UK savers and investors are being encouraged to make the most of their tax-free allowances as the current tax year draws to a close on Sunday, 5 April.
Taking timely action can help shield savings and investments from HM Revenue and Customs (HMRC), providing significant tax benefits.
Personal finance experts advise individuals and families to review ISA, pension, and other allowances to ensure their finances are optimally structured ahead of the deadline.
Deadline for making tax-efficient savings
The end of the financial year marks an important cut-off for utilising annual tax allowances. Missing this date may mean losing out on tax advantages for untapped allowances, as unused portions cannot be carried forward.
Financial specialists stress the urgency for savers to review their accounts before the deadline. Personal finance expert Camilla Esmund highlighted the importance of timely action, stating that initial steps should include topping up Individual Savings Accounts (ISAs) wherever possible to secure returns sheltered from taxation.
Maximising ISA opportunities
ISAs allow individuals to save up to £20,000 per tax year without incurring tax on interest, dividends, or capital gains.
While some may be cautious about investing in a Stocks and Shares ISA amid volatile markets, experts note that contributions can be made in cash before the deadline, with investment decisions deferred to a later date.
This flexibility enables investors to secure their allowance for the current year, with the option to invest when market conditions are more favourable.
Considering pensions for additional relief
Pensions remain one of the most tax-efficient vehicles for retirement savings in the UK. Contributions receive upfront tax relief, particularly benefiting higher-rate taxpayers.
However, pension funds are typically inaccessible until age 55, with this threshold set to rise to 57 from 2028. Esmund recommended that savers consider boosting their pension contributions before the end of the tax year to maximise tax relief and long-term returns.
Workplace pension advantages
For employees, workplace pension schemes can provide further benefits. By law, employers contribute a minimum of 3% of qualifying earnings if the employee pays in at least 5%.
Some employers offer higher contributions if employees are willing to increase their own input. “Employers must pay at least 3% of qualifying earnings into your pension, provided you pay 5%,” said Esmund.
“Some will pay more, though you might have to increase your contribution to receive it. This is essentially free money.”
Family tax allowances and Junior ISAs
Families can also benefit from tax-efficient saving through Junior ISAs, designed for individuals under 18. The allowance for the 2023-24 tax year stands at £9,000. Using this option can help build savings for future expenses such as education or first vehicles, all while generating tax-free growth.
Esmund advocated involving all family members in the saving process, highlighting the Junior ISA as a practical tool for long-term planning.
Final Summary
With the end of the tax year approaching, savers and investors are advised to review their financial arrangements and make strategic decisions to maximise available allowances.
Actions such as topping up ISAs, increasing pension contributions, and utilising capital gains and dividend exemptions can lead to significant long-term tax benefits.
These steps, when taken before the April 5 deadline, can help households retain more of their investment returns and support long-term financial goals. For those looking to keep track of their tax wrappers and allowances, financial tools and applications like Pie can offer valuable support in managing and optimising personal finances.
