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Resolve to be on top of your taxes this year

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14/03/2019
The end of the tax year is looming. If your taxes got on top of you in 2018/19, Brian Byrnes, investment adviser at Wealthsimple gives some practical tips on how to be more efficient in the year ahead.

File early

It has been estimated that 700,000 people are likely to have missed the deadline to file their tax return this year altogether, whilst 12% of the self-employed population left it right up until the last 48hours to meet the January 31 deadline. In theory, you could save yourself the stress and file your taxes for 2018/19 as soon as the tax year ends on 5 April 2019. It may also help iron out any problems that may delay your submission.

Take advantage of tax-free accounts 

An ISA is a great way to build wealth for the future, tax-free because all the money you earn will be 100% yours to keep. You can also open a Junior ISA for your child with a £4,260 annual contribution until they turn 18. You don’t have to invest the maximum: £100 stashed away in a ISA or JISA can still make a huge difference over time. The most important thing is getting started.

Research from asset management firm Architas found that investing your full ISA allowances on the first day of the tax year would have returned £165,161 over the past 10 years, against a return of £158,534 if you’d left it to the last day, excluding charges. Acting early would have left you £6,627 better off.

Stick to the 30% rule

If you are freelance or self-employed, it’s always worth remembering that taxes aren’t taken out of your pay cheques, so don’t get carried away with your spending. A good rule of thumb is to stash away 30% of each payment in anticipation of the taxes you’ll have to pay when filing your tax return.

Make a tax rebate go further 

If you’re lucky enough to get a tax rebate from the 2017/2018 tax season, don’t just splash your cash. This is a good opportunity to make your money go further. Consider spending 15-20% on a treat for yourself and then put the remaining in savings or long term investments where your money has a chance to grow over time.

Don’t forget to claim reliefs and exemptions

You’ll get tax relief! The start of a new tax year is a great chance to take a look at where you can save a few pennies through tax breaks. Even the smallest change now, could reduce your tax bill for years to come. Contributing to a pension is one of the best ways to do this. For most of us, the UK government will add 25% of whatever we contribute. So a £10,000 contribution will result in £12,500 in your account. There is also pensions and tax relief for people who don’t work. You can contribute £2,880 and the government will top you up by £720, which is great for spouses who aren’t working or children.

 

 

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