Do not make the mistake of thinking you have time to pause for breath. After the rush of last- minute questions, applications, pension top-ups and Isa reshuffles, tax year 2016/17 is now history.
Yesterday, we bid a cautious welcome to tax year 2017/18, which will bring with it fresh challenges, new numbers to commit to memory and a whole new set of new financial planning opportunities. In some cases, there may only be days to ensure clients benefit fully from them, hence the need for a flying start to the year.
Take Isas, for example. There is the welcome and significant uplift in the annual allowance to £20,000. That is a combined £40,000 per couple that can be safely squirrelled away in a tax-advantaged account.
And with these sort of numbers, why wait until the end of the tax year to move assets under the Isa umbrella? I have a good number of clients where we agreed to sell assets in the final couple of weeks of last tax year (taking profits on equity funds and using capital gains tax allowances while we were at it) ready to add the maximum possible to their Isas as soon as we are able.
There is the added delight this year of the new Lifetime Isa. That is, if you can find a provider willing to take your client’s money. This is a clunky and complex product, and I can see why many of the banks and building societies are cautious about in-branch sales.
That said, as IFAs providing a fully advised service, we can see a myriad of potential uses. I have a few clients, for example, who are “late 30-something” high earners and annual allowance capped for pension saving. They may not be the target market but they are eager to commit £4,000 a year until age 50, effectively clawing back in Lifetime Isa bonus a fraction of what they have lost in pension tax relief. But where a client’s 40th birthday is April or May they need to be signed up and saving in to a Lifetime Isa in double quick time.
This is also the tax year where we expect the tapered annual allowance to really bite. Many of our high-earning clients have been able to continue pension funding as normal so far by using up their remaining carry forward allocations. But that carry forward pot is dwindling, so fresh thinking is needed.
Like other advisers, we have seen more appetite for investments into venture capital trusts and enterprise investment schemes as pension saving is shut off. But capacity with the most credible providers in this arena is always limited, so a lesson for this year is to have clients “teed-up” and “pre-advised” on the concepts. This means we can move quickly on their behalf as and when the right doors open.
Last month’s U-turn over National Insurance rises shows there is little chance of an increase in the basic rates of tax this Parliament. With public finances so tight – and the Chancellor now boxed in – I fear this brings both pension tax relief and the relatively generous tax treatment of capital gains back into focus as potential revenue earners. So it is a year to make the most of both these options while we can. Happy new tax year to you all.
Stephen Womack is a chartered financial planner and director of David Williams IFA