The tax year end is approaching fast, and as advisers scramble to make some last minute savings, there are a few things every adviser should consider, according to Martin Cotter.
The 2021-22 tax year ends on April 5, about two weeks after the government's spring statement, which is due to take place on March 23.
The tax burden is already at a 70-year high, as rising inflation couple with rising energy prices adds further strain to the cost of living for many.
With that in mind, advisers will want to make sure they secure every penny of tax saving they can for their clients.
Cotter, a chartered financial planner and managing director of Lumin Wealth, tells FTAdviser In Focus what his business will be prioritising in these coming weeks; his outlook on what's to come as the chancellor seeks to balance the books; and his business's take on the growing phenomenon that is cryptoasset investing.
FTA: We are approaching the end of the tax year, what will Lumin Wealth's advisers focus on in these final weeks of the fiscal year?
MC: The end of the tax year is always a busy time for advisers up and down the country. The Lumin team will be concentrating on implementing our capital gains tax ‘harvesting’ process, making use of the £12,300 annual exempt amount to offset gains made on investments held in our model portfolios.
We run a CGT report for each client and assess the possibility of making any switches or trades to crystallise any extra gains to meet the allowance. We do this in March because it is after the last rebalance, so no further gains will be crystallised by our investment process.
FTA: If there was one thing a tax planner should do in March, what should it be?
MC: We are often surprised by the way in which some consumers use general investment accounts. GIAs of course have their place; they can be accessed at any time, and there is no limit on contributions. However, they don’t benefit from the same tax-free privileges as pensions or their Isa cousins.
The Isa annual allowance of £20,000 for each adult operates on a ‘use it or lose it basis’ in each tax year, so maximising Isa contributions before paying into a GIA is a no-brainer.
FTA: How do you expect the economic environment to develop over the next year and what effect will this have on financial planning?
MC: If anything, the current squeeze on the cost of living, combined with headwinds such as the planned national insurance hike and threshold freezes, means that the financial advice market is even better placed to assist consumers in a time of need.
We have seen many consumers come to us with financial planning needs amid the pandemic landscape, and that need isn’t going to go away any time soon.
