The 2017-18 tax year ends on 6 April, so now is the time to use up your tax-free allowances – and start planning for changes in the upcoming 2018-19 tax year.
Which? has come up with a to-do list to give your finances a boost before the new tax year begins.
1. Use up your Isa allowance
For the 2017-18 tax year, you can save £20,000 into an Isa without having to pay tax on the interest you earn.
The allowance will remain the same for the 2018-19 tax year.
But you won’t be able to carry over any of your unused allowance from this year to the next.
If you want to take advantage of your full allowance, you can pay into a mix of Isa types – including a cash Isa, stocks & shares Isa, lifetime Isa, Help to Buy Isa or an innovative finance Isa.
For some types, there are limits to how much you can deposit in any given year – including £4,000 into a lifetime Isa each year, and £2,400 in a Help to Buy Isa.
Don’t forget, you can also pay into Junior Isas you may hold for your children without eating into your £20,000 allowance. You can save up to £4,128 tax-free in 2017-18, and this is set to increase to £4,260 in 2018-19.
- Find out more: How does the Isa allowance actually work? – we break down how you can best use your £20,000 and what the rules are when it comes to transfers and withdrawals.
2. Transfer your Help to Buy Isa to a lifetime Isa
There’s a loophole in the 2017-18 tax year that could allow you to earn an additional bonus for transferring into a lifetime Isa.
If you move funds from a Help to Buy Isa to a lifetime Isa before 5 April 2018, you can do so without the money counting towards the £4,000 annual lifetime Isa limit.
This is ideal if you want to consolidate your savings towards your first house, or if you’ve decided to save the money in your Help to Buy Isa for retirement after the age of 60.
But bear in mind that if you hold your lifetime Isa with Skipton or Nutmeg, this won’t be an option. Skipton’s deadline for Help to Buy transfers was 1 March, and Nutmeg currently does not accept any transfers into its lifetime Isa.
- Find out more: lifetime Isas – read our guide to find out how they work and what the rules are.
3. Max out your savings allowance
Separate to your Isa allowance, basic-rate taxpayers also have a £1,000 savings allowance for the 2017-18 tax year.
This means you can earn £1,000 in interest on your savings stored in banks and building societies, or in accounts with providers such as credit unions or National Savings & Investments (NS&I), without having to pay tax on it.
If you pay a higher rate of tax, your savings allowance is £500.
Depending on whether you’re paid interest monthly or annually, it might be worth making a larger deposit now to take advantage of any unused allowance.
These thresholds will remain the same for the 2018-19 tax year.
- Find out more: How to find the best savings account – we explain how to find the best account for you.
4. Take advantage of your capital gains tax allowance
Everyone is allowed up to £11,300 of tax-free capital gains, which is the profit you earn from selling possessions that have increased in value during the time you’ve owned them.
This could include selling a second home, antiques or shares. So, if you have something you’ve been meaning to sell, now might be the time to do it, as you can’t carry over any unused allowance into the next tax year.
Alternatively, if you’re already close to hitting the capital gains tax-free threshold, it may be worth waiting until after 6 April to sell anything else. For 2018-19, the capital gains tax allowance will rise to £11,700.
Profits from selling certain items will not incur capital gains tax, such as your own home or car.
- Find out more: capital gains tax allowances and rates – find out how your income affects the tax you have to pay on capital gains.
5. If you’re self-employed, make business purchases
If you’re self-employed and have been planning a work-related purchase, now is a good time to do it, including stationery orders, logo designs or office equipment.
Spending more on business expenses before the end of the tax year will mean your profit will be smaller, and you’ll pay less tax as a result.
However, HMRC will scan for any unusual activity when you submit your tax return, like unnecessary or overly expensive purchases, so stick to things that you genuinely need.
- Find out more: Self-employed: tax allowable expenses – check which expenses can be deducted from your self-assessment tax bill.
6. Sign up to employee salary-sacrifice benefits
Salary-sacrifice schemes vary depending on what they fund, and what your employer is willing to offer – but many have deadlines at the beginning of April.
From April 2017, you’ll need to pay income tax and National Insurance on the salary you forego for most salary sacrifice schemes, but there are a few exceptions.
Schemes where you can don’t pay tax on the sacrificed salary include:
- childcare (including childcare vouchers and employer-provided childcare)
- ultra-low emission vehicles including company cars (ULEV*)
- retraining courses and outplacement services
- intangibles, eg buying annual leave.
If you sign up to one of these schemes, you’ll effectively be taking a pay cut, but you’ll also pay less tax and National Insurance. But think carefully about the implications, as a lower salary could affect entitlements such as maternity pay, or applications for credit, including mortgages.
Check with your employer to see whether they offer any salary-sacrifice options and when the deadline is, then weigh up whether these might work for you.
- Find out more: Salary sacrifice – we explain how it works, what are the benefits, and what kinds of things you can swap your salary for.
7. Claim childcare vouchers before the scheme ends
The childcare voucher scheme is ending on 6 April 2018, to be replaced by tax-free childcare. But if you sign up for vouchers before the deadline, you can continue to benefit as long as your employer participates.
Both schemes have pros and cons, depending on your financial situation and number of children you have.
The old scheme means you could swap a chunk of your pre-tax salary for vouchers to give to a childcare provider of your choice, up to £243 a month per parent for basic-rate taxpayers.
It’s for all children under the age of 16, and can mean a saving of £930 a year per parent (and both parents can claim).
The new Tax-Free Childcare scheme is only for children under 12, and foster children are excluded. Both parents must be earning, but only one can open an account. Each parent must earn a minimum of £120 a week, but if either parent earns more than £100,000 you won’t be eligible, unless you’re self-employed.
You can gain a maximum of £2,000 per child each year, and receive 20% off childcare costs. You can’t claim tax-free childcare at the same time as Universal Credit, Working Tax Credit, Child Tax Credit or childcare vouchers.
- For more information, read our guide to childcare vouchers and the new Tax-Free Childcare scheme.
8. Fill gaps in your National Insurance record
Occasionally, your National Insurance (NI) record for the past year might have gaps – including if your income was below the threshold, you spent time living abroad, you were unemployed but not claiming benefits or you’re a married woman or widow who stopped paying reduced rates.
Gaps in your NI record can affect the amount of state pension you’re entitled to, as well as other benefits such as maternity allowance.
This might not worry you, depending on how long you’ve worked for. But if you do want to back-fill your record, you can choose to pay voluntary National Insurance contributions.
These can be paid retrospectively for up to six years, so 5 April marks the deadline for contributions towards the tax year 2011-12.
- Find out more: National Insurance contributions
9. Organise your files and receipts for your 2017-18 tax return
If you need to file a tax return, he end of the tax year is a great time to gather together all of your records and receipts for the 2017-18, so you can store them separately from records for 2018-19.
While getting yourself organised won’t necessarily save you any money, it could save you a lot of time – and will mean you’re not at risk of getting charged a penalty for submitting your tax return late.
It also means you won’t lose any vital paperwork or receipts that would allow you to claim deductions.
- If you want to file your tax return early, the Which? tax calculator allows you to submit online and submit directly to HMRC.