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The end of the tax year is nearly here, which means there are plenty of things you could be doing to tighten up your tax-efficiency. To make your life a little easier, I have created a list of ‘five money must dos’, which you can concentrate on before the 5th of April arrives.
In reality, these will vary from person to person, depending on your current circumstance, but I have aimed to ensure this list targets the core things that almost everybody should focus on.
I have also discussed each of these ‘must dos’ in my other videos, so check them out if you want further detail on each:
Pension contributions: An investment that gives a 72% return overnight | Saltus
For those earning over £100,000: Earning over 100k? How to avoid the 60% tax trap | Saltus
Capital gains tax: Save thousands using your CGT allowance | Saltus
Meet your financial needs and objectives…Speak to an expert
- Use your ISA. You can currently put up to £20,000 a year in an ISA, and, once it’s in there, it’s completely free of income and capital gains tax. Whilst you may well have paid income tax on the earnings you put into your ISA, there will be no further tax to pay when you come to access your money. This tax-free environment makes Stocks and Shares ISAs an excellent vehicle when growing your wealth!
- Make pension contributions. Pensions might sound boring to most people, but they are actually one of the most phenomenal vehicles for growing your money. If your contributions are made via salary sacrifice then your pension contributions will be gross of income tax and National Insurance. If you’re a higher-rate taxpayer, the potential tax saving is equivalent to a 72% return just by putting the money into a pension. If you want to make additional contributions before the end of the tax year, you can either do this via your employer or simply contact the pension provider directly and make an ad hoc contribution.
- If you’re earning over £100,000 – avoid the 60% tax trap. If you earn over £100,000, you’ll be losing your tax-free personal allowance and some of your income will effectively be taxed at 60%! For every £2 earned over the £100,000 threshold, £1 of personal allowance is lost. If you earn £125,140, you’ll lose your personal allowance in its entirety. By making pension contributions, you can reduce your taxable income and potentially reclaim your personal allowance. So, get it right and that’s an extra £12,570 out of the tax man’s grasp.
- Make use of an industry secret known as ‘carry forward’. Each year, most people can make pension contributions up to a limit of £40,000, known as the ‘annual allowance’. Although, the allowance does taper down for those earning in excess of £240,000. Go over this limit, and HMRC will look to claw back any tax relief you received. However, if you have used up your current year’s pension allowance, you can also look back over the past three tax years to make up for any previous unused allowance. This means you could theoretically put as much as £128,000 into your pension in a single tax year. You’ll then receive 20% in relief from your pension provider, immediately turning this £128,000 into £160,000. Now there are some nuances that can impact just how much you can put into your pension in a single tax year. As such, I would suggest reading the article noted above on ‘carry forward’ if you feel it might be relevant to you. It’s a fantastic thing, though, if you can make use of it as there aren’t many other ways people can make £32,000 with such little effort.
- If you have any unrealised capital gains, make disposals up to your annual allowance of £12,300. Do this properly and you should be able to reduce your tax exposure every single year. It’s even more important this tax year as the chancellor announced the capital gains tax allowance is being reduced to £6,000 in April.
So, if you’re not sure what you should do before the end of the tax year, hopefully, my five ‘must dos’ will make your life a little bit easier. Don’t wait too long – it’s nearly here!
All authors have considerable industry expertise and specific knowledge on any given topic. All pieces are reviewed by an additional qualified financial specialist to ensure objectivity and accuracy to the best of our ability. All reviewer’s qualifications are from leading industry bodies. Where possible we use primary sources to support our work. These can include white papers, government sources and data, original reports and interviews or articles from other industry experts. We also reference research from other reputable financial planning and investment management firms where appropriate.
Saltus Financial Planning Ltd is authorised and regulated by the Financial Conduct Authority. Information is correct to the best of our understanding as at the date of publication. Nothing within this content is intended as, or can be relied upon, as financial advice. Capital is at risk. You may get back less than you invested. Tax rules may change and the value of tax reliefs depends on your individual circumstances.
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Financial planning can help you reach your goals in life, whether you want to determine when you can retire comfortably, bring organisation to your financial world or pass on your wealth effectively.
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Deciding when to retire is a challenging decision and can feel like a leap of faith. At Saltus, we gather information on all of your existing assets and then use our technology and expertise to show you exactly how to achieve the retirement you’re after.
Reducing your tax burden
How to structure your wealth and access income should be approached in a sophisticated way. A detailed financial plan may use pensions, ISAs, general investment accounts, offshore bonds and other tax wrappers to ensure you can draw your money in a tax-efficient manner.
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Holding multiple investment accounts and pensions can mean they’re hard to keep track of and administer. We’ll help you overcome this by consolidating your accounts into a single plan so that you can understand your financial position with ease.
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We protect our cars and houses without much thought yet you might be the most valuable asset in your family. Whatever your situation, we can provide advice to ensure you have the right level of insurance in place to keep your finances protected.
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Significant life events can present great opportunities but also considerable challenges. Whether you are going through a business sale, divorce or are receiving a lump sum, we’ll help build a financial plan to meet your changing lifestyle.