Important information - the value of investments and the income from them, can go down as well as up, so you may get back less than you invest.

Savers now have a brand new set of shiny tax allowances for the 2024/25 financial year.

Across the main tax-efficient savings options - ISAs and pensions - it is now possible for an adult to save £80,000 each year tax-efficiently - £60,000 into a pension (or 100% of their earnings, whichever is the lowest) and £20,000 into an ISA - assuming they are not subject to any restrictions on their allowances.

And there are also tax-allowances that children can use, with £9,000 able to be contributed to a Junior ISA and £3,600 allowed within a pension for a child

Taken together, a family of four could save £185,200 a year tax-efficiently, meaning any investment gains made on that money would be tax-free. ISA money is then available without tax applying while 25% of pension money is available tax-free (subject to some restrictions) and the rest subject to Income Tax, with tax relief potentially applying on contributions. You can find a full breakdown of how tax on pensions works here.

This amount far exceeds what most families can save for the future, of course, but it shows how - for those able to take advantage - the savings system can be generous.

And it is important to take the maximum advantage of tax-efficient allowances where you can because other elements of the savings tax system are getting less generous.

Here’s a breakdown of the tax changes affecting savers in the new tax year - both positive and negative.

Dividend Tax

The dividend tax allowance is set to decrease further from £1,000 to £500 on 6 April and will affect individuals earning dividends on investments held outside of tax wrappers that surpass the new, smaller allowance. The allowance was £5,000 as recently as 2018. The amount of tax you pay on dividends above the allowance will depend on your Income Tax band with basic rate taxpayers paying 8.75% tax, higher rate payers paying 33.75% and additional rate payer paying 39.35%.

Capital Gains Tax

Investors will also need to consider changes to their Capital Cains Tax (CGT) allowance, which is dropping from £6,000 to £3,000 in the new tax year. This is the amount of gains you can realise before Capital Gains Tax applies. The allowance has shrunk dramatically in just a few years, falling from £12,300 in 2022/23.

If you pay higher-rate tax CGT will be charged at 20% for most chargeable gains - such as those on stocks and shares investments - but at 24% for chargeable gains on residential property (outside of your main residence). For basic rate taxpayers the rate is 10% (18% for residential property) on gains falling within the basic-rate band.

Lifetime Allowance abolished

The pension Lifetime Allowance (LTA) will be abolished from 6 April, over one year after the Chancellor announced the plans at the 2023 Spring Budget. The LTA currently sits at £1,073,100 and will be replaced by a Lump Sum Allowance and a Death Benefit Allowance.

The Lump Sum Allowance will be set at £268,275 and is the tax-free lump sum limit people can take from their pension, and the death benefit allowance will be set at £1,073,100. The new allowances boost the tax-efficiency of pension savings over a lifetime. The maximum amount people can save into pensions each year without paying a tax charge increased from £40,000 to £60,000 for the 2024-25 tax year.

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Tax treatment depends on individual circumstances and all tax rules may change in the future. Junior ISAs are long term tax-efficient savings accounts for children. Withdrawals will not be possible until the child reaches age 18. A Junior ISA is only available to children under the age of 18 who are resident in the UK. It is not possible to hold both a Junior ISA and a Child Trust Fund (CTF). If your child was born between 1 September 2002 and 2 January 2011 the Government would have automatically opened a CTF on your child’s behalf. If your child holds a CTF they can transfer the investment into a Junior ISA. Please note that Fidelity does not allow for CTF transfers into a Junior ISA. Parents or guardians can open the Junior ISA and manage the account, but the money belongs to the child and the investment is locked away until the child reaches 18 years old. Withdrawals from a pension product will not be possible until you reach age 55 (57 from 2028). This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.

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