on providing significant additional support to knowledge-intensive companies increasing the annual limits for individuals from £1 million to £2 million, provided that anything above £1 million is invested in knowledge-intensive companies.
This means investors have been able to earn up to £600,000 in tax relief, up from £300,000 in the previous tax year. This doubling of the limit is still to be viewed with caution, particularly as a new ‘risk to capital’ test was introduced, to ensure new schemes are only used for genuine growth companies.
Seed Enterprise Investment Scheme (SEIS)
A SEIS attracts all EIS tax reliefs, but differs in that income tax relief is 50% and CGT reinvestment relief is up to a maximum investment level of £100,000. The new ‘risk to capital’ test has also been applied to new SEIS investments.
Venture Capital Trusts (VCTs)
VCTs have the same income tax relief as EIS and provide tax free dividends. Neither CGT nor IHT relief is given, while the plan term is five years and maximum investment is capped at £200,000. Since 6 April last year, VCTs have had to invest at least 30% of their funds in qualifying holdings within 12 months and hold 80% of their assets in qualifying companies rather than the previous 70%.
Capital Gains Tax (CGT)
The annual exemption will increase from £11,700 to £12,000 in 2019/20 with transfers between spouses being exempt.
Capital Gains Tax rates remain at 18% for basic rate tax payers and 28% for higher and additional rate tax payers on residential property sales. All other assets liable to capital gains, will incur Capital Gains Tax at the reduced rate of 10% for basic rate tax payers or 20% for higher and additional rate tax payers.
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