Article published by Integrity365, a Beavis Morgan group company.
Enabling clients to make the most of their available allowances and tax reliefs ahead of the April 5th deadline is always a busy period in the financial calendar, especially during Covid times where processing timescales at Providers are lengthened. The question is, should we see the deadline as the completion of a tax year or focus more on the opportunities the new one holds from the beginning?
The 6th April soon arrives and brings with it new allowances for you to utilise wherever possible. Many clients see this time as a fresh start financially, taking stock of their investments and finances, and planning for the future – but why wait until the end of the tax year to invest?
Investing at the earliest point in the new tax year could prove financially beneficial. Although investment returns are not guaranteed, in theory the sooner that your money is invested in a tax-free environment, the sooner you are benefitting from tax free growth. For example, if you were to utilise your ISA allowance from the 6th April as opposed to waiting until the 5th April the following year, your £20,000 investment would have had the opportunity for an extra year’s tax free growth. Multiply this year upon year and this could make a significant difference to your overall financial plan. It is also one thing ticked off your ‘to-do’ list early in the financial year. Whilst I appreciate that for some clients, it is occasionally necessary to make pension contributions towards the end of the tax year as earnings levels need to be checked, timing is certainly a factor worth considering in line with your individual circumstances.
For those wishing to make an early investment or contribution outside of your regular adviser meetings, once receiving your instruction, your adviser can place the additional investment into your existing holdings in line with your current attitude to risk and subsequently evaluate this as part your annual review. There is no need to wait if this is something you would like to consider, your adviser will be more than happy to help.
The benefits of using your allowances:
Prior to the end of this tax year, I assisted two new clients with advice regarding the implementation of their Self-Invested Personal Pensions (SIPPs) and how best to make use of not just their unused Annual Allowance (AA) from the 2020/21 tax year, but also the previous three tax years. The clients have both benefitted from an immediate boost to their pension funds, as personal contributions to a registered pension scheme receive basic rate tax relief at source. For every £80 paid in, the pension fund will receive an additional £20 in tax relief; in this particular case it has resulted in tens of thousands of pounds of additional tax relief. Higher and additional rate taxpayers can claim further tax relief through their tax return, making their SIPP contributions even more tax-efficient.
For more information on making the most of your allowances from the start of the new tax year, get in touch on: 0117 450 1300.