This is your last call on tax year end! There are just one day to go in the 2022/23 tax year, meaning you have precious few hours left to do more with your money.
Don’t be caught out by leaving it to the last minute, use your allowances today and follow the below tips to ensure you are doing more with your money. Being tax efficient with your ISA and Pension is one of the building blocks for growing your investment towards your goals. The actions you take today could echo long into the future.
Review how much ISA allowance you have left.
Your annual ISA allowance for the 2022/23 tax year is £20,000. You can’t carry that allowance over into the next tax year, so it is a matter of ‘use it or lose it’ before midnight on April 5th.
Your allowance applies across all of the ISAs you have – for example you could put £10,000 into a Cash ISA and £10,000 into a Stocks & Shares ISA.
Choosing the right ISA is all about your goals, and attitude to risk and return:
- For short-term goals below five years, a Cash ISA may be more appropriate as your capital is not subject to investment market movements.
- If you are able to leave your money invested for a least five years or more, then you may want to look at a Stocks & Shares ISA. Your money has the potential to grow at a higher rate than cash savings and inflation over the long term, but your capital will be at risk.
Making any last minute contributions is easy with impulseSave® in the True Potential app. You can top up an existing ISA right up until midnight on April 5th.
Check if you have a Flexible ISA to replace withdrawals.
If you have a Flexible ISA, you can also replace any withdrawals you have made within the same tax yearwithout reducing your current year’s allowance.
For example, if you added £20,000 to an ISA this tax year but later withdrew £5,000, you would be able to add £5,000 back into a Flexible ISA.
True Potential ISAs are flexible, but not all are – so it’s worth confirming with your provider if you have this option.
Review your remaining Pension allowance.
Your Pension is one of the most effective ways to be tax efficient with your money.
In the 2022/23 tax year you’ll typically get at least 20% tax relief on the money you pay into your Pension pot. This tax year, you can pay in up to a maximum of £40,000 or 100% of your salary, whichever is lower (the annual allowance is set to rise to £60,000 in the 2023/24 year).
For example, basic-rate taxpayers can invest up to £32,000 of their annual earnings and receive up to £8,000 on top from the Government.
If you’re a Higher or Additional rate taxpayer, you can claim a further 20% and 25% tax relief respectively and this is done through your Self Assessment Tax Return.
Keep in mind that you won’t be able to access your Pension investment until age 55 (the Government plans to increase this age in the future) and if you’ve already withdrawn from your Pension, you may have a reduced annual allowance – speak to a financial adviser if you’re unsure.
Make use of carry forward for your pension.
Unlike your ISA allowance, you may be able to carry forward any unused Pension annual allowances from the three previous tax years, as long as you held a registered UK Pension in those tax years. If you would like more information on this topic, please get in touch.
Making the most of your tax allowances is an important part of long-term saving and investing as it can keep your money working hard for you. Remember, topping up doesn’t have to be all or nothing – we’ve shared the full allowances in this article but every pound you can invest towards your future in a tax efficient Pension is a pound working for you.
When investing, your capital is at risk. Investments can fluctuate in value and you may get back less than you invested. This article is for information only and is not a personal recommendation or financial advice. ISA and Pension eligibility apply. Tax rules apply. Tax is subject to an individual’s personal circumstances, and tax rules can change at any time. You should ensure your contribution does not result in your total ISA contributions within the tax year exceeding £20,000. You should also ensure your contribution does not result in your total Pension contributions within the tax year exceeding £40,000.
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