Sunday Mirror

Time to get your finances in order

Use tax breaks to make your money work for you We all want to make the most of our money – so ensure the next tax year, which started on April 6, gets off to a good start.

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How much we can earn without paying income tax has just increased by £70, to £12,570.

We will pay 20% income tax on the next £37,700 we receive – that figure is up £200 this year – and after that, it’s 40% on income up to £150,000. Above that, income is taxed at 45%.

In addition to income tax we also pay national insurance (tax) on our earnings.

There is no national insurance payable on the first £9,568 we make (increased by £68 this year), then we pay 12% up to £50,270 (up £270 this year), then 2% on income above that.

If we sell an investment asset such as a share or a buyto-let property and make a gain, we pay capital gains tax on any profit over our capital gains tax allowance (£12,300) at 10% or 20%, depending on our income and the size of the gain.

For buy-to-let properties, the capital gains tax rates are increased by an additional 8% to 18% and 28%, unchanged since last tax year.

Our tax-free ISA allowance remains at £20,000. You can also invest up to £9,000 into a Junior ISA for children up to age 18, or £4,000 into a Lifetime ISA for those aged 18 to 40.

You will receive a 25% bonus on the

By not investing in an ISA, you’re missing out on thousands of pounds

contributi­on of up to £1,000 – but your LISA funds must be used to help purchase your first home or be put towards your retirement from age 60.

Many people leave investing into their ISAs until the last minute, but that could mean leaving thousands of pounds on the table. Investing the full £20,000 into an ISA at the end of the tax year for 20 years at a 9% per annum growth rate would produce a fund of £1,023,202.

If you invested at the start of the tax year instead, you’d have £1,115,291 – a whopping £92,089 more, just for getting yourself organised.

You continue to be able to put up to 100% of your income and taxable benefits into a pension, up to a limit of £40,000 annually, which could be reduced if you earn over £200,000.

If your income is below £3,600, you can still pay £2,880 into a pension and receive 25% tax relief (£720) to help save for your retirement. You can even set up a pension for a newborn baby.

Saving into your pension can also benefit from paying in early: saving £2,880pa into a pension at the start of the tax year from age 21 to 66 at 9%pa produces a fund of £2,063,470, whereas leaving it to the end of the tax year produces a fund of £1,893,091. That’s £170,379 just for saving early.

For more investment and financial planning ideas search for The Money Planner podcast.

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