Having been asked by Ritsut: " what if any provisions you make for new tax year approaching?",
I have to say that most of my planning is a continuation of previous years in that I use a self select Isa for most of my dealings and this covers the majority of my published portfolio sheltering gains from CGT and dividends from any further tax liability.
For those holdings outside of this shelter, I occasionally top slice them in order to put the funds towards my Isa allowances.
If I am lucky then topslicing these would utilise the Capital Gains annual exemption amount of £10680 (2011-12) but I don't specifically set out to do this.
£10,680 being the amount of exempt profitable gain realised (net of applicable expenses), not the total funds received from a sale (original investment plus profits/loss).
£10,680 being the amount of exempt profitable gain realised (net of applicable expenses), not the total funds received from a sale (original investment plus profits/loss).
In previous years I have also sought to maintain a roughly equal split between cash and equities so I have also used:
- cash Isa's and
- NS & I Index linked saving certificates to mop up spare savings
These instruments are tax free shelters but the events of recent years has seen the cash Isa marginalised with derisory and wealth robbing interest rates whilst Index linked savings certs have made only a partial comeback following their postponement when the attractiveness of products on offer from the increasingly risk laden savings industry created an imbalanced demand for the National Savings products which are 100% government backed and, at the time, offered superior returns which led to savings being withdrawn from banks and put into National Savings.
Although it serves as a useful reminder to people to use their allowances, I rarely see anything appealing in the investment industry's year-end fire sale, particularly when investing large amounts in April/May is possibly not the most advantageous time to invest and actually goes against much of the industry's advised "pound cost averaging" methodology.
This drip feeding of amounts into the market averages the purchase price of unit/share prices so whilst not always benefitting from market lows (if you knew when they took place of course), you would at least mitigate the risk of buying when the market/units/share price peaks.
So I actually prefer to undertake my tax planning at the beginning of the year which gives me a little more time to make a more informed decision and also to "drip feed" savings or investments in smaller amounts.
It also gives me time to transfer existing products as necessary.
That just leaves me with a mopping up exercise at this time of year (if I have anything left of course).
The quandary I continue to have is whether or not I should be transferring some of my cash Isa's into equities and the pros and cons of doing this.
It is certainly a deviation from my efforts to maintain a 50-50 balance but does the additional risk of being overweight on equities (values can go down as well as up) outweigh the risk of holding an investment in cash that, although it can be tax free, is certain to lose value against inflation due to the current and foreseeable interest rates which themselves give very little advantage over non-Isa rates?
So whilst the Bank of England and the savings industry are intent on exploiting savers perhaps there is very little to recommend in a "tax free" shelter neutered by a miniscule return.
As ever the greatest risk is in doing nothing.
2011-12:
- Dividends are taxed at:
- 10% notional for basic rate tax payers as they are paid with a 10% tax credit
- 32.5% for 40% rate band taxpayers (22.5% payable net of 10% tax credit)
- 42.5% for 50% rate band taxpayers (32.5% payable net of 10% tax credit)
- ISA Limits:
- £10680 for equity investments "inclusive" of;
- £5,340 Cash Isa maximum investment.
- Capital Gains Tax:
- £10,680 annual exemption limit for individuals.
- Rates to apply in excess of the annual exemption amount for individuals:
- 18% for Standard rate taxpayers
- 28% for Trustees/higher rate tax payers
These are other rates and limits for Enterprise Investment Schemes, Venture Capital Trusts etc that I haven't discussed here.
Related posts:
- Budget Musings / NS&I Index linked savings 
As said the tax planning with proper investment plan will save a lot of our money. Thanks for the information and do add up more info on tax savings and tax planning methods..
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