Many people only think about their tax planning right before the tax year deadline. However, by this stage, most tax-saving opportunities are already limited. Instead, if you review your financial plan at the start of April, you can make the most of your allowances, and you could earn more interest. We look at common missed opportunities and what to consider.
Review your financial plan at the start of the tax year
April marks the start of the new tax year. It’s when annual allowances reset, so it’s also a good time to review and plan for the financial year ahead. Usually, any changes in the Spring Budget will have been announced, helping you to plan ahead. Tidying up your expenses, pensions, ISAs and dividends early on in the tax year will make budgeting easier.
Once the tax year ends, any unused allowances are lost, and you could face higher income tax and unnecessary capital gains or dividend tax. Last-minute tax planning often leads to missed opportunities. It can slow wealth growth, which could have a significant impact on your financial future. If you’re a high earner or you have complex finances, small oversights can cost thousands over time. Therefore, it’s always better to be strategic and not reactive.
Financial planning is a process
When it comes to your financial planning, there are many things to consider at the start of a new tax year. It’s a good time to factor in any changes over the past 12 months, and if you’re expecting any big life events in the year ahead. You might’ve moved house, changed jobs, welcomed new family members or lost a loved one. All of these life events could affect your financial situation and estate.
Below are some things to consider when reviewing your financial plan:
- Start by reviewing your income and withdrawal strategies – to see where you can make use of available allowances. By using your ISA allowance early, for example, you’ll give your money more time to earn interest or investment returns (for Stocks and Shares ISA).
- Plan your pension contributions for tax relief. This is important if you are a high earner because you can turn your income tax into savings by contributing more to your pension. Higher rate (40%) and additional rate taxpayers (45%) can claim back extra relief through self-assessment to significantly reduce their income tax liability.
- Structure your investments in a tax-efficient way. Investing in a pension, for example, helps high earners to save tax and grow their savings free from income tax and capital gains tax. Also, check that you have a well-diversified portfolio and you’re happy with your chosen level of risk. By spreading your risk across multiple assets and funds, you will help to protect your investments from market volatility and shocks.
When you’re reviewing your financial plan, your aim should be to align your finances with your long-term goals. Make sure your investment strategy still matches your goals, chosen level of risk and tax position. In some cases, you might need to refine and rebalance your investments, but always remember that successful investing relies on a long-term strategy.
Financial Planning in Nottingham and Lincoln
Proactive financial planning will help you reduce your tax liabilities while growing your wealth more efficiently. Without a solid strategy in place, poor tax planning could diminish your hard-earned wealth and have an impact on your financial future and your legacy.
Don’t wait until the tax year-end to review your finances. By reviewing your financial plan in April, you will be able to make better strategic decisions to help you minimise any tax liabilities and plan ahead for the future. By giving your finances an annual “spring clean”, you can use available allowances and make your money work harder.
At Balance: Wealth Planning, our approach to financial planning is always tailored to your individual goals. We offer fixed-fee financial planning, giving you full transparency over our support. Our financial planners will help you make the most of available tax relief, so you can optimise your savings and investment strategy.
Get in touch to book a full financial review with our team.
Sources:
https://www.wellersaccountants.co.uk/blog/why-does-the-uk-tax-year-start-in-april
https://www.moneyhelper.org.uk/en/blog/savings/understanding-the-new-ISA-rules
