What to do at the start of the new tax year
Towards the end of last month, we’re sure you will have heard plenty of experts telling you to get your tax in order, and rightly so, but why leave it to the last minute?
As the new tax year has only just begun, it’s a great time to re-assess your finances, as you’ll be able to take your time and ensure your money is working hard for you all year round.
Understand your tax allowances
The tax industry is one that never stands still, there are always changes that you need to be aware of, with one big change for this year being that the Capital Gains Tax allowance has been cut from £6,000 to £3,000.
Calculating how much you earn before income tax and any other allowances means you can get a clear view of your tax liability and avoid overpaying.
Get saving
Individual Savings Accounts (ISAs) are commonly used as they are both tax-efficient and a great way to save – however there are now new rules around these. For example, savers can now split their allowance across multiple ISAs of the same type, whereas previously, in a single tax year, you could only contribute to one of the specific types.
Being aware of these changes means you can maximise your savings throughout the year and choose an ISA that best suits your goals.
Step up your pension saving
The start of the tax year is an ideal time to increase your pension contributions or set up a personal scheme, should you be able to afford it.
Pensions are one of the most tax-efficient ways to save for your future, as the amount you save benefits from tax relief, which increases your wealth.
The earlier you start saving the better, as you’ll benefit from compound growth later in life.
Taxpayers on the basic rate will gain an automatic 20% tax relief on pension contributions, with higher rate payers will benefit from even more tax relief.
Reassess your budget
Circumstances are always changing, as will the amount of disposable income you have. Maybe this is due to you moving jobs and receiving a pay rise, or you could have just taken out a mortgage and had a baby.
Paying attention to your income and expenses gives you a clear image of where your money is going and where you can afford to save or invest.
Review and set financial goals
Setting goals always help keep you on track and will motivate you throughout the whole of the tax year, lowering the risk of making rash decisions that can steer you off path.
Get on top of the paperwork if you’re self-employed
Tax return deadlines can be very stressful if you’re doing it yourself, especially if your paperwork isn’t up to scratch.
So, if you set yourself a target to always gather receipts straight away and make sure you have clear and organised records of income and expenses throughout the year, it will save yourself the panic as the tax year ends and make the process a lot easier.
Stay up to date
With there being various changes, it’s important to keep your eye on these so you can ensure you’re maximising your tax allowances. You can do this by checking the government website, or by speaking to a financial planner, as it’s their job to make sure you’re aware of any changes and what they mean for.
Our Wealth Experts can offer you their insights and specialist advice to make sure you’re confident your money is working hard for you. Get in touch with one of our team here, to discuss further how we can help.
