With the new tax year approaching, now could be a great time to start planning ahead to ensure your finances are in order. But what steps should you be taking to make the most of the new financial year?
Well, it’ll all depend on your own circumstances and financial situation, but here are some things you might want to consider.
Keep an eye on the news
New tax years are often synonymous with changes to things like tax allowances – and if you want to be ahead of the game, it’s important to keep yourself informed.
Typically, the government will announce new tax measures in their Budget Statement, which usually takes place in March and November, so make sure you keep an eye out for those and check the news in case there’s any tax changes.
Review your ISAs
A good way to get ahead in the new tax year is to get your finances in order. And a nice way to think of it as your annual spring clean.
If you have old ISAs (Individual Savings Accounts) that you opened and paid into during previous tax years, think about bringing them into one place instead of having multiple ones. Not only could this make your life a bit easier as you'll have money tucked away in less places, but you could potentially pay less fees by moving to a provider with lower ones, and consequently end up with more money at the end.
However, before you move your ISAs anywhere, make sure you shop around and check the different transfer rules. Transferring your old ISAs won’t impact your current ISA allowance, which means you can transfer as many as you want. However, if you’re moving your current ISA, you’ll have to transfer the full balance as it counts towards your ISA allowance.
For every transfer you make, you’ll need to use the official transfer in form – this should be given to you by your new provider. Do not withdraw your money to move it or you’ll lose your ISA tax benefits.
Review your pensions
Before the new tax year starts, it could also be a good idea to review your pensions. After all, if you've had multiple jobs, you may have a few pots that you (and your employer) have paid into.
If you have got several floating around, consider consolidating them (this is just a fancy way of saying 'moving them into one pot') and have them under a single scheme. This will make it easier to manage them and keep track of how much you have tucked away for your retirement, and again, you could pay less in fees by choosing the provider with the lowest charges.
All you need to do to transfer your pensions is locate where your pots are. But don’t worry if you can’t remember – you can find them using the 'find pension contact details' section on the HMRC website.
Once you know where your pensions are, you’ll need to collect your pension documents and contact the provider you want to transfer them to.
If you want to switch to a digital investment platform, like Wealthify, the hard work will be done for you – just provide us with some details about your pensions and we’ll do the rest. We'll also manage your new pension for you on an ongoing basis, choosing what you invest in at different times based on how the markets are performing.
Consider using your ISA allowance
You may be looking forward to the new tax year, but why wait until then to do anything when you can start taking control of your finances now?
If you have any ISAs (such as a Cash ISA or Stocks and Shares ISA, for example) remember, you’ve got until the end of 5th April to use your 2023/24 ISA allowance (which is £20,000). After that, you’ll lose it and get a new one to use.
With that in mind, you may want to consider making more payments to your ISAs to take advantage of it before it refreshes (if your finances allow that, of course).
And if you haven’t used any of your ISA allowance yet, then now could be a good time to start – the new tax year may be near, but it’s not too late to get the ball rolling and put some money in an ISA.
Having an account open before the new tax year comes may encourage you to save when it does arrive – and don’t forget, you’ll get a brand-new ISA allowance too. It should be £20,000 again, but it could change in the future.
Choosing an ISA
With ISAs, you can spread your allowance across the four types that are available or put your money in one. But which is the best option for you? A Cash ISA, a Stocks and Shares ISA or another type of ISA?
There’s no right or wrong answer here. However, here's some information that could help you choose between the two we've mentioned.
With a Cash ISA, you get to save money and earn tax-free interest – what’s not to love? Well, although you’re guaranteed to make a gain, saving in a Cash ISA might not be the best option if you’re pursuing long-term growth.
Let us explain. With time, things tend to become more expensive – this is what we call 'inflation'. And if you want to enjoy real financial growth, your savings will need to grow at least at the same pace as everything else. But if inflation is higher than the interest rate you're getting, your money will actually be worth less in the future, even if on paper it's grown.
This is where investing could be beneficial. With a Stocks and Shares ISA, any returns you make aren’t fixed to any interest rates. This means that there’s a risk you could get back less than you initially put in (as stock market performance does go up and down). However, there could also be potential for you to end up with more than you would gain in interest.
Think about your retirement
Tying back into pensions, now could be a great time to plan for your later life. After all, it will be here before you know it, so if you haven’t started planning for retirement yet, why not start today?
The State Pension
Firstly, there's something called the new State Pension, which is paid to you by the government when you reach State Pension age (this differs and will depend on when you were born).
This applies to anyone who is either a man born on or after 6th April 1951 or a woman born on or after 6th April 1953.
To receive any State Pension, you’ll need to have paid at least 10 years’ worth of National Insurance (NI) contributions. And to claim the full amount, you'll need to have paid it for 35 years.
You can go to the HMRC website to find out more about the State Pension and check your National Insurance record if you're unsure whether you've paid enough.
Workplace and Personal Pensions
In addition to this, if you’re employed, you may also be enrolled in a workplace pension that you and your employer both pay into. And with the new tax year coming soon, could be wise to check how it’s been performing (as pensions are invested in the stock market and can go up and down over time) to determine whether you’re on track with your retirement goals.
And if you want to boost your retirement savings, you could open a personal pension to complement any workplace pensions you have.
If you're unsure how they work, you basically make your own contributions (the minimum you can put in at a time is £50) and you'll get 20% tax relief from the government. This means that for every £80 contribution that you make, the government will add £20 to your pot if you’re a basic rate taxpayer. If you do the maths, £20 is 25% of £80, so you’ll effectively get a 25% uplift on your money.
The total amount you can pay into your pension isn’t limited per se, but the amount you’ll receive tax relief on is limited – this your pension annual allowance and it’s currently set at £60,000 per tax year, or 100% of your total income, whichever is lower.
This allowance resets as soon as 6th April starts each year and includes all contributions across all of your pensions (plus tax relief).
Don’t forget the kids
If you have children, you may also want to look at their finances before the new tax year starts. And if you're thinking "what finances?", well, case in point.
If you're already putting money away for their future, is it actually getting the interest it deserves? If not, then you may want to have a look at other options to help their savings grow over time.
One option to consider is a Junior Cash ISA or Junior Stocks and Shares ISA. Like adult ones, you won't pay tax on any gains the money makes, but your child's ISA allowance is different. For the 2024/25 tax year. you can pay in up to £9,000 per year, and there's been no indication that this will change for the next tax year.
Just like your own ISA allowance, your child will get a new one from 6th April. But that also means that if you don’t use the current one before it resets, it’ll be forever lost.
One good thing about Junior ISAs is that everything you pay in belongs to your child and nobody can dip into their pot. And your child won't be able to access it until they're 18 either. Plus, if you choose a Wealthify Junior Stocks and Shares ISA, your friends and family can pay in too.
Past performance is not a reliable indicator of future results.
Wealthify does not provide financial advice. Please seek financial advice if you are unsure about investing.
The tax treatment depends on your individual circumstances and may be subject to change in the future.
Please remember the value of your investments can go down as well as up, and you could get back less than invested.
