Investment & Wealth Advice

Why it's time for a financial workout

Clare Munro, Senior Tax Advisor

COVID-19 is having a dramatic impact on both financial markets and Government spending. Last week saw the first ‘baby steps’ out of lockdown, but we’re still being encouraged to spend most of our time at home.  So, if you’ve had enough of physical decluttering, and your attic, shelves and cupboards are in apple pie order, now would be a good time to spring clean your financial and tax affairs.  Here are four suggestions to get you started

1. Pensions

Registered pension schemes are the nearest thing the U.K. has to an onshore tax haven. There is tax relief for contributions while you’re earning, the fund income rolls up tax free and then, when you get to pensionable age and want to draw on the fund, there’s even an element of tax relief as 25% can usually be taken as a tax free lump sum. For many people, their pensions are a significant part of their wealth, yet few take the time to review them.
You may have accumulated several pension pots, both occupational and personal, at different stages of your career. Can you save costs by consolidating them? Have you utilised your contribution capacity to the full? For most people the annual contribution limit is £40,000. Unused capacity can be carried forward for three years, but is then lost, so a review of the past three years’ contributions could reveal more opportunities to save tax efficiently for retirement.
Do you know the value of your funds in aggregate? The lifetime limit for pension funds has been around since 2006 to cap the value of tax-relieved funds and the standard lifetime allowance in 2020/21 is £1,073,100. If the allowance is exceeded there are additional tax charges at up to 55%. Protection of larger funds up to £1.25m may be possible but only if contributions cease.Understanding where your fund sits in relation to the lifetime allowance may help you to avoid unexpected charges and allow you to continue to save tax efficiently.

2. ISAs

Every year, everyone is able to invest £20,000 in an ISA wrapper, with the result that income on that investment is tax free. You can’t carry the allowance forward, so, every March, as the end of the tax year gets close, there is a dash to get funds invested before 5 April. It doesn’t need to be like that and, by using your ISA allowance early in the tax year, another year’s worth of income is tax free.
ISA investments can be in the form of cash or stocks and shares, so are flexible enough for all investment tastes. So rather than waiting until March 2021, take the time now to invest this year’s ISA allowance and maximise your tax-free returns.

3. Tax returns

Another job that gets relegated to the back end of the year is preparation of your tax return or collating the information to do so if you have an accountant. Chances are that most of the information you need is available now and, by getting it done early in the year, you can plan for the payments accurately.
This year the pressure of payments on account is relieved – the government has announced that the payments on account which would normally be due on 31 July can be deferred to 31 January 2021. That means you might have a larger payment to make next January, but by calculating it now, it’s possible to put that money aside and make it work for you for the next eight months.

4. Capital gains (and losses)

No-one welcomes falls in the value of their assets. However, tough times in the markets can present an opportunity to review portfolios and exit from holdings that no longer merit their place in your portfolio, crystallising valuable tax losses on the way.
More positively, every year, each of us is entitled to use a personal CGT allowance (£12,300 for 2020/21) to make tax-free capital gains, yet few use their allowance. A review of your portfolio can identify holdings standing at a gain which could be sold to use your allowance. If you simply buy back the same stocks within 30 days, the tax effect is eliminated and it is as though you never sold them. However, if you immediately buy back the same stocks in an ISA, the market movement is limited and the sale captures the capital gains tax allowance.

Talk to our team

If you could use some help to manage your investments and pensions, our Investment and Wealth Advice service may be able to assist.  Please click here to contact our team who will telephone you back to discuss your needs.



So, you want to retire at 60? David Stead, Senior Private banker, explains why you need a cashflow plan.

"With the average lifespan lengthening and the age at which the state pension can be claimed rising slowly but steadily, retiring at the spritely age of 60 now seems achievable in a way that perhaps it didn’t a generation ago."

Cash Flow Planning


When it comes to planning for the future, most people tend to focus on one thing: building as much wealth as they can. This is vital, of course. If you want to meet your financial goals, then saving and investing wisely is absolutely fundamental.

The Weatherbys Investment & Wealth Advice service will help you build a cash flow plan to ensure sufficient income for life.


Important information

The information contained in this article does not constitute financial advice or a personal recommendation.  Past performance is not a guide to future performance. The value of an investment and its income can both increase and decrease and you may not get back the full amount originally invested. The value of overseas investments will be influenced by the rate of exchange.

Tax laws are subject to change and taxation will vary depending on individual circumstances.


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