Tips and topics ahead of tax year-end
March 1st is a lot of things. St David’s Day, Self-Injury Awareness Day. It’s also National Peanut Butter Lover’s Day, apparently.
But March 1st also starts the five week countdown to the end of the tax year and time, then, for us to lay out some considerations for your consideration.
Tax, ISAs and pensions – let’s get technical …
£20,000 use it or lose it
As a basic rate tax payer, you can earn interest on your savings of up to £1,000 before tax kicks in. Higher rate taxpayers have a £500 tax-free allowance.
So if you’re holding money and likely to pay tax on the interest then consider moving it into a Cash ISA where interest isn’t taxed and each person can put away £20,000 as such. Given interest rates are topping 5% these days, holding £20,000 or more in cash, you will hit the £1,000 interest mark and thus be subject to tax.
If you can afford to put money away for a while, say five years or more, a Stocks & Shares ISA can be a great option to boost your financial future. Sure – investing doesn’t come with guarantees but history says the stock market will outperform cash over time.
Those saving for a home have a LISA allowance of up to £4,000 each tax year — part of the £20,000 per person ISA allowance — and the government will bonus you 25% on top.
Lastly, if you have kids then each has a Junior ISA allowance of £9,000 a year. Accessible when they hit 18, these are a great way of saving for your child’s future.
Tax TLC for your pension
We love pensions here at Money Means. Why? Well for starters the government tax relief on offer is akin to free money. Oh and if you’re employed then your employer contributions equal even more free money.
Most people can put up to £60,000 per year into a pension, inclusive of both personal and employer contributions. Okay, we may not have £60,000 in cash lying around, but tax-year-end is still a good time to ponder propping up your pension.
Oh also, for you higher rate tax payers a gentle reminder that you’ll need to reclaim your additional tax relief back.
Anyway. We hope that’s given you a few things to think about. Even if it doesn’t land right now, keep it on your radar for 2025 as these opportunities all come around again.
So get thinking, get planning and get more from your money.