Lowes Magazine Issue 129

PLANNING

The Tax and Pension landscape 2024

The tax and pension landscape is changing in 2024. Wealth Manager, Michael Stowe looks at what investors and savers need to do to maximise their tax and investment position this year.

for investors to benefit from the growth of a wider range of companies. No date for the change has been announced as yet. However, direct share ownership comes with its own risks of course, and ownership has to be managed, such as knowing when to buy and sell a share. We would advise investors to continue to invest via mutual funds, managed by professionals. The advantages are that mutual funds have thousands or more investors’ money to invest, meaning funds are able to access these higher cost shares as a matter of course; the fund managers’ job is finding the best companies to invest in; and they have team of researchers to help them make their decisions. If you have money to invest and have not used all your ISA allowance for the 2023-2024 tax year, make sure you invest by 5th April. Consider also, investing as early as you can in the 2024-25 tax year, rather than waiting until the end of the tax year. Earlier investment into an ISA can boost your overall returns in the long run. Changes to pensions One of the most significant changes to affect pensions has been the Chancellor’s announcement that the Lifetime Allowance (LTA), the amount that anyone can save into a pension in their lifetime, will be abolished from April 2024. The lifetime allowance was £1,073,100, with the maximum amount of pensions tax-free cash someone can build up in their lifetime usually limited to 25% of this – £268,275. If any payments were made above this lifetime allowance and then withdrawn, they were taxed by HMRC at either 25% if taken as income, or 55% if taken as a lump sum.

This year we can expect some significant changes to the financial landscape, not least due to the announcements around tax and pensions made in both the 2023 March Budget and the Autumn Statement. How Lowes clients will be impacted will depend on individual circumstances, but nearly everyone will be affected in some way. Here are the major changes of which to be aware. Changes affecting investing Standard and sound advice when building our wealth is to ensure that we take full advantage of the tax allowances and exemptions that we have available to us. The ISA allowance of £20,000 a year is the first that springs to mind. Money invested into an ISA is free of income tax and capital gains tax - although it does form part of the estate for inheritance tax purposes. Currently, savers have a total allowance of up to £20,000 per year. This can be placed into a cash ISA and/or a stocks and shares ISA, but not more than one of each. The Lifetime ISA has a £4,000 limit per annum. From April, this changes. Savers will be able to subscribe to multiple ISAs of the same type and will be allowed to partially transfer funds between different providers. This can help with diversifying portfolios, particularly for stocks and shares ISAs. In the Autumn Statement the Chancellor announced the intention to enable fractional share ownership within the ISA wrapper. Currently, HMRC only allows investors to hold a full share within an ISA. But with some shares costing several hundred or even thousands of pounds to own, the opportunity to invest in fractions of shares opens the doors

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