Now, with the end of the tax year fast approaching (it ends on 5 April in case you are wondering), is a good time to spring-clean your finances. Here are some ideas that could help you make the most of your money, now and in the future. Striking a balance between spending and saving is not as difficult as it seems and you won’t necessarily have to sacrifice things you enjoy now.
Here are a few tips to help you optimise your finances in the 2018/19 tax year – and possibly for many years ahead. To be effective for the current tax year you need to act before 6 April.
Use or lose annual allowances
Using the annual allowances that the government gives you each year can help you shelter as much money as possible from tax in the future.
- Check how much income your workplace and any other pensions are likely to provide. Will this be enough to cover your expenditure in retirement? If not, consider paying in more, especially as the 20% income tax you paid is added to your contributions and any growth is free of tax.
- Have you and your family made the most of your £20,000 ISA allowances for the 2018/19 tax year? ISAs are an efficient way of saving because there is no tax to pay when you withdraw money and, unlike pensions, you can access them whenever you want.
- Would you like to help your children or grandchildren financially? If so, you could consider paying in to an ISA on their behalf. You could also pay into your spouse’s or children’s pensions.
Optimising income tax
This is particularly important for people with income of £50,000 – £60,000 and who could lose child benefit.
- Are you on the right tax code? Even a small change in your circumstances can affect it.
- Have you included charitable donations on your tax return and, if you pay higher rate tax, reclaimed it on gift aid donations?
- Could you contribute more to your pension without going over your annual contribution and lifetime allowance limits?
- Might it make sense to transfer some income-producing assets to your spouse or partner or vice versa, if one of you does not use your full personal allowance or pays a higher rate of tax?
There are pros and cons to these suggestions and it is important to understand the full implications of what you are considering. It therefore makes sense to talk to one of our professional financial advisers before you act.
The value of your investments, and the income you receive from them, can go down as well as up, so you could get back less than you put in. A pension is a long-term investment and inflation will reduce how much your income is worth over the years. Your eventual income may depend upon the size of the fund at retirement, future interest rates and tax legislation. Tax advice which contains no investment element is not regulated by the Financial Conduct Authority.