USE YOUR TAX ALLOWANCES
Every individual has a personal allowance before paying Income Tax…
Those of us born after 5th April 1948 have a personal allowance of £9,440 per annum in 2013/14 tax year.
Those of us born between 6th April 1938 and 5th April 1948 have an age related personal allowance of £10,500 per annum in 2013/14 tax year.
If you were born before 6th April 1938, your age related personal allowance os £10,660 per annum in 2013/14 tax year.
There is an income limit for age-related allowances (for those born before 6th April 1948) of £26,100 per annum in 2013/14 tax year.
For every £2 over this limit, your personal allowance will reduce by £1, until it reaches the same level as applies to those under the age of 65. If your income from pension, interest dividends and any work totalled £26,102 (£2 over) your personal allowance would be reduced to £10,499 (£1reduced) and so on until your age allowance rolls back to £9,440. The reduction stops once you have reached £9,440.
If you are a couple, you will have two personal allowances, one for each individual. Therefore in 2013/14 a couple under the age of 65 can earn £18,880 before paying tax.
Ensure assets are spread between you, to fully utilise each allowance. There are no tax implications for transferring assets between spouses or civil partners.
For more information on Income Tax, please see the HMRC website.
TAX FREE INVESTMENTS
Each individual has an ISA allowance of £11,520 in tax year 2013/14. Therefore, in two tax years, £46,080 of a couple’s assets could be sheltered from tax (£23,040 could be in cash).
You could each hold £30,000 in premium bonds and the “winnings” are tax-free and you can access you capital within 8-10 working days.
From time to time, NS&I issue Index Linked Savings Certificates with the maximum holding of £15,000 per issue, per individual, usually inflation linked with tax-free proceeds after three or five years.Currently no issue is available.
Cash ISA,Premium Bonds are useful for holding cash reserves with easy accessability and tax free returns.