There are 10 working days until the end of the tax year (5th April).
You can still take action to save you money over the next 12 months.
Here are the top 3 things you can do to enhance your personal finances before 5th April:
1. Maximise your ISA allowance
You have a £20,000 ISA allowance and if you don’t use it by 5th April… you lose it!
With cash savings rates increasing over the past couple of years, now might be the time to open a cash ISA. Why?
Interest, income and growth in ISAs are tax free.
Interest above your personal savings allowance is taxable. (read more about that here)
Holding your emergency fund in a cash ISA allows you to maintain cash outside your usual spending account. Saving it for emergencies!
2. Use your capital gains exemption
You can make a capital gain of up to £6,000 before 5th April and no tax will be payable.
If you have investment gains in your company shares, a General Investment Account, or maybe you’re winning the crypto game, it might be time to crystallise some gains and allocate your money elsewhere.
Like your ISA allowance, you can’t take your capital gains exemption forward with you.
3. Consider pension contributions
You can tactically use pension contributions to minimise tax and maximise your savings.
You should have a sustainable long-term pension contribution plan. However, at tax year end there can be particular planning opportunities.
For example, if you have adjusted net income
Between £100,000 and £125,140, pension contributions can receive up to 60% tax relief.
Between £50,000 and £60,000 and have children, pension contributions can help you reduce the high income child benefit charge and get tax relief as well.
Pension contributions should be affordable and allow you to continue your current standard of living. The maximum pension contribution that qualifies for tax relief is £60,000 in 2023/24, or 100% of your total annual earnings, whichever is lower.
Please note that if you have adjusted net income above £200,000, your maximum qualifying contribution can be lower. You can't access pensions until age 55 at the earliest (rising to 57 from April 2028).
If you would like a long-term pension contribution plan, a financial planner can help.
A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available.
What’s changing from 6th April?
Going into the new tax year, the following changes might affect you:
National insurance contribution rates are reducing:
If you’re employed and earning over £50,270, the recent budget announcements will increase your income by c.£125 a month compared to December 2023.
Capital gains exemption reducing to £3,000 a year:
The amount of capital gain on investments or property you can make without tax being due has reduced from £12,300 in 2022/23 to £3,000 from 2024/25.
Dividend income allowance reducing to £500:
The tax free dividend amount has reduced from £2,000 in 2022/23 to £500 in 2024/25.
Any dividends over £500 will be taxed at your marginal rate (8.75%/33.75%/38.10%).
High income child benefit charge (HICBC)
If you have children and earn over £60,000, it might be time to opt back into receiving child benefit.
From 6th April, you’ll be charged 1% for every £200 of adjusted net income you receive above £60,000.
Effectively, you should opt back into receiving child benefit if you have adjusted net income below £80,000. Government website information here.
Financial planning
In the UK, we experience continuous change of tax rules and legislation. With an election on the horizon, one thing is probably certain… more change.
Financial planning helps you maximise the money you have, intentionally allocate money to what’s important to you, and maintain peace of mind.
For more information, book a call with us below.
Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.
The Financial Conduct Authority does not regulate Tax advice.
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