As we approach the new tax year, wealth planner George Thomas has provided a to-do list of 10 things every taxpayer should consider.
April 6 marks the start of a new tax year and one that will be defined by higher taxes, high inflation and a continuing squeeze on household budgets.
It will herald an additional 1.25 per cent of national insurance payments and rising energy prices bolstered by geopolitical uncertainty caused by Russia's invasion of Ukraine.
To combat this the chancellor earlier this month announced he would raise the national insurance threshold at which the tax becomes payable by £3,000 to £12,570, same as income tax. He will also lower the basic rate of income tax to 19 per cent, but not until 2024. The NI change takes effect in July.
So what should savers do as we head into the new tax year?
1. Check your PAYE tax code
The tax code is the identifier that tells an employer how much tax should be deducted from people's salaries when they get paid.
Thomas says: “It’s important to check your tax code. If you have multiple employers or pension providers, you may get more than one tax code.
"If you’re on the wrong one, you could be paying HM Revenue & Customs more than you ought to be. On the other hand, you risk getting penalised if you’re paying too little."
2. Transfer part of your personal allowance
Married couples and registered civil partners are permitted to share 10 per cent of their personal allowance between them.
The unused allowance of one partner can be used by the other, meaning an overall combined tax saving.
The amount people can transfer in the current tax year is £1,260 but transfers are only available to those on the basic rate of income tax.
3. Tax-free savings and dividend allowances
For 2021-22, savings income of up to £1,000 is exempt for basic rate taxpayers, with a £500 exemption for higher rate taxpayers. The tax-free dividend allowance is £2,000 for all taxpayers.
"Married couples and registered civil partners could save tax by ensuring that each person has enough of the right type of income to make use of these tax-free allowances," says Thomas.
4. Contribute to your Isa and Junior Isa
Savers should start putting money in their Isa and Junior Isa early and benefit from tax-free capital gains and income, says Thomas.
“You can put the entire amount into a cash Isa, a Stocks & Shares Isa, or a combination of both.
“The fund builds up free of tax on investment income and capital gains until your child reaches age 18, when the funds can either be withdrawn or rolled over into an adult Isa. Relatives and friends can also contribute to your child’s Jisa, as long as the limit is not breached."
For adult Isas the contribution limit next year remains at £20,000, whereas for Jisas it is £9,000.