As the new year starts to unfold, it’s the perfect chance to break old money habits and make some new ones. Cultivating good money habits is essential to our financial well-being – and even more so during current circumstances, with prices and interest rates still high.
Tony Clark, Senior Propositions Manager at St. James’s Place, says:
“Getting into good tax and financial habits helps make your life so much easier. The key is to form new habits that make your good intentions stick, so they become second nature, to the point where you don’t even notice you’re doing them.”
Indeed, positive money habits are at the heart of personal financial well-being. They help us plan our long-term goals as well as our short-term family finances. Harnessing these habits helps us feel in control of our money and our budget, fostering financial confidence and paving the way for a secure future.
Here are our top tax-smart habits to get into before the end of the tax year, on 5th April:
Making smart tax moves
Making the most of tax reliefs and allowances can help secure your financial future and that of your nearest and dearest. Many of us remember to top up our ISAs as much as possible before tax year-end, but there are ways to save tax that are sometimes overlooked.
“Make sure you’re not missing out on the allowances that you can benefit from. Are you using what you’re entitled to, such as ‘carry forward’ on your annual pensions allowances or your gifting allowance?”
Did you know, for example, that you can give up to £3,000 worth of gifts in a single tax year and it won’t be counted as part of your estate when it’s time to pay Inheritance Tax? Or that in addition to the £60,000 tax relief allowance (or 100% of your earnings, whichever is lowest) on pension payments, HMRC will let you carry forward any unused allowances from the three previous tax years?
Overcome that financial procrastination
Making the best use of your tax allowances helps to make your money go further. But remember that you’ll need to use them while they’re available – in some instances, it’s a case of ‘use it or lose it’.
And while 5th April may seem like a while away, preparing for the end of the 2023/24 tax year-end now can help you avoid any unnecessary deadline stress. So, it’s time to break the ‘last-minute’ tax habit and carve out some time now. After all, you don’t know what else might be on your to-do list by April!
Check whether you need to top up your ISA or review your mix of Cash and Stocks and Shares ISAs. Or put cash into extra pension contributions.
Make it a habit
Don’t feel guilty if you can’t put away that much – it’s keeping the regular saving habit going that’s important in the long run. If you have a family, setting your own good money habits sends a clear signal to your children that managing your money needn’t be stressful or scary.
Get your paperwork in order
If you’re self-employed, you’ll no doubt have your eye on filing your self-assessment tax return. As the January deadline for online self-assessment returns approaches, you may find yourself scrambling at the last minute to locate records, receipts, missing statements and other information that you need to make sure your return is accurate and complete.
But if you get into the habit of keeping your paperwork up to date, you’ll make life a lot easier come self-assessment time!
“It’s especially important for sole traders to be organised and get advice. It’s easy to miss the deadline and incur penalties that you might otherwise avoid. If you’re self-employed, your personal finances will be closely linked to your business, so you’ve got more work to do.”
The app advantage
Simply knowing your correct tax codes and other official information saves you time and last-minute searching for information at tax year-end. The HMRC app is a useful resource in helping you keep track of your records and stay on top of things such as your tax code.
How a financial adviser can help
If you’re not already taking financial advice, this is perhaps the best habit to get into. Financial advice helps you stay on track for your long-term goals; it gives you clear, practical advice if you hit a bump in the road or need advice managing your family finances short-term.
“A regular check-in with your adviser will give you the impetus and momentum to keep on top of everything. They help guide and support your decisions, remind you of your options and ask the questions you need to think about.”
There’s no time like the present
As we’ve seen, getting ahead of tax year-end and using the available tax allowances can reap rewards over the longer term, helping to create long-term financial security for you and your family.
Are you ready to make 2024 the year of the good money habit?