A tax saving to-do list to do before 5th April

March 2022


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The tax year ends 5th April, an important date for anyone who has yet to use their tax allowance for the year. If you already hold an ISA or an investment, 5th April signals the last date to undertake any last-minute checks and tasks that could benefit you financially.

With this in mind, we’ve created a handy tax year-end checklist to help you make the most of your ISA and the financial allowances you’re granted each tax year.

Put it in your calendar

By setting up an annual reminder a month before the tax year ends, you’ve affording yourself time to consider any final decisions you want to make about your savings or investments. Whether you’re investing in an ISA or pension for retirement, this means you aren’t making rushed decisions closer to the time.

Make the most of your ISA allowances

Most people are familiar with Cash ISAs and Stocks & Shares ISAs (also known as Investment ISAs) but are you familiar with other types of ISAs such as Lifetime ISAs and Junior ISAs? They have different maximum limits that you can invest into them, but for each one 5th April signals the deadline before the new tax year, and allowances start again on the 6th April. It’s worth thinking about whether you want to use your allowance before the tax year ends. You can’t pass any unused allowances into the next year, so you could be limiting the potential growth and impact when you achieve your longer term financial goals.

You can open and invest up to £20,000 in ISAs for yourself each tax year. You can put all of it into one ISA or, split it between different products, subject to the investment limits (as set out in the HMRC guidance notes) and as long as you don’t exceed your total allowance of £20,000.

A LISA is a great way to save for a first home or for retirement. The Government add a 25% bonus onto any amount you invest so if you invest this year’s maximum of £4,000, you could benefit from an extra £1,000. LISAs can be opened by 18-39 year olds but, once you have one, you can keep topping up as long as you are under 50.

If you have children or grandchildren aged under 18 years old, you might want to start building an investment for them with a Junior ISA. This can be opened by a parent or guardian and allows investments of up to £9,000 every tax year into a Junior ISA on their behalf. Plus the amount you invest is separate from your own ISA allowances. As such, it’s a great way to help build a child’s financial future with them unlocking the money when they reach 18.

So, no matter which kind of ISA is right for you, it’s worth checking that you’re making full use of the yearly allowance before the end of the tax year.

Consider how your ISA could help fund your retirement

Have you considered using an Investment ISA or Lifetime ISA alongside your pension as an additional way to fund your retirement? This is becoming an increasingly popular choice with investors for a number of reasons. ISAs give you a tax-free way to let you grow your investment and if you save using a Lifetime ISA, you even get that 25% Government boost to any contributions you make. Another advantage of investing in an ISA for retirement is that you don’t need to declare them on your tax return. Which in turn makes them easier to manage and administer.

Having both a pension and an ISA gives you the freedom to access your money at different times. A pension only releases funds when you reach an agreed age, whilst an Investment ISA gives you the flexibility to withdraw your investment whenever you need, or want, it (although of course, you should view any investments as medium to long term). Lifetime ISAs give you a blend of both – you trade a bit of flexibility for that generous Government bonus – if you make a withdrawal before age 60 (unless it’s towards your first home) you’ll be charged 25% of the withdrawal amount.

Make the most of your capital gains allowance

Don’t forget that you have a capital gains tax allowance currently of £12,300 each tax year. This allows you to sell assets for profit without having to pay any tax on what you make. As this allowance can’t be carried forward, you can make the most of it by selling certain assets before the 5th of April deadline. Investments in an ISA are not subject to capital gains tax.

Speak to loved ones about their finances

You might have your finances all in hand for the tax year end, but what about those close to you? A quick chat with family members might help them make the most of their tax allowances. For example, a relative aged between 18 to 39 years old wanting to buy their first home could open a Lifetime ISA. The money can then be used to buy a first home or taken out when they turn 60. The choice is theirs.

Distribute investments more effectively with your partner

If you’re married or have a civil partnership, it is worth checking to see if you’d be better off redistributing your financial assets between the two of you. This allows you to make full use of each person’s tax-free threshold and possibly invest more money tax free.

Give gifts to reduce inheritance tax liability

You can give a gift of up to £3,000 tax free to one person or split the £3,000 between several people. This can be useful if you are going to be leaving an estate of over £325,000 to your family, as those receiving it may have to pay inheritance tax. By giving a yearly gift, you can slowly reduce the amount of money you’re leaving in your inheritance.

As you can see, there are a number of different ways you can plan ahead and make sure that you’re staying on top of your investments prior to the end of the tax year on 5th April. By knowing what your options are, you can take advantage of any tax benefits to the full and can be all set for the start of the new tax year on the 6th. Just remember that the value of your investments can go down as well as up.

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Risk Disclaimer

Past performance is not a guide to future performance. The value of investments and any income derived from them can go down as well as up and investors may not get back the original amount invested.

The information, opinions, estimates or forecasts contained in this document were obtained from sources reasonably believed to be reliable and are subject to change at any time.

Tax allowances and the benefits of tax-efficient accounts are subject to change and tax treatment depends upon your individual circumstances. We do not offer tax advice. If you are unsure, please consult your tax or financial adviser.

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