We all hate deadlines. So I want to give you plenty of notice of this one: it’s just over four weeks until the end of the tax year. So what? So you need to start planning to take advantage of this year’s tax allowances and, if you’re 55 or over, preparing for the new pension freedoms that come into effect on 6 April.
The main tax handout you should be thinking about is your 2014-15 Isa allowance – especially as they have became much more flexible since last July. Now you can transfer cash from savings accounts to investments and back again within your Isa.
Why should savers be using Isas? Because of the tax benefits. If you’re a basic-rate taxpayer, the return you can get outside an Isa is worth 20 per cent less than within the tax-free environment. If you’re a higher-rate taxpayer, it is worth 40 per cent less.
In other words, fail to put your savings into an Isa and you’re handing cash to the government. Just bear this in mind: if you don’t take up the current year’s Isa allowance by 5 April, you lose it.
Meanwhile the new pension freedoms announced by the Government in last year’s Budget come into effect on 6 April. From then on, people aged 55 and over will be able to choose what to do with the cash in their pension pot rather than being forced to buy an annuity.
You’ll be able to take the whole lot in one go, take smaller sums when needed or take a quarter tax-free and a regular, taxable income from the rest. But it seems that confusion reigns among consumers about their options.
That’s hardly surprising as the policy has been introduced relatively quickly, and has left the financial services industry scrabbling to come up with new-style retirement options.
The Government is developing a website to help people at pensionwise.gov.uk. Meanwhile I’ve made a series of videos which I hope will help people with their pension choices as well how to make the most of Isas. They’ll be online at independent.co.uk/money in coming days and weeks.