As we approach the start of a new tax year on April 5, millions of Brits will face a series of financial and money changes.
Finance expert Brian Byrnes, head of personal finance at digital wealth manager Moneybox, has explained that the end of the current tax year is something all people should be keeping an eye on. He stresses that it provides the perfect opportunity for you make you money work "as hard as it can for you".
In April, there will be a series of changes for DWP benefits, wages, energy bills, broadband, taxes and more. While there are a lot of changes which can be hard to keep track of, Mr Byrnes highlights the importance of getting all your finances sorted in time, the Mirror reports.
Read more: The seven things that will cost you more money from this weekend
He said: "As we head towards the end of the 2022/23 tax year, now is the time to check you’re taking full advantage of the tax wrappers available, to ensure your money is working as hard as it can for you.
“We can all be guilty of leaving things until the last minute, and committing to sit down and spend some time reviewing and planning our finances can be a struggle. Tax allowances do not roll over into the next tax year, so it’s a case of “use it or lose it”.
“These five top tips will help you understand how tax year end might affect your finances, and what simple steps you can take that might save you money and make you money.”
Capitalise on your savings
Firstly, Mr Byrnes advises making the most of your personal savings allowance which will vary depending on which tax band you fall into. Those with a basic rate tax can earn up to £1,000 in interest on savings without needing to pay any tax on it.
Meanwhile, those in a higher tax band have a £500 limit. Because of this, it's vital that you double-check which tax band you fall into to find out how much you could put into your savings.
Take advantage of an ISA
According to Mr Byrnes, using a tax-wrapped savings/investing account can help protect you from interest/returns. It is no secret that interest rates are consecutively rising month after month, however, this can be good thing as you could make more earnings on cash savings.
But to take advantage of this, the money needs to be in an account that is in a tax-wrapped account. An ISA allows you to deposit up to £20,000 each year before any tax on interest earned is paid.
One recommended ISA is a Stocks & Shares ISA which, compared to other options like a General Investment account where you pay tax on your gains, can help you save as much money as possible.
Double-check your pension
You could maximise your "free money" via Pensions tax relief. If you are a basic rate taxpayer in the UK, you can receive up to 20 per cent tax relief which can be framed as a top-up on your contributions. For example, if you contributed £4,800 to your workplace pensions, the government will give you free money in the form of a top-up of £1,200 - bringing your total contributions to £6,000.
For this tax year, you could deposit £40,000 or money equal to your salary (whichever is lower) into your pension to help secure your retirement. Next year, the limit will rise to £60,000.
However, if you don't use the full allowance, you can carry it forward to next year to help you get the full benefit of tax relief. This applies to the past three years of unused allowances as long as you had a pension during that time.
You also don’t pay any investment taxes on the growth within your pension.
See if you can claim a trading allowance
If you've started a side hustle this year or are self-employed, you can claim a trading allowance before the end of the tax year. If you started in 2022, you will have been eligible for a trading allowance that allows the first £1,000 you earn to be tax-free.
If you're self-employed, you may have a self-employed personal pension (SIPP). It's a good idea to ensure you've made use of your annual pension allowance before it resets in the new tax year.
Up to £40,000 can be deposited into a SIPP each tax year while the government will give you a top-up of at least 25 per cent on your deposits. For example, if you invest £4,000 into your SIPP this year, you'll get at least an extra £1,000 from the government.
Push your Lifetime ISA to the limit
If you're saving for your first home or for retirement, then it's important that you max out your Lifetime ISA government bonus.
A Lifetime ISA offers a 25 per cent government bonus for every £1 you save. Up to a max of your contributions of £4,000 every tax year can receive this bonus.
Therefore, if you could earn up to £1,000 in 'free money' each year to help you get on the property ladder sooner. Your options include either a Cash LISA or an S&S LISA, depending on your savings timeline, which allow you to earn interest and/or investment growth on both of your deposits and the government top-up.
A Lifetime ISA can also boost your retirement savings with a 25 per cent government bonus on all contributions made up until the age of 50. However, if you choose to withdraw money from a Lifetime ISA for any other reason than buying your first home or fore retirement, you will suffer from a 25 per cent penalty fee and get back less than you put in.
Read next:
Millions of McDonald's customers to be hit with extra charge from today
How much your benefits could go down if you don't pay your bills
People who will get the full DWP £1,350 cost of living payments and when they will be made
Money Saving Expert urges Brits to stockpile 68p household item before Monday
