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Making the most of your moneyTuesday 7th August 2018
Governments don’t give concessions easily so it makes sense to take advantage of any tax allowances put your way. Efficient use of allowances can help you reduce your tax bill and boost your savings.
As we’re now into the second quarter of this tax year, we thought it would be timely to remind you about making use of your available allowances, while there’s still plenty of time to make a difference.
Use your ISA allowance
Yes, it’s like a stuck record but it is a message that bears repeating. With an adult ISA allowance of £20,000 this year, it’s worth taking advantage. Remember: time and compound interest are your friends here.
Use your pension allowance
The pension allowance has been much reduced and now sits at £40,000 per year. However, using it can reduce your gross salary, meaning it could come down sufficiently to put you in a lower income tax bracket. With the tax relief on your savings and the potential to reduce your income tax this could be a win-win. Remember though, if you earn more than £150,000, the tapered allowance kicks in and this could reduce your allowance to just £10,000 (depending on your salary) – but it’s still worth taking advantage of.
Claim higher tax relief on your pension contributions
Your pension contributions attract tax relief of 20% and this is generally added at source. However, if you’re a higher rate tax payer, you are entitled to claim extra tax relief depending on your situation. The important point though is to make the application, if you’re not already doing so – don’t miss out on a valuable allowance!
File your tax return
Whether you do it yourself, or hand the task to your accountant, it makes life easier if you complete it sooner rather than later. Not only does HMRC get overwhelmed closer to the deadline, so do accountants. Everyone does a better job when the pressure is off, and knowing what you have to pay sooner can also help you plan the rest of this tax year more effectively.
For more information on tax efficient financial planning, contact your Financial Planner.