Are you prepared?

It is just under a month until the end of the tax year, and so it would be prudent to start considering your tax planning. Please see below for our handy list of tips which can guide you to ensure you are making the most of your money and saving on your tax bill.

  1. Make the most of free government money – It is important that you ensure you are claiming any ‘free money’ you are entitled to. Whether that is your state pension, your lifetime ISA, or any tax breaks available to you. Please also remember to claim marriage allowance or tax-free childcare if you are eligible as you could receive a 20% top-up on money you use for childcare. Furthermore, if you are just over the £50,000 limit for receiving child benefit, you can make larger pension contributions to reduce your salary and ensure you receive the benefit.
  2. Utilise ISA and pension annual allowances – ISAs and pensions are an excellent way to save for the future because any income and capital gains made on investments held in both are free from income tax and capital gains tax. Please do not forget that ISAs cannot be carried forward to future tax years, so you should consider using it before the 5th April deadline.
  3. Protect your investments – If you have investments outside of your ISA, you can use something called a ‘Bed and Isa’ to funnel them into an ISA where they will be protected from tax.
  4. Be mindful of high inflation ratesThe Bank of England is expecting inflation to peak at 7.25% in April and still be above 5% in a year’s time. Due to this, it is wise to not make an ISA subscription in cash. It would be best to work out what you might need in the next five years as an emergency pot and see how that stacks up against the amount you have in cash. If you have more than that set aside, think about investing it to obtain a higher return.
  5. Look at reducing your taxable income – If your taxable income creeps over the £100,000 threshold, you are at risk of losing a great deal of your personal allowance (£1 for every £2 of your income). You can overcome this by reducing your taxable income through charity donations or by contributing to your pension.
  6. Track down your missing pensions – If you have changed jobs multiple times, as most people do, you may have multiple pension pots with several different providers. To keep on top of these, it would be best to track them down using the government’s pension tracking service. Once you have done this, you can combine them with your existing provider, making them easier to maintain. Therefore, you could more easily benefit from lower charges, greater investment choice and more flexibility in the future.
  7. Set up regular investing – It is easy now to set up a direct debit that will automatically transfer money into your investment account each month and then set up regular investing on your platform, which will automatically buy the funds or shares you’ve chosen. Many investment platforms will allow you to start investing as little as £25 or £50 a month and you can always pause it if you decide to skip a month for any reason.
  8. Look into automatic dividend reinvestment – If you have dividends from investments in your ISA, these can be withdrawn tax-free, but if you do not need the income now you could use them to turbo-charge your returns. If you reinvest them, you can buy more shares in the same investment, which can hugely impact the size of your ISA fund in the long-term.
  9. Beat the dividend tax rise – The dividend tax is rising, with an extra 1.25% being added to all, regardless of the level of dividend tax you pay. It is more beneficial than ever to put your income-producing investments inside an ISA, to protect them from the additional tax.
  10. Utilise CGT allowance – It is important to remember that the annual capital gains tax-free allowance cannot be carried forward into future years so if you do not use it before the end of the tax year, it will be lost. If you have investments with gains outside of an ISA or pension you should consider whether to realise it before the end the tax year to make the most of your tax-free allowance.

As always, if you would like any further information regarding the above, please feel free to contact our offices by email Alternatively, find out how we can help you to plan your taxes ahead of the new tax year.