The end of the tax year is fast approaching! Here are our five end of tax year tips to make the most of your tax-free allowances. 

 

Maximise your ISA📲

ISA stands for ‘individual savings account’ and it’s a savings or investment account that lets you grow your hard-earned money, tax free. Each tax year you get an allowance of up to £20,000 (this includes the £4,000 Lifetime ISA allowance) and you won’t be taxed on any of your interest or gains. 

You can split this allowance across different ISA products, including a Stocks & Shares ISA and a Lifetime ISA, but if you don’t use it, you lose it, because your allowance doesn’t roll over into the next tax year.

If you don’t already have an ISA, or haven’t opened one this tax year, consider opening one before the end of the tax year deadline. 

You can open a Moneybox Stocks & Shares ISA for the 2021-22 tax year up until:

  • 4pm on 29th March to make our final weekly collection at 12pm on 30th March, or
  • 8am on 5th April to make our final instant bank transfer deposit cut off at 12pm on the same day. You can add a minimum of £100 at a time via instant bank transfer.

Opening an ISA with Moneybox is quick and easy and can be done in a few minutes.

 

Open a Stocks & Shares ISA

 

Please note instant bank transfers are not supported by all banks. Please make sure to check whether your bank supports this feature prior to the deadline. If your bank does not support instant bank transfers, your final opportunity to contribute by the 2021-2022 tax year deadline will be via the weekly collection deadline above

All investing should be regarded as longer term (at least 5 years). The value of your investments can go up and down, and you may get back less than you invest.

 

Boost your LISA bonus 💸

It may sound too good to be true, but one ISA actually gives you free money! If you’re saving for your first home, you can get up to £1,000 every tax year from the government by paying into a Lifetime ISA (also known as a LISA). 

Introduced to help first time buyers get on the property ladder sooner, a Lifetime ISA has been labelled as a ‘no-brainer’. It’s available to people aged 18-39 who have never owned a home and offers a government bonus of 25% on top of your tax-free savings. You can deposit up to £4,000 per tax year into your Lifetime ISA, giving you a potential bonus of £1,000 each year you save! 

If you think the Lifetime ISA is right for you, check out our market-leading Cash Lifetime ISA or our Stocks & Shares Lifetime ISA. You can also learn more in our blog post – What is a Lifetime ISA?

You can open a Moneybox Lifetime ISA for the 2021-22 tax year up until:

  • 4pm on 29th March to make our final weekly collection at 12pm 30th March, or
  • 8am on 5th April to make our final instant bank transfer deposit cutoff at 12pm on the same day. 

Hold an ISA, Help to Buy ISA or Lifetime ISA elsewhere? You can transfer these into a Moneybox LISA! Simply open a LISA account in-app, request a transfer form (Settings > Transfers), fill in your details, then email it back to us! If you’re transferring an existing ISA into a Moneybox LISA, we’ll need to receive your form by 1st March.

 

Open a Lifetime ISA

 

A 25% government penalty applies if you withdraw money from a Lifetime ISA for any reason other than buying your first home (up to £450,000) or for retirement. Your account also needs to be open for 12 months before you can withdraw penalty-free for a house purchase. It counts as ‘open’ once you’ve made your first contribution.

 

Pay into your pension for annual tax relief 💰

With a government tax relief on your pension contributions available each tax year, not paying into your pension is like missing out on free money. If you’re a basic rate UK taxpayer you’ll be eligible for 25% tax relief on your contributions.

To benefit from pensions tax relief you may contribute up to 100% of your earnings or  £40,000 (the annual allowance) whichever is lower, each tax year, but, you can carry forward any unused tax allowance from three previous  tax years  (as long as you were a member of a pension scheme during that period), so if you hit the £40,000 cap this tax year but only managed to save £30,000 last year, you’d be able to roll over the additional £10,000. 

Please note the annual allowance includes the total  pension contributions paid into all your pension schemes by yourself, or on your behalf (e.g. any employer pension contributions) and any pensions tax relief received. 

 

If you are a higher or a top rate taxpayer, Moneybox will still only claim basic rate tax relief. You will have to claim any additional tax relief that you may be entitled via your self assessment tax return.

 

The Moneybox Pension allows you to consolidate all of your old workplace pensions, track your progress, and make contributions directly into one simple personal pension account. 

We can even help you track down your old pension pots, even if you don’t know the name of your old provider or policy number, through our Provider Search tool in-app. Simply tell us the name of your old employer and the years you worked there and we’ll do the rest! 

You could receive an instant result to help you track down your lost pots, or our Pension Detectives will get to work locating these for you. We now have one of the UK’s largest employer databases with over 21,000 employers! Check out the benefits of the Moneybox Personal Pension.

As with all investing, the value of your pension can go up and down, and you may get back less than you invest. Tax treatment depends on individual circumstances and is subject to change.

Payments you make into your pension won’t be accessible until the minimum pension age (currently 55, increasing to 57 in 2028).  If you’re not sure whether the Moneybox Pension is right for you, a suitably qualified financial adviser can help you decide. Moneybox Personal Pension T&Cs apply.

 

Save or invest your spare change 💷

While maxing out the £20,000 ISA annual tax-free allowance might be out of reach for many of us, it’s important to remember that every little saving matters. Making the most of what you do have now so it counts towards this tax year’s allowance is key. 

That’s because your allowance doesn’t roll over from each tax year – so you need to use it, or you’ll lose it. With every Lifetime ISA deposit you’ll receive a 25% top up (up to the £4,000 annual allowance), so putting in just £50 now, will give you an extra £12.50 in your LISA. 

There are many simple ways to make a little go a long way, like rounding up your everyday purchases and saving or investing the difference, or through small, regular deposits. This allows you to set money aside without even thinking about it! 

You can then increase these deposits over time, or use opportunities like a pay rise or a bonus to boost your savings and investments throughout the year.

 

Start benefitting from compounding 📈

The end of the tax year may already have you thinking about saving and investing for the year ahead – but be sure to turn those thoughts to actions! As the proverb states – the best time to plant a tree was 20 years ago, the second best time is now. 

The earlier you start investing, the more time your money has to benefit from the power of compounding. Compounding is the return you get on the gains from your original investment, and to benefit from compounding, you need to leave your investment returns alone rather than withdrawing them as profit.  

As an example, let’s say you invested £5,000 and it grew by 7% each year. At the end of the first year, you’d have £5,350.

At the end of the second year, you’d have £5,725 – that’s an additional £375 return – because you made gains on your original £5,000 and on your return from year one. That’s a compound return.

So when you leave your returns to compound over time, your money can grow exponentially all by itself. As a longer term example – if you were to invest a £1,000 lump sum earning a 7% return aged 40, you’d have £3,870 when you’re 60. Start ten years earlier, at 30 and you’d have £7,612 – almost twice as much. Remember, these figures do not provide guarantees of future performance and do not include costs and charges.