Households are being urged to act now to beat the HMRC (Image: Getty)
Cash ISA experts are urging households to ‘beat HMRC’ before the new tax year in April, regardless of what happens to Cash thresholds this month.
Speculation is running rampant that Chancellor will take the axe to Cash limits with rumours she could cut the cap from £20,000 a year to just £4,000. Whatever happens, though, savers up and down the UK have just weeks left to max out their current Cash ISAs – or they will lose all of the tax perks for the current year when the new tax year begins.
Andy Wood, an international tax advisor, has shared key tips to legally beat and cut your tax bill before the deadline.
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He said: “Maximise Your Allowance. remain one of the most tax-efficient ways to save and invest, with up to £20,000 in annual contributions protected from both income tax and capital gains tax. However, any unused allowance is lost when the tax year resets, meaning savers need to act quickly.
“An ISA is one of the simplest and most effective ways to protect your savings and investments from tax.
“The £20,000 allowance doesn’t roll over, so if you haven’t yet used it, now is the time to act. “With rumours swirling that the government may change or even scrap cash ISA allowances, it makes sense to take full advantage while you still can.”
For those saving for a first home, Lifetime ISAs (LISAs) offer a 25% government bonus on up to £4,000 of savings each year, providing an extra £1,000 tax-free – but contributions must be made before April 5 to qualify for this year’s bonus.
Outside of ISAs, contributions to pensions can also lower your tax bill.
Contributing to a pension can not only help secure your retirement but also reduce your taxable income. Pension contributions receive tax relief at your marginal rate, meaning a higher-rate taxpayer (40%) pays just £6,000 for a £10,000 contribution.
“Pensions remain one of the most tax-efficient savings vehicles,” says Wood. “For higher earners, especially those making over £100,000, pension contributions can help reclaim their personal allowance and reduce their effective tax rate from 60% to 40%.”
The annual pension allowance is currently £60,000 or 100% of earnings (whichever is lower), and individuals can also carry forward unused allowances from the past three years.