There may be gloom all around, but the new tax year does offer advantages to be considered while making a spring clean of your finances.
Advice on the subject has come from Myles Palmer (pictured), divisional director of Marlborough-based Brewin Dolphin, the investment house that sponsors arts events in the town, including the jazz and literary festivals.
“New ISA limits mean you have never been able to save as much in the tax-efficient shelter,” he points out. “This tax year you can invest £11,280 in an ISA, with a maximum of £5,640 allowed in cash.”
“It is the same with pensions. The more you put in the more you get back from the Treasury. High earners paying the top rate 50 per cent tax should maximise their pension contributions to get the 50 per cent relief.”
“They could also take advantage of the 22 per cent tax gap between capital gains tax and income tax to increase capital return from investments.”
He admits that with the economy still fairly fragile many households will be eager to give their finances a boost.
“For starters, get yourself an action plan,” he suggests. “Dig out your financial records, including savings, bonds, insurance plans, both general and life, pensions and mortgage statements.”
“If you have debts, use it to repay them. Borrowing rates may be low, but savings rates are lower still. It is more than three years since the Bank of England cut base rate to just 0.5 per cent.”
“And so it makes sense to repay debt now while rates are at rock bottom.”
He adds: “Spring-cleaning your finances is not just about cutting back. It is also about making the most of what you have.”
“Check whether you had an account that offered a bonus a year ago. If you did, that bonus has probably disappeared and so you may find that your rate has fallen off a cliff. If so switch to a better paying account.”
Becoming an early bird investor too by taking advantage of the new tax year ISA and pension provisions and take a look too at Enterprise Investment Schemes.
From April 6 anyone investing up to £100,000 in a new start-up business will be eligible for income tax relief of 50 per cent, plus for 2012 any tax on capital gains invested in such businesses will be waived.
But he warns: “The risks related to these investments are high and are not suitable for all investors. Though of course, you should never let the tax tail wag the investment dog.”
“But irrespective of whether you are a higher rate or a lower rate taxpayer, get your tax personal tax affairs in order.”
