How to SQUEEZE MORE out of YOUR money

A new tax year means new opportunities to maximise your savings, making it the perfect time for a financial MOT. Here’s our expert guide to the six money moves you should make this spring…

USE YOUR SAVINGS ALLOWANCES

The Government allows you to stash away £20,000 in tax-free savings using an ISA (Individual Savings Account), so make the most of it. You get a savings allowance every tax year, but it’s a case of use it or lose it, so if you haven’t made use of the allowance for the 2017/18 tax year, which ends on 5 April, now is the time.

‘ISAS should be the bedrock of your finances, as your money grows tax-free,’ says Danny Cox, adviser at Hargreaves Lansdown. If you don’t need access to your savings anytime soon (five to 10 years), a stocks and shares ISA could potentially give you better returns than cash ISAS, but there is more risk involved. As well as investment and cash ISAS, the £20,000 ISA limit covers Help to Buy, Lifetime and Innovative Finance ISAS. There is no change to the £20,000 limit for the 2018/19 tax year.

If you’re saving for a child (or grandchild), you can also put money into a Junior ISA. The maximum pay-in for the tax year is £4,128, but this will rise to £4,260 in 2018/19. Family and friends can also contribute, but the money will only be accessible by your child at the age of 18.

It’s also still worth having a savings account, thanks to the personal savings allowance. Higher-rate taxpayers don’t have to pay a penny of tax on the first £500 of interest they earn, rising to £1,000 for basic-rate taxpayers. Shop around for the best rates at moneyfacts.co.uk.

BLITZ THE PAPERWORK

Aim to have all your paperwork in one place and get rid of anything you don’t need. Shred any sensitive information to protect yourself from fraud.

If you need to file a tax return, keep this in mind during your clear-out. Keep records for at least five years after the 31 January submission deadline of the relevant tax year.

If you’re self-employed, be rigorous about keeping bills and receipts, as you can claim for the extra costs involved in running a business from home, as well as the cost of running a car. These can be offset against profits, reducing your overall tax bill.

If you’re one of the many people who sells goods on ebay or Etsy, or rents out a room on Airbnb, you may now need to file a tax return. You can earn up to £7,500 tax-free when renting your spare room.

‘Individuals are also entitled to two £1,000 allowances: one for trading and miscellaneous income, such as selling on ebay; and one for property income, such as renting your driveway,’ says tax manager Sarah Ghaffari at the Institute of Chartered Accountants. ‘Provided the income does not exceed £1,000, then it does not need to be declared and there is no tax due.’

Deadlines are 31 October for paper returns and 31 January if you want to file online. You will get a penalty if you miss these deadlines. Find an accountant at Icaew.com/ about-icaew/find-a-chartered-accountant.

REDUCE YOUR INHERITANCE TAX BILL

You can leave £325,000 tax-free when you die. If you pass on your home to your children, this increases to £425,000. Everything over this is then subject to 40% inheritance tax (IHT). But there are a number of annual exemptions that enable you to reduce the amount you pay.

‘You can give away £3,000 a year, exempt of IHT, and can make small gifts of £250 each. You can also make wedding gifts of £5,000 as a parent, and £2,500 as a grandparent,’ explains Patrick Connolly, adviser at Chase de Vere. You can also make potentially exempt transfers – gifts of any size that can be given free of IHT as long as you live for seven years after making them.

CHECK YOUR TAX CODE

Don’t assume the tax code sent to you by HMRC is correct. You will find your code on your P45 or your wage slip. The number reflects the amount of tax-free pay you’re allowed to earn in each tax year, eg, 1150 allows you to earn £11,500. The final letter in the code provides your employer with further information on the allowances you receive, or the rate of tax that should be charged. Visit gov.uk/tax-codes or call 0300 200 3300 to query your tax code.

SIGN UP FOR SALARY SACRIFICE SCHEMES

In April, childcare vouchers will be replaced by the new Tax-free Childcare, which was introduced last year. Under this new scheme, the Government will contribute 20p for every 80p that parents spend on childcare – up to £2,000 a year per child. With existing voucher users able to continue the scheme, it’s time to find out which would save you the most, visit gov. uk/childcare-vouchers-better-off-calculator.

With the Government-backed Cycle to Work scheme, you can make savings on the cost of a bike and accessories through salary sacrifice. With Cyclescheme, for example, you could get £1,000 to spend and then pay a monthly salary sacrifice to effectively hire the bike and kit over a year. You can then purchase the bike at a fraction of its cost.

See moneyadviceservice.org.uk/en/ articles/cars-insurance-and-other-employeebenefits for other employee benefits you may be able to take advantage of. Beware that some benefits may be taxable.

MAXIMISE YOUR CAPITAL GAINS

If you’re selling assets for profit, such as property or shares, you will have to pay capital gains tax (CGT). You can currently earn £11,300 in gains in the tax year before a charge is due. The exempt amount will increase to £11,700 for the 2018/19 tax year.

‘This allowance is often overlooked, but it’s one I encourage people to use,’ says Gary Smith of financial planners Tilney. ‘You can’t carry forward any unused allowance to subsequent tax years.’ One way to maximise your capital gains is by transferring an asset into joint names with your partner, so you can both use your tax-free allowance. A couple could make £22,600 of capital gains in the 2017/18 tax year before paying tax. Always keep records for assets on which CGT might be due.

If you haven’t made use of your allowance, now is the time