The new tax year starts on 6 April 2021. Although this will affect businesses more than individuals, there are still a few things that you can do at the start of the new tax year to make sure you’re maximizing your income.
Take a few minutes to get your savings and tax payments straight and you’ll set yourself up well for the year ahead.
Choose your ISA
Every year, you’re allowed to pay up to £20,000 into an individual savings account, or ‘ISA’. Unlike other types of savings, the interest that you earn in an ISA is completely tax free. Some ISAs also offer additional bonuses – notably the lifetime ISA, which pays out a 25% government bonus for people buying their first home.
This April, it’s a good idea to consider your existing savings, and look into opening an ISA that works for you. There are a few different options:
- Lifetime ISAs – for people planning to buy their first home, or saving for retirement. You can put in up to £4,000 each year (this comes out of your overall ISA savings limit), and will receive a bonus payment from the government each year. Some lifetime ISAs also pay additional interest on top. However, there are fees if you decide to withdraw the money early.
- Cash ISAs – simple savings accounts that pay traditional interest. At the moment, interest rates on these types of account are low. For people with small amounts of savings, it may be more beneficial to open up a higher interest account instead. ‘Regular savings accounts’ offered by banks such as HSBC easily beat the interest offered by cash ISAs on the market at the moment.
- Stocks and shares ISAs – for people looking to invest their money. There are many good stocks and shares ISAs on the market at the moment, which may well outperform other investment accounts. These accounts are a good way to minimise the amount of tax that you need to pay on your returns.
Check your tax code
It only takes a couple of minutes to check your tax code, but surprisingly few of us have ever looked at it. Many people in the UK have the wrong tax code assigned to them, which could mean that you’re overpaying every single month.
Your tax code is listed on your payslip, and for most people earning under £100,000 it should read ‘1250L’. If you see something else on your slip then double check that you haven’t been placed on an emergency tax code. Do this at the start of the tax year to make sure that you’re paying the right amount in the months ahead.
Apply for benefits and tax allowance
There are tax breaks available for married couples, but you need to apply for marriage allowance in order to claim them. This is a simple process, and you only need to do it once – the allowance will then be applied every year going forwards. While we’re talking about claiming what you’re entitled to, now is also a great time to check whether you could be eligible for any benefits. Although it’s not technically affected by the tax year coming to an end, it’s a great thing to check while you’re going through your finances.