Six tax-year hacks to boost your finances

Taking action this weekend could be the making of your money

Felicity Hannah
Friday 30 March 2018 17:13
Probably best to stay in and sort out your ISA this long weekend
Probably best to stay in and sort out your ISA this long weekend

Easter may have come early this year but at least that gives you this long weekend to sort your financial affairs before the end of the tax year.

So brace yourself, not just for the promised snow flurries, but also for a serious session of personal finance management. Then reward yourself with a chocolate egg.

Here are some of the things you need to consider before 5 April.

1. Use your ISA allowance

Recent changes to savings rules might mean you’re tempted to ignore the end-of-tax-year ISA deadline but that’s not a good idea. Your ISA allowance runs from tax year to tax year, so if you don’t use it then you will lose it.

Of course, the allowance is now £20,000 and, admittedly, few of us have that much to save or invest in any one year. So you might think you have no reason to rush to use this year’s allowance if you’re unlikely to brush up against the £20,000 limit next tax year.

But once it’s banked or invested, your returns are safe. Using as much of the allowance as you can this side of the tax year means that you have greater choice and flexibility next year.

2. Plan your investments

Once you have some emergency cash saved in an easy access account, you might decide to turn your attention to investments.

Interest rates are still quite low and so some people turn to alternatives to cash accounts to try and boost what they earn. If you want to use a stocks and shares ISA or innovative finance ISA to shield any earnings from the tax office then it’s important to give yourself time to choose the right investment opportunity for you.

The Easter weekend is a good time to do that. Jason Chapman, managing director at Willis Owen, says: “The upcoming Easter weekend may offer the perfect moment to think about which fund choices people want to make. As ever, we urge investors to resist making snap decisions and base choices on their long-term goals. And, unlike the Easter bunny, think twice about placing all eggs in one basket.

“Try not to wait until the very last minute. Every year we see people miss out due to web connectivity issues, or not having funds cleared in their account in time. It is important to make sure the investments are made as far from the deadline as possible.”

Don’t forget, of course, that with stocks and shares the value can go down as well as up.

3. Give some money away

If you want to give away money tax-free – or if someone wants to gift it to you – then it makes sense to be smart about the tax year end.

Under our current rules you don’t have to pay tax on small gifts from your normal income, like Christmas or birthday presents. And you can also gift money to your spouse or civil partner, as long as they are based in the UK.

But if your estate is large enough to attract inheritance tax then any other gifts will be charged the tax if you die within seven years. Unless you’re smart about your gifting allowance, that is.

You can give away £3,000-worth of gifts each tax year without them being added to the value of your estate. It’s called your annual exemption. You can carry forward last year’s unused amount but only for one year. That means a maximum potential amount this year of £6,000, depending on whether you used it last year or not.

This really is a use it or lose it scenario. If you want to gift some of your money without risking incurring a future tax bill for the recipient then you need to use your allowance each tax year.

4. Plan your next ISA move

OK, yes, so three of these are about ISAs. But making cash savings, and stocks and shares investments that are protected from tax is one of the best financial moves many people make.

So while you’re spending time planning your finances, give some consideration to what you’re going to do next year.

Will it be a cash ISA account? Stocks and shares? A lifetime ISA, an innovative finance Isa? Will you use your children’s junior ISA allowance?

By forming plans ahead of the new tax year you can stagger contributions across the year and save more. You can also lock your money away earlier in the new tax year and benefit from the tax-free returns for longer.

5. Make a will

No, there is no particular reason to rush this in ahead of the end of the tax year but it’s a really good idea to make writing a will a real priority.

After all, when you’re sorting your investments, making the most of your cash savings and gifting what you’re legally entitled to, it’s also important to make sure that your estate would go where you want it to in the event of your death.

For example, if you’re not married or in a civil partnership and you don’t have a will then your partner isn’t legally entitled to anything of yours on your death. And if you’re married and separated but not yet divorced then your ex will still inherit everything if you don’t have a will.

It won’t take a lawyer long to draw up a simple will but it could make all the difference to your loved ones. So while there’s no tax-year urgency, there is simple common-sense urgency. Now is as good a time as any.

6. Know what changes

A number of personal allowances and limits come into force in the new tax year and knowing what changes can help you plan.

For example, the annual exempt amount for Capital Gains Tax rises from £11,300 to £11,700. The income tax personal allowance in England, Wales and Northern Ireland will increase by £350 to £11,850 a year, meaning you can earn more before owing any income tax.

And the higher rate threshold jumps considerably from £45,000 to £46,30, meaning you can earn more before reaching the 40 per cent rate.

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