Coronavirus Uncertainty: Impact on Personal Finances at Tax Year End

March 2020
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While we are all facing unprecedented disruption to our daily lives, it is important not to lose sight of long-term goals and to consider what action we can take to limit the financial impact of the emergency on us.

At LEBC we can continue to provide advice and guidance to individuals, families and businesses. We have planned for major disruption to our business. Our preparations have enabled our staff to continue working remotely and safely, so that we will be available to help our clients.

We have introduced a document transfer portal which enables us to securely exchange sensitive personal information with you. In order for us to send you an invitation to access this you simply need to send your usual LEBC contact your email address, we will then enable you to register for this service, which will be our main means of communication with you during the emergency. You can also contact staff by telephone on their mobile numbers. For the time being we will not be communicating by post unless there is no alternative. All face to face contact is also suspended as required by the Government.

Tax Year End Deadline 5 April

Tax efficient savings
The Government has not made any change to the deadline of 5 April, for pension savings and other tax efficient vehicles, such as Individual Savings Accounts (ISAs) to be made in the current tax year.  We are still able to help you make these tax efficient savings before this deadline, but you will need to contact us soon if you wish to consider doing so.

You may be uncertain about investing in certain assets at this time, due to the extreme volatility displayed in the world’s stock markets. If that is the case but you would still like to consider using your tax efficient savings allowances, a solution may be at hand. It is possible to invest in an ISA or pension wrapper to secure the tax efficient allowance for this tax year, but to delay the investment into assets, which are experiencing volatility, by placing the investment in a cash fund in the short term.

Cash funds are not likely to be suitable as a longer-term investment, unless you wish to take only a very low level of risk. Rates of return on cash investments are low and are unlikely to keep pace with inflation. However, they can be a useful temporary home for your money, enabling you to make use of the tax efficiency of pensions or ISAs, and then switching your investment into longer term investments such as shares, property, fixed interest or commodity funds later. The switch can either be as a lump sum, or regular drip feeding into longer term investments, to even out the peaks and troughs of asset prices.

Whether it is suitable for you to invest at this time and the amount you can afford to save will depend entirely on your personal circumstances. Your usual LEBC contact will be able to help you assess this and to take the action needed if you do decide to invest before the tax year end.

Personal taxation
The end of the tax year is also the time to consider whether there are allowances or reliefs you need to claim. Many allowances are provided for the tax year in which you are in and on a use it or lose it basis. We highlight some of these below:

  • Capital gains, net of losses, can be realised and offset against the tax-free allowance of £12,000 (the figure for the current tax year) and which is lost if not used. Losses realised can be carried forward to offset against future years’ gains. 
  • The annual allowance for inheritance tax free gifts of £3,000 per donor is also tax year end determined but can be carried forward for one year as long as the current year’s allowance is also fully used. Similarly, the tax- free allowance of £250 per recipient of a lifetime gift is per tax year.  
  • Marriage allowance is available to married couples and civil partners. If one of you is a non-taxpayer and the other a basic rate taxpayer, the lower taxpayer may elect to give up 10% of their personal allowance to the other, saving £250 per year of income tax (the figure for 2019/20 and 2020/21). For couples who qualify, in the previous 4 years, a claim can be backdated for that period so is currently worth up to £1,150 in tax refunds. After 5 April, the 2016/17-year allowance is no longer available.

For specific guidance and advice on how you may benefit from some of these allowances and reliefs please contact your usual LEBC adviser. 

Kay Ingram
Director of Public Policy

Please remember, no news or research item is a recommendation or advice to buy. LEBC Group Ltd is not responsible for accuracy and may not share the author’s views. The contents of this blog are for information purposes only and do not constitute individual advice. A pension is a long-term investment. The fund value may fluctuate and can go down. The value of an investment and the income from it could go down as well as up. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested. If you are unsure of the suitability of any investment or product for your circumstances, please contact an adviser. All information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxation, are subject to change. The Financial Conduct Authority does not regulate estate planning, tax advice, wills or trusts.

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