Stephen Martin: Make the most of your money in the new tax year

Here are some key areas for savers and investors to consider for the 2018/19 tax year.

The subscription limit for individuals savings accounts (ISAs) remains at £20,000 for this tax year, though the annual allowance for Junior ISAs has been increased in line with inflation to £4,260.

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While many people wait until the end of the tax year to use their ISA allowance, by investing now you can benefit from tax-free returns straight away.

Interest rates on cash ISAs may not seem enticing, but if you are comfortable investing for the longer term then look at putting your cash into a stocks and shares ISA.

Although there is always the danger that the stock market could suffer a crash, over the long term shares tend to rise and to outperform cash.

You can also reduce the risk of investing in the stock market by investing monthly rather than all in one go.

It is worth reviewing your existing ISA savings too - many people have poor-paying cash ISAs that could do better by switching into a stocks and shares version.

For younger adults, a Lifetime ISA (LISA) could be attractive. This account offers a 25 per cent government bonus and is aimed at helping the under-40s save for retirement or build up funds towards the purchase of a first home.

In the pensions world, from April 6 the lifetime allowance increased in line with inflation to £1.03 million.

This allowance is the maximum amount of pension savings you can amass without incurring a tax charge.

If you are fortunate enough to have accumulated this level of pension savings, or think you may hit the limit in future, it is worth taking professional advice on possible ways to mitigate the tax charge – which can be as high as 55%.

Meanwhile, the annual allowance – the limit on the amount of pension contributions made each year that qualify for tax relief – remains at £40,000 for 2018/19.

While this will be more than enough for most people, for some high earners tax relief is only available on £10,000 of contributions.

Again, high earners may benefit from taking advice on what is a complicated area.

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In terms of buy-to-let, previously, landlords were able to claim tax relief on 100% of mortgage interest costs at their highest rate of tax.

That meant all landlords only paid tax on the difference between their expenses and income: their profit. But that changed in April 2017, when the amount of relief that landlords could claim on mortgage interest at their top rate of tax was restricted.

In the 2018/19 tax year landlords can only claim 50% of mortgage interest costs as a deduction.

On the remaining 50%, relief is restricted to the basic rate of income tax.

It is important to note that in Scotland, income from buy-to-let could push taxpayers into higher tax brackets that do not exist in the rest of the UK.

For example, somebody earning £32,000 in property income with interest of £8,000 could deduct 50% of the interest costs, but because they still earned £24,000, they would pay the Scottish intermediate rate of income tax on the top £4,000, equating to £840 – that is £40 more than in England, Wales and Northern Ireland.

Finally, the level of dividends individuals can receive tax free has been cut from £5,000 to £2,000. Meanwhile, the annual tax-free allowance for capital gains tax (CGT) has increased to £11,700.

If you have a large share portfolio outside an ISA, it may be worth restructuring your holdings to keep your dividend income within the new £2,000 annual allowance. At the same time, you could use the increased CGT allowance to generate tax-free “income” by taking profits on shares.

Stephen Martin is head of the Glasgow office at Brewin Dolphin.