Two Things To Do Before April

A new financial year looms; here are a couple of things my family is planning to do in the next few days.

So how, if at all, did Wednesday's budgetbenefit you?

On first glances, one of my few positives (as a working couple with a baby daughter) was the fact that Child Benefit is set to rise to £20 per week for the first child by 2010. And with nursery fees eating up a large chunk of our income, it was encouraging to hear that free nursery provision for all three and four year olds is set to increase from 12.5 hours/week to 15 in the same time frame.

What's more, with cash ISA limits finally increasing for the first time since their launch 10 years ago to £3,600 from April 2008, as a couple we will be able to potentially save £7,200 in cash, next year. Alternatively, with the equity ISA limit being raised to £7,200 we would be able to invest £14,400, should we have the funds.

As neither of us smoke, nor do we drink excessively the increased taxes here are unlikely to affect us terribly. And as we don't own a Chelsea tractor, or any other type of gas guzzling vehicle, our road tax should not increase -- indeed I live in hope that my small economical car will warrant a reduction.

But anyway, budget aside it is almost the end of the tax year and a good time to get finances in order. Here are a couple of things that I intend to do before the start of April.

1. Use that ISA Allowance

Firstly, as you'll no doubt realise, most of us are entitled to ISA allowances. Everyone over 16 can currently save up to £3,000 cash, and anyone over 18 can additionally invest up to £4,000 in stocks and shares (alternatively, you can invest up to £7,000 in equities) free of tax.

Clearly, ISAs offer a great way to save or invest. Looking at the cash ISA option, a couple that both saved the maximum £3k in accounts paying 6%AER would jointly earn £360 over a year. This is £72 more than if they'd saved in an equivalent savings account (and they were both liable for basic rate tax) and whopping £144 more if they were both in the higher rate bracket. Suffice to say, we intend to make full use of our ISAs before the end of the tax year.

2. Maximise Child Trust Fund

On a slightly different note, although my daughter is not yet a year old, she's still managed to pretty much take over our house with an unbelievable number of toys and other paraphernalia. What's more, with her first birthday coming up, there will undoubtedly be more to come!

However, in addition to presents, some wise friends and family members have chosen to give her cash, to be put towards her future. One obvious potential home for this money is her Child Trust Fund.

Every child born on or after 1 September 2002 should have received a £250 voucher (£500 for low income families) from the Government, to be used to open a Child Trust Fund account. Families can top up the accounts with up to £1,200 each year (the yearly allowance runs out on the child's birthday) to grow, free of tax.

In my daughter's case, the CTF we chose was a cheap, index tracker Child Trust Fund, to which we also contribute monthly (remember, the lower the charges, the more profit you get to keep!). However, like most excited new parents we didn't get round to opening the account until she was a few months old, meaning that she is still far from having maxed out on this year's contributions.

Of course, like ISAs if you fail to use your child's CTF allowance each year, it is lost forever. And as my daughter's birthday happens to fall at the start of April, this means we have but days to max out her account. Another priority, therefore, is to send a cheque off to her CTF provider to top up that account, before her first year's allowance runs out on her birthday.

There are, of course, other ways to save for your child, be it through a simple savings account, an alternative index tracker/managed fund or even via a pension.

£100 Rule

But as a final note, it's important to mention that one benefit of choosing either the Child Trust Fund or pension options are that the money invested or saved will not be liable to the £100 rule. This rule states that should your child make more than £100 in interest pa, you will be taxed on it at your highest rate (this maximum is per parent, so your child could potentially make £200 before you get hit) which means, should you have the money, you can put away even more for your child.

So that's just a couple of things that I intend to sort out before the end of March. Why not take a look at your finances and get them in shape for the new tax year?