Ahead of the April tax year ending – it’s a good idea to make sure you’ve made the most of all the tax breaks available to you, as it could save you a fortune in the year ahead
Right now is a great time to spring clean your finances and make the most of HMRC tax breaks before the new tax year starts on April 6, but where do you start?
While many of us put off financial admin for as long as possible, putting a bit of work in and setting a bit of time aside can certainly pay off in the long run. Anyone with savings needs to make sure they are making use of all their tax allowances and getting the best bang for their buck.
To make it a bit easier and less confusing, Charlotte Baroukh, Chartered Accountant and Tax Expert at self-assessment app Pie, shares her top tips for maximising finances and tax allowances ahead of tax year end (April 5).
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1. Act on your ISA
As we approach April 5, it’s smart to ensure you have used your full annual Individual Savings Account (ISA) allowance. For the 2024/ 25 tax year, this is a total of £20,000 that can be put into tax-free savings and investments.
With this, you can invest in cash ISAs or stocks and shares ISAs, and the returns are tax-free, so it’s a smart way to reduce your tax burden while building your savings!
The full £20,000 is, of course, a huge amount for a lot of people – so the key here is just to put in any extra cash you can to the relevant ISA before April 5 to reap the tax-free savings or investment benefits.
2. Topping up Junior ISAs
The ISAs above also extend to children under 18, but the annual limit is less than £9,000. So, if you are planning to or are currently managing a Junior ISA for your children, it’s worth looking at topping this up closer to the yearly limit if you can.
As an extra tip – if you have a set date each month when you automatically contribute to your child’s ISA, it’s worth being savvy and pulling that forward for April (ahead of April 5) to take advantage of a more significant tax-free benefit.
3. Be smart with your LISA
A Lifetime ISA allows you to contribute up to £4,000 per year into a pot that can only be used to purchase a first home (up to a value of £450k) or used for retirement.
The government offers a 25 per cent bonus on contributions, up to a maximum of £1,000 annually – essentially free money! So again, if you can, it’s worth looking at topping up to the maximum yearly contribution of £4,000 (or as close to) before April 5 comes around.
4. Don’t forget dividends
Everyone is entitled to a specific tax-free dividend allowance, depending on their tax brackets. The dividend allowance for basic rate taxpayers is £1,000, and it’s £500 for higher rate taxpayers, so double-check where you fit in and enjoy the benefits of tax-free dividends.
5. File your tax now
Following the tax deadline on January 31, HMRC reported that over 1.1 million UK taxpayers missed the date and are now facing £100+ penalties. HMRC enforces fines that escalate over time, with daily penalties after three months and interest on unpaid tax.
It’s so important to get this done if you haven’t already done so, either via HMRC’s portal or through an easy-to-use self-assessment app like Pie.
Pie, for example, covers all income types, including child benefits, tax reliefs, and more, in one place (and you can submit it directly to HMRC for free). So it’s worth a go if you’re struggling for time or find the process difficult to understand (and it’s also great to start the new tax year with a clean slate).
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