The end of the tax year can be a busy time for personal financial planning, and there’s often lots to be done. But with the new tax year starting on the 6th April, this is a great time to start some future financial planning to set you up for the year ahead.
Create a financial calendar and set some goals
First things first, it’s advisable to set up a financial calendar if you’re prone to forgetting those all-important dates. Whether it’s to remember your quarterly tax payment dates or to remind yourself to carry out a periodic credit report, setting up a calendar is invaluable when it comes to personal financial planning.
Use the new tax year as an opportunity to establish some financial goals for the year ahead. Whether it’s to do with savings or investments elsewhere, some careful financial planning will help you focus on what you’d like to achieve and how you can achieve it.
Be aware of new tax allowances when financial planning
The tax-free personal allowance is the amount of income you can earn before paying income tax. If you’re self-employed, it’s important to have an awareness of the changes to personal tax rates when financial planning.
For 2019 to 2020, the personal allowance will increase from £11,850 to £12,500. The basic rate limit will also increase to £37,500 for this new tax year. This change will mean you can earn up to £50,000 before you venture into the 40% tax bracket.
Some forward financial planning, along with knowledge of the various different thresholds, will help you work out what your total income in the next tax year might be. Getting everything in order and keeping your paperwork up to date will help for next year when you’ll be expected to submit your tax return for the year just gone.
Financial planning and ISAs
There’s no better time to really get going with your savings than at the start of the new tax year. Individual Savings Accounts, or ISAs, are a great way to save because of their tax-efficient nature.
Interestingly, the annual ISA allowance for this new tax year has stayed the same as the last, with adults being able to invest for themselves up to £20,000. It is possible to have more than one ISA, but your total investment cannot exceed this amount.
You also won’t be able to carry any unused allowance into the next tax year, so it’s beneficial to use your entire allowance if possible.
Consider the different ISAs on offer to you before you start financial planning. Cash ISAs typically have lower rates of interest, while stocks and shares ISAs give you a better return. However you decide to invest your money, get the ball rolling with your financial planning and start saving as soon as you can.
Dividend allowances
Dividends are a great way to generate regular income from investments, but you’ll have to pay dividend income tax on anything you earn over £2000 in the 2019/2020 tax year. The increase in your tax bill will depend on what rate of tax you pay.
As part of your personal financial planning, it’s worth checking at the start of the tax year how much dividend income you are likely to receive, as this may prompt some investment changes.
Personal financial planning: in summary
Personal financial planning is crucial if you want to keep on top of your finances and make the most of tax-free savings. Setting yourself some financial goals and starting the new tax year as you mean to go on will also make next year’s tax return an easier process.
