60 Saturday April 9 2022 | the timesMoney
T
he beginning of a new tax
year presents plenty of
opportunities to shape up
your finances.
There are stacks of tax
breaks and reliefs available — and theyed personal pension (Sipp). If you are
self-employed and pay into a pension,
make sure you increase your contribu-
tion as your earnings rise. According to
PensionBee, a pension platform, only
18 per cent of self-employed people pay
into a pension. If you’re not one of them
now is the time to start.
If you’re paying into a personal pen-
sion you get basic rate tax relief of
20 per cent on your contributions, but if
you are a higher-rate taxpayer you can
get 40 per cent relief, or 45 per cent if
you are an additional-rate taxpayer —
but you have to fill in a self-assessment
tax return to get it. Total relief is limited
to £40,000 a year.0 Sort out old pensions
Use a brand new tax year as
an excuse to round up all
your pensions and make
sure you’ve got the full
picture. You might
even unearth money
you had forgotten
about. Losing track of
a pension is far
more common than
you might think: there
are about 1.6 million lost
pension pots worth
£19.4 billion, according to the
Association of British Insurers, an
industry body.
If you think you have some money
lurking in an old workplace pension
scheme, you can get in touch with your
former employer and ask for the details.Ditch cash and bed your shares
are there to be used. If you don’t, you
lose them (in most cases).
By using tax rules wisely, you can
help to offset the impact of the new tax
rises we’re seeing, such as higher
national insurance bills.
Here are some new (tax) year resolu-
tions you might want to make.0 Use your Isa allowance
You can stash up to £20,000 in an Isa,
where it’s exempt from income tax and
capital gains tax. This allowance is
renewed every April. By taking fullment returns. Shelter as much as you
can afford in your Isa.0 Ditch cash accounts
The consumer prices index measure of
inflation for the year to February was at
a 30-year high of 6.2 per cent — and it
could get worse. The Office for Budget
Responsibility predicts that inflation
will peak at an eye-watering 8.7 per cent
at the end of the year and average
7.4 per cent for 2022.
The highest-paying easy-access cash
Isa will give you only a 1 per cent return,
which means that you are losing money
in real terms. Instead, look to invest in
the stock market, where your money
has greater potential to earn inflation-
beating returns.0 Don’t delay investing
The sooner your cash is invested the
more time it has to grow.
A third of the 973 Isa millionaire
investors at the investment platform
Hargreaves Lansdown maxed out their
allowance in the first month of the tax
year in 2021-2022. Almost half used it
all within three months.
The key point is that the longer you
can leave your money, the more likely
you are to make a profit, so it makes
sense to do it at the start of a tax year.0 Use “bed and Isa”
This weird and wonderful phrase re-
fers to moving dividend-paying shares
into an Isa to avoid racking up big tax
bills. Each of us can receive up to £2,000
in dividends tax-free. After that you’ll
pay 8.75 per cent for basic rate, 33.75 per
cent for higher-rate and 39.35 per cent
if you are an additional-rate taxpayer. If
shares are moved into an Isa, no tax is
charged.0 Automate your savings
Set up a monthly amount that goes into
savings on payday — you may not even
notice it being whisked away but it
could make a big difference. To boost a
rainy-day fund you might want to use a
regular savings account that pays more
interest than a standard easy-access
option. You can normally save between
£10 and £250 in the account each
month and access it only at the end of
the 12-month fixed term. Check which
account is paying the best rate using a
comparison website. You should also
automate how much you put into your
Isa. This can be easily set up with your
Isa platform.0 Embrace a whizzy app
If you can’t set a fixed amount to save
each month you might want to try an
app that can help you to build up your
savings in a different way. In recent
years several new apps have come onto
the market to offer people innovative
saving methods. Some use algorithms
to analyse your current account and
work out what you can afford to save,
while others give the option to
round up your purchases to
the nearest pound and save
the difference (eg 40p on
a £2.60 spend). There
are plenty of apps, such
as Chip, Moneybox
and Plum, to explore
so look around at
which one might suit
your needs best.0 Pay more into your
pension
Employees are likely to be
paying into a pension thanks to auto-
enrolment, which was introduced in- You can always pay in more than
the minimum, though. You could add
extra to your existing scheme or set up
a personal one — perhaps a self-invest-
Holly Thomas explains
how spring cleaning
your finances can help
to offset the tax rises
‘We should
have started
investing
ages ago’
2,000
Isa millionares in
the UK. The
wealthiest 60 have
£6.2m on averageadvantage you could grow a savings pot
worth hundreds of thousands of
pounds over time.
Some very successful investors have
managed to grow their Isas to more
than £1 million by using the full allow-
ance. There are now 2,000 Isa million-
aires in the UK and the wealthiest 60
have amassed £6.2 million each on
average. They will have done this
through a combination of maxing out
their Isa allowance each year since the
accounts were launched in 1999 and
making some very generous invest-