The end of the tax year is this Saturday and that means there’s just two days to sort your Isa or pension out before the deadline and save on tax.
If you’ve already done everything you need to do, then I salute you but if you’ve left it to the last minute, I’d highly recommend not leaving it any longer.
If you’re in the latter camp, I feel your pain, as your correspondent is a classic last-minute person.
I recently read something that suggested this may not be my fault, I might suffer from ‘time blindness’. I’ve self-diagnosed but haven’t tried this excuse with the taxman yet, and I’m not sure if it will wash.
So, having been there before, I’d strongly suggest not trying to sort something financially important on the last possible day. Especially if it’s a Saturday.
This leaves almost no margin for error and as doing your Isa or pension often involves shuffling money about, that’s not wise.
Time is running out if you want to use your tax-friendly saving and investing allowances
Why an Isa or pension pays off
This time last year, I said it had probably never been more important to think about whether you needed to act by the end of the tax year at midnight on 5 April.
At that point, investors were staring down the barrel of the capital gains tax allowance being slashed from £6,000 to £3,000 and the dividend tax allowance halving to £500.
That was a Tory move we can thank Jeremy Hunt for, but the new Labour government has continued the raid on investors and savers.
Rachel Reeves hiked capital gains tax rates in her Autumn Budget, from 10 per cent to 18 per cent for basic rate taxpayers and from 20 per cent to 24 per cent for higher and additional tax rate payers.
Once again, there was no rise in the personal savings allowance that lets savers earn £1,000 of interest tax-free, but is just £500 for higher rate taxpayers or zero for additional rate taxpayers.
This hasn’t budged since 2016 and the Chancellor also kept income tax thresholds frozen, which is dragging more people into paying higher rates of tax on their savings and investments too.
The big concern is after a Spring Statement that rebalanced the books but left limited headroom, Reeves could come back for more tax in autumn.
For those able to save and invest to build their wealth, this means using the tax-friendly wrappers of an Isa or pension really matters.
Paying more into your pension can also help those who face some of our crazy tax quirks, such as the 60 per cent tax trap from the personal allowance removal above £100,000, the childcare trap at the same level, or the child benefit removal trap.
How to sort it now
You need to use as much of your Isa allowance as you can, get money into a pension if you need to this tax year, look at any savings and investments in standard accounts and consider shifting them.
Get your money into an Isa and you don’t need to worry about tax on investments or savings, as we explain in full in our essential Isa guide.
But if you’ve got savings or investments outside of an Isa, consider shifting them into a cash or stocks and shares Isa to use any unused portion of your annual £20,000 Isa allowance. If you move fast, you may still be able to do this.
My simple guide to cash Isas explains the basics and if you can take money out of a standard savings account and get it into an Isa, it’s worth acting. Our best cash Isa rates tables highlight the top deals.
Remember you can now open more than one of each type of Isa, so you could stick the rest of your allowance in the best deals from the cash Isa battle that means some offer 5.6 per cent.
Our stocks and shares Isa guide is here and investors can read more on how to use existing investments with a Bed and Isa in this guide, but most platforms’ deadlines to do the work for you have passed, so you may have to sell and rebuy yourself. Check first with your investment platform that the timing works out.
You can pay cash into a stocks and shares Isa and not invest it straight away, to use the allowance money just need to be in the account by the deadline. The same is true of pensions.
When it comes to pensions, you can usually now pay in up to £60,000 a year. This includes tax relief and your employer’s contributions too but is still a level most are very unlikely to hit.
Sticking extra cash in your work pension or a self-invested personal pension can help beat the tax traps I mentioned above – and you get a pension tax relief boost on contributions.
Our guide to how paying into a pension reduces tax and income will help you understand more about how this can help dodge those high marginal rates.
Remember though you need to act on these things now.
The last minute is technically 11.59pm on Saturday 5 April 2025 and I bet we’ll be able to find an investment platform that processes an Isa or Sipp contribution then.
But don’t gamble on leaving it beyond now.
Try my method to trick myself into not being late, set your clock forward. Pretend it’s already the last minute now and do it as soon as you can.