The financial planning journal

5 money must dos before the 5th of April

9 March 2021

Your 5 money must dos before the end of the tax year

The end of the tax year is almost here, meaning there are plenty of things you could be doing to tighten up your tax efficiency. No need to panic! To make your life a little easier, I have created a list of ‘5 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:

1. ISA’s  The 10% income boost you could be missing out on – Saltus

2. Pension contributions An investment that gives a 72% return overnight – Saltus

3. For those earning over £100,000 Earning over 100k? how to get 60% tax relief – Saltus

4. Carry forward Carry forward- an industry secret to make up to £32,000 – Saltus

5. Capital gains tax Save thousands using your CGT allowance – Saltus

1. ISA’s. 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!

2. Pension contributions. Pensions might sound boring to most people, but they are actually one of the most phenomenal vehicles for growing your money. In fact, by receiving national insurance and income tax relief, higher rate taxpayers can make a 72% return, just by putting their money into a pension. Yes, that’s right, a 72% risk free return.

3. For those earning over £100,000. High earners, who have an income of over £100,000 are losing their tax-free personal allowance. This means you are effectively being taxed at 60%! Luckily, there is a way to use your pension wisely, before the end of the tax year, and reclaim your personal allowance. Paying into your pension correctly can bring down your annual income, resulting in an additional £12,500 of tax-free money back in your pocket.

4. Carry forward. Each year, you have a £40,000 pension contribution limit. Although this does taper down for those earning in excess of £240,000. 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 also receive a further 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, so I would suggest looking back at my previous video if you feel it might be relevant to you. Just make sure you don’t let these nuances put you off, as there aren’t many other ways someone can make £32,000 with such little effort.

5. Capital gains tax (CGT). We all have an annual CGT allowance of £12,300 which, when used correctly, can enable people to grow huge amounts in taxable accounts. If you have any capital gains tax exposure, be sure to make disposals (up to your annual allowance) before the 5th of April. This should be a yearly process that will reduce your tax exposure on an ongoing basis. This may be even more important going forward as the Office of Tax Simplification (OTS) have made sweeping recommendations to the chancellor around CGT. Fortunately, the Chancellor decided to overlook some of the OTS’s recommendations in the Spring Budget, opting to freeze the annual allowance at £12,300 until 2026. However, he well and truly left the door open for future announcements relating to an increase in the rate of CGT. We could well see CGT double in the near future.

So, if you’re not sure what you should do before the end of the tax year, hopefully my 5 ‘must dos’ will make it a little easier. Make sure you use these to get planning right away, time is ticking.

Arrange a financial review

Share this article: