Tax year end: Your last minute checklist
Tax year end has almost arrived, with the 2021/22 tax year set to end at midnight on April 5th. What does this mean for you and could you be doing more with your money? Here’s everything you need to know about tax year end and maximising your potential wealth.
Could you invest more into an ISA?
You have an annual ISA allowance of £20,000 which you could invest before tax year end. This could be into a Cash ISA or Stocks & Shares ISA.
Keep in mind that even the highest Cash ISA interest rates on offer at the time of writing are below inflation, so your money could in fact lose value. Contrast this with a Stocks & Shares ISA, where your investment has the potential to grow beyond inflation and increase your wealth.
With an ISA, you won’t pay any Income or Capital Gains Tax on the interest your ISA generates or the increase in investment value – which is why it makes sense to use as much of the allowance as possible. And as always, investing something could be better than doing nothing, particularly if you are invested for the long-term and benefiting from compound growth.
You can’t carry forward your ISA allowance, quite simply it is use it or lose it. You’ll start the 2022/23 tax year on April 6th with a new £20,000 allowance.
Could you invest for your child?
Giving a child the best start to life is the aim of any parent, so why not invest into a Junior ISA before tax year end?
You can contribute up to £9,000 per child into a Junior ISA with no further liability to Income or Capital Gains Tax.
This can be either a Cash ISA or Stocks & Shares ISA, meaning you can shelter your money from the corrosive impact of inflation at the same time as potentially growing a fund for things such as university fees or a house deposit.
Have you invested into your Pension?
You typically get at least 20% tax relief on the money you pay into a Pension pot. This tax year, you can pay in up to a maximum of £40,000 or 100% of your salary, whichever is lower.
This is an effective way to keep more of your salary, and effective at protecting your money from inflation. Your money has the opportunity to grow over the long-term, and the earlier you invest in a Pension the better for compounding growth towards your goal.
Unlike an ISA, if you don’t use all your allowance in one year, you can ‘carry it forward’ for up to three years.
If you have a financial adviser, now could be a good time to contact them and go through your personal finances.
Together you can identify where you could be doing more with your money around tax year end.
There are certainly more complicated aspects to consider where it could be wise to consult a financial adviser, particularly around issues such as inheritance tax, estate planning, or capital gains tax and share dividends.
At the very least, consider the points made here about ISAs and Pensions. Can you do more with your money before tax year end? Remember to consider your attitude to risk, can you afford to lose money if markets don’t grow?
Don’t worry if you can’t max out your allowances before 5th April, every pound that you can invest could make a difference to your future. And, as you’ve seen, with annual allowances it’s “use it or lose it”.
There is still time left to make use of the valuable allowances that are available. With our impulseSave® technology you can top up an existing ISA right up until midnight on 5th April.
Do more with your money, check in on your investments today.
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 recommendation or financial advice.