You Don’t Know What You’ve Got Till It’s Gone

As Joni Mitchell said in her 1970 hit ‘Big Yellow Taxi’ …

Was she talking about the tax year end? I’m not so sure!

April 5th is looming fast and when the clock strikes midnight you’ve lost your opportunity to soak up valuable freebies and allowances. If you don’t act then once they’re gone they’re gone for good.

Here’s my no-nonsense summary of what you need to be thinking about. If I work with you as your financial adviser then relax as I’ve already got this covered for you 👇

They paved paradise. And put up a parking lot!

We’re now just over a month away from the most riveting time of the year in my work (and social) calendar: the dreaded tax year end. This probably says more about my social life than I would care to admit, but we move.

Question is… why should you care?

Isn’t this something for the financial advisers and accountants to stress about?

Well… yes if you have a financial adviser or accountant.

But if you’re on the journey alone then take note of the below.

I’ve kept this as short and sweet as I can as let’s be honest who in their right mind really wants to be thinking about this stuff?!

But bear with me as this is important and can save you £000’s. In tight times like these you need to grab every freebie and opportunity you can get. But just like Nicola Sturgeon’s WhatsApp messages .. once they’re gone they’re gone!

It really is as simple as use them or lose them.

If you have a financial adviser then I would take this list to them to make sure they’re aware of these and to check if you should be doing anything about them. If they’re doing their job then they should already be all over this stuff!

Once the clock strikes and welcomes in the 6th April, it’s already too late.

Here’s a rundown of what you should be thinking about:

ISA allowance – you can put £20k a year into an ISA which you can think of as a tax sheltered pot where your money can grow tax-free.

Look out for an upcoming podcast episode this Friday where I explain why cash ISAs are rarely worth it.

If you don’t use your ISA allowance by 5th April close then you don’t get to carry this forward.

If you make use of Junior ISA allowances for your children then you also need to be actioning this before 5th April closes.

Pension allowance – pensions are incredible and can’t be beaten for tax efficient long-term growth of your money. The trouble is the maximum you can put into a pension in any one tax year is capped at the lower of how much you earn in that tax year or the annual allowance (which is currently £60k).

It gets more complicated than this, so do seek advice, but the key takeaway is: as you move into the new tax year you may have lost opportunity to get more into your pension.

There’s also a weird quirk in the pension system where you can ‘carry forward’ any unused allowances from the preceeding 3 tax years. This sounds generous, but you need to have relevant earnings to make the contributions in the first place, so if you expect your income to drop in 2024/25 then now is the time to act.

Once we’re in the new tax year you lose the chance to carry back to the 2020/21 tax year.

Dividend Tax allowance is going down  – you’ve maybe read that in 2024/25 the amount you can earn tax free in dividends is going down AGAIN. It was £2,000. It dropped to £1,000. And with effect from 6th April 2024 it goes down to a measly £500.

This means more people than ever before will be caught by dividend tax which makes it all the more important to use the valuable ISA and pension allowances mentioned above to get your money tucked away in tax sheltered pots!

And so is the Capital Gains Tax allowance – at the moment you can make a capital gain of £6,000 before you pay any capital gains tax, but this is going down (again) on the 6th April to a pathetic £3,000.

Similar point to the above; more people will start to be caught by this so make use of your allowances before you lose them.

Use your annual Inheritance Tax allowances – if you’re concerned about the tax man/woman taking a chunk of your estate away from your family and friends then you should be using up your annual Inheritance Tax allowances.

Every tax year you can gift £3,000 without a IHT charge. As you can carry forward any unused allowances from the previous tax year, a married couple could gift as much as £12,000 before 6 April. You can also give £250 to as many people as you like.

Gifts out of normal expenditure exemption is a further useful string to your bow as it means any payments into a child’s pension or ISA will not give rise to an IHT charge.

If you want some more info on this topic then check out episode 27 of my podcast which I released before Christmas. Here’s the link and you can then listen on your preferred streaming service.

So there you have it.

This list is by no means exhaustive and I could bore you with this all day.

But in light of the fact we all have lives to be getting on with, the above will hopefully help guide you as a ‘starter for ten’.

Thanks for sticking with me.

Benjamin

Benjamin Mitchell

Benjamin Mitchell

I’m a chartered financial planner that can help you plan for tomorrow and also live for today.

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