What does the end of the tax year signify to you? Is it something you notice only when your P60 form lands in your inbox, or is it a deadline marked in your calendar so that you can make the most of every tax allowance before the old tax year ends, and have everything in place for when the new tax year begins on 6 April?
There’s no prize for guessing which approach is favoured by financial experts. The good news is that, if you haven’t already factored tax reliefs and allowances into your finances this year, it’s not too late – and Boundless partner Lighthouse Financial Advice can help you to make the most of them.
How can an adviser help?
“An expert financial adviser will provide jargon-free advice to create a financial plan that allows you to benefit from tax allowances, as well as taking other important factors into account,” explains Graham Crossley, Head of Technical Business Development.
As you’d expect, it’s wise to have plans in place at the beginning of the tax year for the simple reason that if you’re using your allowances from the start, you’ll be able to benefit from them for longer. But an end-of-year review can be very productive, too.
“End-of-year planning means you can factor in any actions on allowances that are relevant to you before they expire at the end of the tax year,” says Crossley. “It can also be useful where you need certainty on specific factors.
“For example, if you’re looking to make a pension contribution to reduce your liability to higher-rate income tax, it’s important to know what your income for the year will be. This is much easier if you’re planning at the end of the tax year, compared to the start.”
You may also be able to take advantage of tax reliefs on certain work expenses, from professional fees and accommodation costs, to the clothing, vehicles and tools you use for work, and the cost of cleaning uniforms.
If you had to work from home during Covid restrictions, you can also claim a whole year’s ‘working from home’ tax relief on £6 a week for the 2021/22 tax year (you can claim more if you have evidence of increased costs). “HMRC has created a website to make it easier to find out about these tax reliefs, and to claim,” says Crossley. “Just visit gov.uk/ tax-relief-for-employees.”
Every individual’s circumstances are different, of course, and your adviser will provide financial advice specific to you. For example, the tax reliefs mentioned previously may be useful if you’re working, but if you’ve retired then you may want to consider the annual gift allowances that you can use to reduce your estate for inheritance tax purposes. For an overview of the various areas in which tax allowances and exemptions might affect any one individual, please see the box below.
There’s no threshold
One last point: don’t assume that you’re not earning enough to make financial advice worthwhile, or that your tax affairs are so straightforward that they don’t warrant an expert’s insight. “Everyone wants financial security,” Crossley points out. “To achieve it, you need a plan – without one you will arrive somewhere, but the chances are it won’t be where you want to be. For your plan to work, it must consider your goals, the choices available to you to meet those goals, and how changing circumstances might influence how you achieve them. To build your plan for financial security, you need high-quality advice and access to the expertise, tools and products that are essential if you’re to achieve your aims.”
Tax-friendly savings and allowances
Key considerations at the end of the tax year, according to financial expert Graham Crossley:
ISAs – A great way to save as any interest you earn or investment gains you make have no income or capital gains tax liability. You have a £20,000 allowance every year.
Junior ISAs – You can contribute up to £9,000 per year for each of your children, with no income tax or capital gains tax liability.
Inheritance tax – You have annual gift allowances that you can use to reduce your estate for inheritance tax purposes.
Capital gains tax – You have an allowance of £12,300.
Pensions – You have an annual allowance of £40,000 (which can be reduced in some circumstances). You can carry forward unused allowance from the previous three years.
Investors do not pay any personal tax on income or gains, but ISAs do pay unrecoverable tax on income from stocks and shares received by the ISA managers.
The value of investments can fall as well as rise.
You may get back less than the amount you invested.
Tax treatment varies according to individual circumstances and is subject to change.
Book your initial financial consultation for free
Find out how Lighthouse Financial Advice can help you by taking advantage of a fee-free initial consultation – you’re under no obligations afterwards. To book yours, or find out more, call 0800 085 8590 or email firstname.lastname@example.org. Please quote the following reference when you get in touch: ‘CSMAwebsite2203’.
Do more with Boundless
Free financial webinars: Lighthouse Financial Advice is planning to hold more of its successful webinars for Boundless members this year – subjects covered in the past include financial peace of mind, and planning for retirement. To find out more or book your place, please visit boundless.co.uk/lighthouse.
Approver Lighthouse Advisory Services Limited. 3 March 2023.