by Martyn Paterson
Chartered Financial Planner
With the new year in the past, thoughts start to turn towards the onset of Spring with its longer days, blooming daffodils, new born lambs and the good old spring clean - well maybe not that! The tradition of refreshing rooms after a long cold winter may be on the wane but that doesn’t mean that your finances should be neglected in the same way.
The springtime and its coinciding with the new tax year therefore provides the perfect opportunity to take stock of your financial affairs and review them.
How often in reality do we check the regular payments from our bank accounts, are there savings to be had by cancelling direct debits no longer required or by shopping around for certain utility providers? When was the last time you reviewed your mortgage for a better deal? This type of exercise also gives the opportunity to plan and budget for your short, medium and long term spending – are you putting aside and directing your surplus income in the most efficient way?
The use of tax allowances and exemptions can be crucial in meeting you and your family’s future aims and objectives, whether this is through such things as ISA and Pension allowances or Capital Gains Tax and IHT exemptions.
- ISA allowance of £20,000 per annum
- Pension allowance of up to £40,000 per annum and you can potentially carry forward unused allowances from 3 previous years – higher earners should also be aware of the Annual Allowance tapering which may reduce your £40,000 allowance to as little at £10,000!
- Capital Gains exemption of £11,700
- Annual gift exemption £3,000
- Small gifts exemption £250
- Pension allowance of £3,600 for non-earning spouse or minors
These are some of the allowances and exemptions that can be utilised and regularly using them will help create a tax efficient portfolio both for your own financial needs and possibly those of future generations.
Many of the allowances and exemptions available have to be used during the tax year with no option to carry them onto a future tax year – use them or lose them!! Every year there is a mad scramble to utilise allowances before 5th April, many clients get caught up in this and unfortunately some miss out, while others simply make a rushed decision due to the fear of missing out, neither option being conducive to good financial planning.
Therefore, springtime is a perfect time to get into the good habit of spring cleaning your finances, check you have utilised your available allowances and exemptions and if not, take action before the new tax year… and if you do run out of time, put things in place so that you miss out in future tax years.