When the end of the tax year is approaching, financial experts rightly urge people to take control of their tax affairs ahead of the looming deadline.
But why do so many people leave it to the last minute?
With the new 2024-25 tax year beginning on April 6th, now is the perfect time to get on the front foot, assess your finances and get your money working hard for you right away.
Understand your tax allowances
Tax-free allowances can change over time, and this new year brings several changes that you might need to be aware of. For example, the Capital Gains Tax allowance has been cut from £6,000 to £3,000.
If you’re aware of how much you can earn before paying income tax and any other allowances you might be eligible for, you can get a clear picture of your overall tax liability and avoid having to pay more than is necessary.
Get saving
Individual savings accounts, or ISAs, are a hugely popular and tax-efficient way to save and invest money, but new rules on ISAs have come into effect this year.
For example, savers are now free to split their ISA allowance across multiple ISAs of the same type, whereas in the past, you could only contribute to one ISA of a specific type, such as a Cash ISA or Stocks and Shares ISA, in a single tax year.
It’s important to be aware of these changes so you can maximise your savings throughout the tax year and find ISA options that best align with your goals.
Step up your pension saving
Now is the perfect time to either open a personal pension scheme or increase your contributions if you can afford to do so.
Putting money into a pension scheme is one of the most tax-efficient ways to save for later life, as the amount you put away is deducted from your taxable income. As a result, you can end up paying less income tax in the current tax year.
Furthermore, if you start pension saving early, it will generate more compound interest – and your pension pot will get bigger over time.
Basic rate taxpayers can enjoy an automatic 20 per cent tax relief on pension contributions, while higher and additional rate taxpayers can claim even more tax relief.
*A pension is a long-term investment not normally accessible until 55 (57 from April 2028). Your capital is at risk. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available.
Reassess your budget
As your circumstances and priorities evolve, the amount of money you have at your disposal will change. Perhaps you’ve had a pay rise or moved into a better paid job. Or maybe you’ve had a baby, taken out a new mortgage or got married?
Look at your income and expenses so you can get a clear picture of where your money is going and how much you can afford to save or invest elsewhere.
Review and set financial goals
Setting clear objectives can help you stay motivated throughout the tax year, and avoid making rash financial decisions that can knock you off course.
Get on top of the paperwork if you’re self-employed
If you’re self-employed, the deadline for filing your tax returns can be a source of panic and anxiety. But that’s often because you might find yourself with little time to assemble and go through all your paperwork.
So as the new tax year begins, gather your receipts straight away and make sure you have clear, accessible and organised records of your income and expenses.
If you do this routinely throughout the tax year, you’ll thank yourself later on when the time to fill in the dreaded tax return form arrives, and the whole process will be so much easier.
Stay up to date
As we stated earlier, various rules, regulations and tax allowances have been revised for the 2024-25 tax year.
Make sure you’re informed and up-to-date with any changes, so you can be sure you’re making the best financial decisions and maximising your tax allowances.
You could do this by keeping a close eye on the government website, but it’s perhaps easier for you to speak to a qualified financial adviser, whose job it is to be on top of any changes that might affect you.
With their knowledge and insight, a specialist in this field can offer advice tailored to your specific needs, circumstances and goals, so you can be confident you’re making the right choices and that your money is working as hard for you as possible.
*Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.
