For many people, tax year planning ranks as one of those tiresome yet necessary tasks that must be completed no matter what. Without it, investments can wither, profits become stifled and tax contributions far exceed what they would do than if you’d planned efficiently. Luckily, it’s never too late for tax planning, and what better time to start than the beginning of the tax year.
There are a great many aspects to take into consideration, but by getting on top of your finances early rather than waiting until Q4 and beyond to execute your strategy, you’ve got a more realistic chance of achieving your goals and avoiding a huge tax bill – not to mention that it’s far less stressful. Checking your allowances and options in advance will also help you to maximise any potential benefits available to you, ensuring optimal return with minimal losses.
To achieve the best results and make your tax bill as efficient as possible for the tax year 2018/19, it might be worth considering the following: Are your current investments effective? Are you taking advantage of new financial products? Are you on top of your tax bill? Are you utilising all the tax relief options available to you? Are your financial records up to date? And are you making the most of savings vehicles?
In terms of your investment portfolio, now is a great time to review your current investments as well as consider future assets that might be worthy additions. Diversification, as much as the assets that you choose, is integral to the balance and success of your portfolio, so take care to establish the potential risk versus reward of each individual investment and how they all work in tandem in relation to the bigger picture goal. Any cash assets, bonds, shares, equity funds and property that you have will need to be reviewed, taking into account any current market trends or relevant reforms that may have an impact on your investments’ performance over the course of the tax year.
With your cash savings, your private pension is always a good place to start. Like last year, the annual allowance will be £40k for 2018, so if you’ve got some extra cash that you’d like to put to good use or invest in a tax-efficient manner then it might be worth focusing on your private pension for this tax year. Of course, if your total savings pension (PIP) exceeds your annual allowance it is possible to reduce the excess by carrying forward any unused annual allowance from the previous three years, as long as you utilise your current PIP first. As it stands the carry forward amounts are £40k for 2014/15, £40k for 2015/16 and £40k for 2016/17 – permitting that taper provisions do not apply. The new tax year is also a good chance to review independent savings accounts (ISAs). As there isn’t the option of carrying over unused allowance, the £20k annual allowance must be used by April 5, 2018 or you lose it. For maximum return, it can pay to invest as much as you can as early as you can, though it is always best to discuss this with your IFA in case it conflicts with your other financial plans. It may well be that for 2018/19 other assets take a priority if the market looks to be performing better in that area.
In the meantime, be sure to make a start on your accounts preparation and stay on top of your bookkeeping, if you’re self-employed. With the whole tax year ahead of you, it's better to take advantage of the time you’ve got than to leave everything to the last minute.