6 top tax tips for the new tax year

The starting pistol has been fired on the new tax year, and this is your chance to get off to a flying start and stay one step ahead of a tax bill.

There are all sorts of opportunities you can snap up in the early days to cut your taxes in the current tax year – and beyond.

Here are six tax-saving tips you can do now to help cut your tax bill.

This article isn’t personal advice. If you're not sure if a course of action is right for you, ask for financial advice. All investments and any income from them can rise and fall in value, so you could get back less than you invest.

ISA, pension and tax rules can change, and benefits depend on your circumstances. Tax rates and bands are different for Scottish taxpayers. Remember, you can't usually access money in a pension until you're 55 (rising to 57 in 2028).

It’s a good idea to think about regular monthly payments into a Stocks and Shares ISA every year.

If you already have a direct debit set up, check to see whether there’s more wiggle room in your budget and whether you can afford to increase those payments.

If you don’t have one, it’s a great way to drip feed money into the stock market and let your investments grow over the long term through the power of compounding.

You’ll also get the benefit from pound-cost averaging which will help reduce the impact of market ups and downs, and average the cost price you pay for an investment over time.

The earlier you do this in the tax year, the more of your annual allowance you might be able to take advantage of, so don’t hang about.

If you have assets outside an ISA or pension, then the earlier in the tax year you can move £20,000 of them inside, the better.

You can use the share exchange process (Bed & ISA or Bed & SIPP) to make it straightforward and swift.

Share exchange involves selling an investment, realising a gain, and then immediately buying it back within an HL Stocks and Shares ISA. Although you might need to pay CGT when you sell shares as part of a share exchange, any future growth within the ISA won’t be subject to capital gains or dividend tax.

You can do the same with your pension. It works the same way but involves reinvesting the proceeds into a pension, like an HL Self-Invested Personal Pension (SIPP). This allows you to get potential income tax relief and avoid capital gains tax on future gains. Please note that you may end up with a lower number of shares than you started with. This is because of a combination of the dealing charge, plus any other costs associated with buying that share..

But don’t forget about your £3,000 CGT allowance when you’re selling investments to move into an ISA or pension.

If you’re planning to give to your spouse, so they can take advantage, then the same applies. So, you should get cracking with any plans to Bed & Spouse & ISA or SIPP.

Make sure to check for any account charges, as charges are different in each account.

It’s always going to be difficult to predict whether you’re going to get a pay rise, and if so, how big it will be.

However, it’s worth making an estimate and checking whether this will take you over a tax threshold into paying a higher rate of tax.

If this is the case, you can consider whether it’s worth increasing pension payments, like into the HL Self-Invested Personal Pension, now to keep your income below the threshold.

You can also consider an HL Cash ISA and/or an HL Stocks and Shares ISA to stop your savings and investment income pushing you over a threshold. And that way if you end up paying taxes at higher rates, at least these investments are sheltered.

If there’s a time when you expect to be paying a lower rate of tax, consider whether you can take income then rather than now.

For example, through Active Savings, you can use fixed-term savings that pay interest annually, instead of easy access paying more frequently. This often makes sense just before retirement. Remember that once money is in fixed rate, you won’t be able to access it until the product matures, unlike with easy access products.

If this money is currently sitting in accounts paying interest in the current tax year, then from a tax perspective, the sooner you move them, the better.

If you’re taking income drawdown in irregular chunks, it’s a sensible idea to consider your needs throughout the year. This means you can take a sensible level of income, and possibly plan to avoid breaching a painful income tax threshold.

If you know you’ll need to withdraw a lump sum for a one-off purchase during the year, which would push you over a tax threshold, this is also an opportunity to consider the alternatives.

For example, you might have ISAs you can draw on instead, so some of your income in retirement for that year can be tax-free.

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Retiring in 2025? – how to take a tax-efficient income in retirement

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Pensions and Retirement Lead

If you’re concerned about inheritance tax (IHT), then you have your inheritance tax gifting allowances to use any time during the year.

However, other rules are worth taking advantage of as early as possible.

If you want to give larger gifts, that you expect to drop out of your estate after seven years, starting now will mean you can get the clock ticking.

If you’re giving gifts to children under 18, you’ll also have their full annual Junior ISA allowance to take advantage of at the start of the new tax year – so you can make the gift today, but it will be tied up until they’re 18.

If you want to make regular gifts from income, which must come specifically from your extra income, then the earlier you start, the more you can give away in total.

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The Active Savings service is provided by Hargreaves Lansdown Savings Limited (company number 8355960). Hargreaves Lansdown Savings Limited is authorised and regulated by the Financial Conduct Authority (firm reference number 915119). Hargreaves Lansdown Savings Limited is authorised by the Financial Conduct Authority under the Electronic Money Regulations 2011 with firm reference 901007 for the issuing of electronic money. Hargreaves Lansdown Asset Management Limited and Hargreaves Lansdown Savings Limited are subsidiaries of Hargreaves Lansdown plc (company number 2122142).