Six ways to tidy up your finances in the new tax year
1) Take account of the new allowances
This tax year ushers in significant changes for personal taxation, notably changes to the Dividend Allowance, which will be cut from £5,000 to £2,000 in the new 2018/19 tax year. These new rules could alter how your finances are best structured, so it is worth taking account of them as soon as possible.
2) Use your ISA allowance early
While many people leave their ISA contributions until the end of the tax year, it is often better to use the allowance early. That way your chosen investments are sheltered from tax immediately and have longer to produce income and growth – though it is also possible it could work against you should they fall in value over the course of the tax year.
For the 2018/19 tax year the ISA allowance remains at £20,000, to be allocated as you wish between a Cash ISA, Lifetime Isa, Innovative Finance Isa or a Stocks and Shares ISA.
3) Plan pension contributions
The auto-enrolment contribution rates for both employees and employers are due to rise in the new April tax year. Currently, the minimum pension contribution rate is 1% from the employee and 1% from the employer, giving a 2% total contribution. But from 6 April, the contributions will rise to 5%, made up of 3% from the employee and 2% from the employer. Maintaining contributions at this level will give a real boost to your long-term retirement prospects.
4) Ensure your portfolio is still appropriate for your needs
Your circumstances and aims will change over time, and it is well worth making sure your portfolio reflects this. Approaching retirement is a good example. This could be a time when to consider reducing risk in your portfolio, particularly if those assets are going to be relied upon to generate an income. This generally means gradually upping the weightings of less risky areas such as cash and bonds and reducing equity exposure.
5) Consolidate your accounts
With some providers you can transfer in ISA and personal pension accounts held elsewhere so that more of your investments are held in one place. It could also be the case that the more assets you hold with a provider, the cheaper it can become.
6) Regular savings
Make a commitment to drip-feed contributions into the stock market. In this way, you can ride out the ups and downs of market volatility because you will be buying at different levels.