Taxes are always high on the agenda during elections and this time is no different.
With the government’s purse strings rather tight, it’s unlikely we’ll get specific and immediate tax cuts promised by anyone.
But we could see vague statements about the direction of travel, and plenty of hope that one day we could hand over less of our hard-earned money to the taxman.
When it comes to potential tax rises, we’re unlikely to find out what’s in store until a chancellor’s fully installed in Number 11 and delivers a budget.
However, there are things we can do to prepare today. That way we can be certain not to pay more than our fair share of tax, regardless of who wins the election.
This article isn’t personal advice. If you’re not sure what’s right for you, ask for ask for financial advice.
ISA, pension and tax rules can change, and any benefit depends on individual circumstances. Remember, you can’t usually take money out of a pension until at least age 55 (rising to 57 from 2028). Investments can rise and fall so you could get back less than you invest.
Get our latest insights on what the General Election could mean for you and your money.
Make use of this year’s capital gains tax allowance
We’ve seen taxes on investments hiked significantly over the past couple of years.
If you’ve made gains on investments outside an ISA or pension, it’s worth weighing up whether it makes sense to use your capital gains tax allowance this side of the election.
If you’re building up a gain, and you can realise it over a period of years, make a plan for how you want to do it, and when to start.
Shelter your investments in an ISA
The best way to shelter investments from taxes is to hold them in an ISA. This way they’re sheltered from UK income and capital gains tax.
You can also move existing investments into ISAs through a share exchange (sometimes called a Bed and ISA), so you can shelter up to the full £20,000 allowance in the current tax year.
Remember your pensions
The annual pension allowance is £60,000 for most people. This is the maximum amount you can contribute to your pensions each tax year without triggering a tax charge.
Pension contributions include those made by you, your employer, or anyone else, plus you then get tax relief added by the government. Boosting your overall pension.
The fact you can also get tax relief at your highest marginal rate means higher earners should take as much advantage as they can that makes sense for their finances.
Don’t forget the rest of your family
The Junior ISA allowance has been at a lofty £9,000 a year since April 2020 – the highest this allowance has ever been.
It means there’s a real opportunity to put aside a nest egg for your children, and shelter this money from tax at the same time.
Junior ISAs have all the same shelters from UK tax as standard ISAs.
Enjoy better value family investing with the HL Junior ISA.
Last year we removed our JISA account charges, so that more of what you pay in will benefit your child. Depending on the investments you pick, other charges could still apply.
Consider your savings
Frozen thresholds mean more people will start to pay higher rates of tax, at which point their personal savings allowance shrinks significantly (from £1,000 for basic-rate taxpayers to £500 for higher-rate taxpayers or £0 for additional-rate taxpayers).
It means it’s worth considering a Cash ISA.
This has the added benefit that if the next government were to make changes to the personal savings allowance, your cash would be protected in an ‘ISA wrapper’ from tax.
