When you’ve got more than your own situation to consider, managing your finances can sometimes feel like spinning plates. You could be trying to make the most of your investments while also beginning to think about retirement and what you need to put in place for that.
Moreover, there are certain periods in life when you might be attempting to keep your own financial plates spinning while also getting some moving for your children. There may even be elderly parents with a range of different, complex financial needs to consider, too.
“Your priorities will change over time, especially as you think about how to balance your own finances and build a foundation for your children’s future, too,” says Tony Clark, Senior Propositions Manager at St. James’s Place.
Every little bit helps
With so many competing priorities, you need all the help you can get, so it makes sense to take advantage of the opportunities that are right in front of you.
You may well use some of your tax allowances and reliefs already, but are you getting the full benefits from them? Even the allowances with which we’re most familiar, such as the annual ISA allowance, can take some of the strain when you’re trying to keep those plates spinning.
It might come down to understanding what will be needed and when, so creating the short, medium and long-term objectives.
ISAs can be the foundation here, with Cash ISAs providing rainy-day funds and Stocks & Shares ISAs to provide the potential for growth from your investments to help meet your various objectives, from buying a new home to building a retirement fund.
When it comes to younger family members, Junior ISAs are a good, tax-friendly way of building up a pot of money that children can access when they turn 18.
“You might also be thinking about helping them get into university, deal with student debt and get on the property ladder,” says Clark. “Today’s teenagers may face working and retirement lives that are very different from those we’re experiencing, so giving them a head start can really help as they enter the working world.”
Outside the box
Pensions are similarly invaluable from a tax perspective, given the difference that pension tax relief in particular can make to your investment growth over time.
This applies to children’s pensions, too. While this may not feel like a priority, the tax benefits on pensions mean that even very modest amounts paid in from a young age can benefit your children later in life.
“Giving them a leg up in their adult life as well as setting something up for later in their lives can really open up their choices when they begin to approach retirement,” says Clark.
Other allowances are sometimes overlooked, but can also make a material difference. The annual Capital Gains Tax (CGT) allowance, for instance, means you can sell a property or investment that has increased in value without paying tax on all the profits you receive.
The allowance is currently £12,300, and there are different levels of CGT, depending on your tax band and the asset you’ve made a gain on. As your assets build up over time, understanding how to get the best from the CGT allowance can become increasingly useful.
Don’t sit on the sidelines
Most of the allowances and reliefs you can benefit from work on a use-it-or-lose-it basis, so planning ahead is important, and taking advice well before the tax year ends is a way of making sure you don’t miss out.
“Have that conversation with your adviser to ensure your thinking is in the right place around splitting your money,” says Clark.
For instance, how much should you put into a Junior ISA and how much into a children’s pension?
“An adviser will talk through ways of doing that and make sure you’re not losing sight of your own objectives,” Clark adds. “They can really help you with the bigger picture.”
Don’t let your tax allowances go to waste. Speak to us today.
The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.
An investment in a Stocks and Shares ISA will not provide the same security of capital associated with a Cash ISA or a deposit with a bank or building society.
The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.