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  • Seven ways to slay your finances

    And why the end of the tax year is the time to do it.

    We’re officially entering the last-minute-panic time of year, where the end of the tax year is looming, and investors and savers kick into a frenzy of activity. This year, a host of rule changes kick-in on 6 April, which mean it’s going to be even more vital for investors and savers to crack on.

    If you’re not an investor, you might be wondering why you should care about this annual rigmarole.

    Afterall, March and early April should be the time when we all start planning our summer holidays, right? Fair enough, but while you’re researching airbnbs and collecting Avios points, it might be worth learning about your tax allowances too. Afterall, it could be the key to a lifetime of lush holidays, if that’s your thing.

    This article isn’t personal advice. If you’re not sure what’s right for you, ask for financial advice. Pension, ISA and tax rules can change, and their benefits depend on your circumstances. Unlike the security offered by cash, all investments can fall as well as rise, so you could get back less than you invest.

    Your allowances – use them or lose them

    Each tax year, which runs from 6 April and finishes on 5 April the following year, we all have a number of allowances – including an ISA allowance and a pension annual allowance – which work on the basis of ‘use it or lose it’. In other words, use your allowance or lose it for that given tax year.

    They’re generous enough for millions of us not to be phased if we skip a year or so. If you miss out on your £20,000 ISA allowance or only use a fraction of your pension annual allowance of up to £40,000, you’d be forgiven for thinking you can make up for it another time.

    But there are seven good reasons to join the fray at this time of year. Even if your savings and investments aren’t much to write home about, this is a way to truly slay investing and take those all-important steps towards financial resilience and independence.

    1. Cash is queen

    You could get a great rate on a Cash ISA. The industry gears up for this time of year, and banks tend to compete harder for your money. We’ve seen some decent rates hitting the market, so it could be far more rewarding to snap up a deal now. Remember inflation can reduce the value of money over time.

    2. Time is money

    If you don’t start now, when will you? If you really mean to start building a house deposit or dip your toe into investing at some point in the future, it’s easy to think you’ll get round to it later. This deadline can be your opportunity to stop putting things off.

    3. Your pension needs you

    You might not get the chance to make up for it later. Women’s circumstances can change fairly significantly during their lives and our incomes tend to fluctuate more than men’s do. That’s a hard fact. When it comes to pensions in particular, you might not have the money to make up for lost time later.

    A pension is meant for your retirement, so you can’t normally access your money until you’re 55 (57 from 2028).

    4. A bird in the hand

    The government could scupper your catch-up plans. Right now, your allowances feel pretty substantial. But there are no guarantees the government won’t tinker with them over the years to beef up their tax take. If they fall, you could kick yourself for missing out.

    5. Is always worth two in the bush

    Some allowances are lower, including the Lifetime ISA at £4,000 a year. So if you want to make the most of the 25% government bonus on building a property deposit, you might need to take as much advantage as possible each year.

    Long story short – top up your Lifetime ISA, while you’re still on the right side of 40, and you can take advantage of the government bonus.

    These rules can change. With a Lifetime ISA, you can withdraw the money to buy your first home, or for later life at age 60. If you withdraw for any other reason, there will usually be a 25% government charge, so you could get back less than you put in.

    6. Self-employed take note

    Getting into the rhythm of the annual tax year cycle can be an admin life-saver, especially if you’re self-employed. If you have to do a tax return, any savings interest or dividends need to be completed on the form, even if it’s a few pounds here and there. Shares and savings in an ISA don’t need to be reported on your tax return at all.

    7. It’s an important ‘heads up’

    It’s always good to know where you stand. And your finances are no exception. You can use a pensions calculator to see if you’re on track for the retirement income you want. You can see how your savings rates measure up with consistently competitive rates too. And if you’ve started to invest, you can revisit whether your investments are still right for you.

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