March 29, 2024: With just one week to go until the end of the 2023/2024 tax year, and a long weekend stretching out before us, Brian Byrnes, Head of Personal Finance at savings and investing app, Moneybox, says now is the ideal time for an MOT on your finances.

“The end of the tax year period should be in every savvy saver’s calendar with time set aside to check that their money is working as hard as it can for them.

“We can all be guilty of leaving things until the last minute, but Moneybox research has revealed that those who spend more time managing personal finances and planning for the future have boosted their net worth by c.£15,000! 

“So don’t underestimate how much could be gained from following these 5 simple steps before the end of the tax year on April 5th.”

1. Check how much interest you have earned on your savings to ensure you’ve not exceeded your personal savings allowance.

Your personal savings allowance is the amount of interest you can earn on your savings each financial year without paying tax. 

If you earn less than £50,270 you will fall within the basic tax band of 20%, and so your personal savings allowance will be £1,000. 

If you earn more than £50,270 and less than £125,140 you will fall within the higher band of 40% and your personal savings allowance each tax year falls to £500. 

Anyone earning over £125,140 moves to the additional 45% tax band and does not have any tax-free personal savings allowance.

The quickest and easiest way to find out how much interest you have earned on each of your savings accounts is to ask your savings provider to let you know.

For context, you would need to have c.£25,000 in savings accounts paying on average 4 per cent interest or more to cross the £1,000 threshold. 

Spending a little time now to understand how much interest you have earned, could help you avoid an unexpected tax bill later.

2. Are you using the best accounts to help you achieve your goals and protect your savings from the tax man?

While interest rates on easy-access and fixed-term savings accounts can be slightly higher than those offered on Cash ISAs, to protect as much of your savings from the tax man as possible, you will also need to ensure you are making the most out of your ISAs tax-free savings allowance.

An Individual Savings Account (ISA) is a tax-wrapped savings or investing account where you can contribute up to £20,000 each year – this is in addition to your personal savings allowance. Should your ISA then grow via interest or growth of shares, you won’t be taxed on these gains.

You can split this allowance across different ISA products depending on your financial goals, including a Lifetime ISA if you’re saving for your first home, a Cash ISA if you’re saving for mid-term financial goals or a Stocks & Shares ISA to grow your money over the longer term.

Your tax-free ISA allowance doesn’t roll over into the next tax year, so if you don’t use it before April 5th, you will lose it.

3. Have you made the most of the free money available via pension tax relief?

Pensions often get left on the bottom of the to-do list when it comes to our finances – but boosting your pension pot can be one of the most tax-efficient ways to save.

If you’re a basic rate UK taxpayer, you get 20 per cent tax relief, which you can essentially think of as a top-up on your own contributions. 

This is because the government offers tax relief on all your pension contributions each tax year.

This means that if you are a basic rate tax-payer and you are paid £6,000, you can either pay your 20% tax and get £4,800 into your bank account, or you can put the whole £6,000 into your pension without having to pay income tax on the contribution. 

Similarly, if you contribute £4,800 from your bank account to a private pension, the government boosts your pension savings with an additional £1,200 in the form of tax relief, bringing your total contribution to £6,000. 

This tax relief is worth even more if you are a higher rate or additional rate taxpayer, and even more again if you are in the £100,000 – £125,140 tax range. At this income level your personal allowance starts to get withdrawn, meaning an effective 60% rate of income tax. Efficient pension contributions can help you avoid the painful tax bracket. 

Now is the time to consider if you might want to boost your pension contributions and make the most of the free money that’s up for grabs from the government as part of your pension tax relief allowance.

4. Are you prepared for the government’s side hustle crackdown?

More people than ever have turned to side hustles to supplement their income due to the cost of living crisis. However, I’ll bet many are unaware that earlier this year HMRC declared its intention to crack down on undeclared earnings from selling goods or services online.

If you are supporting your income through a side hustle like selling unwanted items, starting an online business, or renting out your driveway, the first £1,000 you earn is tax-free. This is known as your trading allowance. 

If your side-hustle gross income goes above the £1,000 threshold, it can be subject to income tax, depending upon how much taxable income you earn from all other sources

If you’re earning income by renting a room via a platform like Airbnb, thanks to the property allowance, you won’t have to report it to HMRC, if it’s less than £7,500. 

Keeping a log of any side hustle income is more important than ever and if you do need to report taxable side-hustle trading income to HMRC, you can register as a “sole trader” on the gov.co.uk website. 

5. Review your 2024 financial goals and adjust as necessary for the year ahead.

As a former financial adviser, I have seen firsthand the difference that committing to regularly reviewing your goals can have in achieving the best financial outcomes. 

And so, my final tip is to take some time this end-of-tax year period to check on the progress you’ve made since the beginning of the year.  

Update your budget to see if your spending patterns have changed. Has your disposable income increased or decreased? Do you need to adjust your savings and investments as a result? Are your financial products still competitive or are there better rates available that you should consider? 

We all have things we want to achieve with our finances and while it’s easy to set goals, making a plan to achieve them and working towards it consistently can often be the challenge. Remember that there will always be unforeseen events that can set us off course, but having that end goal in mind is the best way to ensure you’re always moving in the right direction.

ENDS

About Moneybox:

Moneybox is the award-winning app on a mission to help people build wealth with confidence so they can enjoy life, today and tomorrow. Launched in 2016 by co-founders Ben Stanway and Charlie Mortimer, the company has experienced rapid growth, and today has over £6bn in assets and a community of more than 1.3 million customers. Moneybox provides a range of great value products and services, across saving, investing, home-buying, and retirement as well as helpful tools and educational content, to help people manage and achieve their short, mid, and longer-term financial goals. Moneybox enables customers to set money aside in the way that suits them best using round-ups, regular deposits, or instant payments. In March 2022 Moneybox raised £35m in a Series D funding round, led by Fidelity International Strategic Ventures, existing investors Oxford Capital, CNP, Burda and Breega, plus new investor Polar Capital. This brings total funds raised by the digital wealth manager to £100+ million.