5 Things To Do Before The End Of 2020/21 Tax Year
The end of the 2020/21 tax year is just days away, have you made the most of the opportunities presented? There’s still time to do more with your money.
1.Maximise your Pension contributions
Contributing towards your retirement is important, as True Potential’s Saving Gap research shows that people in the UK may be on course to receive just £6,000 per year from their retirement fund. The same research indicated that potentially you may require up to £23,000 per year in retirement.
What can you do to close the gap? The annual allowance for 2020/21 is £40,000 in the 2020-21 tax year, or 100% of your income if you earn less than £40,000. If you can use up as much of this allowance as possible before next week you can then start with a clean slate of another £40,000 (or your earnings, if lower) to invest into your Pension in the 2021/22 tax year.
There are major tax benefits to this. You receive income tax relief when saving into a Pension, it is an effective way to do more with your money by keeping more of your salary.
2.Top up your Stocks And Shares ISA
You can invest up to £20,000 in a Stocks & Shares ISA in the current tax year, and if you don’t use it you lose it. You can’t carry unused allowance over to the new tax year starting next week.
All growth within your Stocks & Shares ISA will not be subject to Capital Gains Tax or Income Tax, so it makes sense to invest as much as possible in your ISA in order to do more with your money. The savings on tax and the potential long-term growth of being invested in a fully diversified Portfolio is a winning combination.
3.Invest towards the future of your children
A Junior ISA could be a good idea if you want to invest some money towards a brighter future for a child. In addition to your other ISAs, you can invest up to £9,000 per child in a Junior ISA in the 2020/21 tax year.
These tax-free savings can potentially offer growth over the long-term goal to pay for things such as education fees.
4.Consider Capital Gains Tax
We all have a Capital Gains Tax allowance, which is £12,300 in the 2020/21 tax year. In other words, on the sale of any asset where the gain is over £12,300 you will be taxed on the excess.
To avoid this, you could consider staggering the sale of such assets over two years to take advantage of the allowances. You can’t roll over any unused allowance to the new tax year.
5.Prepare for a new tax year
Once you’ve got everything in order for the end of this tax year, start thinking about how you can do more with your money in the new tax year starting on April 6. Your allowances will be refreshed, and the earlier you take advantage of these allowances potentially means more time for growth in your ISA or Pension.
Do more with your money, use the end and start of tax years to ensure your personal finances are in order or speak to a financial adviser if in doubt.
With investing, your capital is at risk. Investments can fluctuate in value and you may get back less than you invest. Past performance is not a guide to future performance. Tax rules can change at any time. This blog is not personal financial advice.