We’ve all been there – leaving it as late as possible to meet your deadline, and experiencing the rollercoaster of emotions: worry, panic and, finally, relief. But while this can easily become a habit, it can come at a cost – especially when the deadline in question is a financial one.
Most of us tend to focus on 5th April as the deadline for sorting out our finances and getting our taxes in order. However, this can lead to missed opportunities.
A different approach
By planning much further ahead, you can take your time, take stock of your finances and assess the actions you need to take.
Pick a date in advance of the deadline to check your tax allowances or do it regularly throughout the year – this not only ensures you beat the deadline, but it also makes the best financial sense. You can do a proper review and assessment of the allowances you’ve used and, where possible, bring forward unused allowances from the previous year.
If you’re doing investment-based tax planning, for example, thinking about your finances before the deadline allows you the opportunity to benefit fully from your money being invested tax-efficiently and using all your allowance.
Spotlight on pensions
If you’re able to pay in more than the current annual pension allowance (£60,000 for the 2023/24 tax year – or 100% of your salary), for example, you can carry forward any unused allowance from the previous three years – an important detail not to be overlooked.
It’s important to note the change to the Lifetime Allowance (LTA) – the cap on the total value that you could hold in your pensions without facing a tax penalty. This usually moves up in line with inflation; however, from 6th April 2023 to 5th April 2024, no one has to pay a lifetime allowance charge, which means you can carry on paying into your pension pot without worrying about receiving a tax penalty. From 6th April 2024, the lifetime allowance will be completely abolished, so there will be no limit on how much you accumulate in your pension while still enjoying its tax advantages. The change will mostly affect senior professionals like doctors and head teachers, who might have previously been tempted to take early retirement or opt out of pension saving.
Although the move has been lauded for simplifying the pension system and promoting greater awareness of saving for the future, industry experts are sceptical. HMRC has yet to show how the LTA abolition could work in practice. What’s more, with a general election looming, Labour has pledged to reverse any changes if they come into power, in favour of a solution for NHS staff only.
Any questions arising from the proposed LTA changes will typically require professional advice on any actions you might need to take to secure your short- and long-term financial well-being.
Beat the deadline
So, what can you do to avoid a last-minute rush in the spring? Download our free tax-year-end checklist now:
If you’d like to find out more, get in touch with us today!
The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.
The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.
SJP approved 11/08/2023