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The deadline for using your ISA allowance for the 2018/2019 tax year is midnight on April 5th, 2019.
 
You can save for retirement in a number of ways. The traditional route is via a pension scheme, but you could also use an ISA.

Savers aged under 40 can open a lifetime ISA, and contribute up to £4,000 per year which attracts a 25% bonus from the Government. This bonus is withdrawn if the savings are accessed in circumstances other than used as a deposit for the saver’s first home, diagnosis of a terminal illness, or from age 60 onwards.

The lifetime ISA savings are counted as part of the annual ISA allowance of £20,000 per tax year. This allowance can’t be carried over to a future tax year, so it’s a case of use it or lose it.

ISA savings are not taxed when they are withdrawn, but they don’t attract tax relief on the way into the account.

Pension scheme savings are taxed when they are withdrawn, with an exception for the first 25% cash lump sum taken. However, contributions into a registered pension fund will attract tax relief at your highest tax rate, subject to the cap imposed by your annual allowance.

This annual allowance is nominally set at £40,000, which covers contributions made by you and by your employer on your behalf. Any annual allowance not used can be carried forward for up to three years.

Where your total income, including pension contributions made by your employer, tops £150,000, your annual allowance is usually reduced by £1 for every £2 over that threshold, down to a minimum of £10,000.

Your annual allowance is also reduced to £4,000 exactly (not tapered down), if you have accessed your taxable pension savings built up in a money purchase (defined contribution) pension scheme. This is to prevent you from drawing funds from your pension scheme and then putting significant money into the same or another pension scheme, with additional tax relief.

This restricted £4,000 money purchase annual allowance can’t be carried forward to future tax years.
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Clarke Nicklin Financial Planning is a trading name of CNFP LLP, registered in England, company number OC324909. Registered Office: Clarke Nicklin House, Brooks Drive, Cheadle Royal Business Park, Cheadle, Stockport, SK8 3TD. Email: enquiries@cnfp.co.uk. CNFP LLP is authorised and regulated by the Financial Conduct Authority.

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