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ISAS
Basics
Individuals who are 18 or over can invest up to £15,240 in an ISA. Withdrawals from an ISA are free of income and capital gains tax, but the
value of an ISA will form part of your estate for inheritance tax purposes.
A Junior ISA of up to £4,080 is available for those who are 17 or under.
Help to Buy ISAs, which were launched on 1 December 2015, allow individuals over the age of 16 to save up to £200 into an account per
month. Buyers can also deposit a lump sum of up to £1,000 when they set up their account.
The money will earn interest and will also qualify for a 25% bonus (up to £3,000) from the government provided the funds are used to buy a
house.
Planning
If you don’t already have an ISA, should you start one this tax year? A further advantage is that ISAs are normally readily accessible (subject
to scheme rules).
TAX CREDITS
Basics
Individuals on low incomes may be eligible to claim tax credits or the universal credit (existing claimants will move to universal
credit over by 2017). The calculations for these bene"ts involve determining 3 "gures: your maximum bene"t, your net income
and your allowance.
The maximum bene"t is the amount you would receive if you had no income at all. As some income is disregarded, it is
possible that someone could receive the maximum bene"t even though they have a small income.
Net income is usually earnings after tax, national insurance and pension contributions. If you have capital above a threshold
this may require a notional income to be added.
The allowances are the maximum amount of income you may earn and still receive the maximum bene"t. If your income is
above this "gure, a percentage of the excess is deducted from the maximum bene"t.
Planning
Check to see if you qualify for these bene"ts as they can be payable for people with fairly high incomes.
As capital can be treated as income that reduces bene"t, it may be sensible to give away funds or to spend them upgrading
your property (as property value is not regarded as capital).
However, there are rules to counter blatant examples of capital reduction.
The high percentages at which bene"t is withdrawn (between 65% and 76% for universal credit) provide much scope for
planning.
Personal Tax Allowances
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