End of the 2019/20 tax year: why you need to look at ISAs, inheritance and your pension now

You’ve only a couple of weeks left to take advantage of these Government tax allowances.

For most people, the end of the tax year isn’t a big occasion.

Yet when the 2020/21 tax year starts on 6 April, it’ll bring several important changes for your money.

Many of them are automatic: your income could be boosted, whether by the increasing minimum wage or rising tax brackets.

But the end of the tax year also means the end of several allowances that could reduce the tax you pay – and therefore, save you money.

Many don’t roll over, and so not using these allowances by 6 April means you lose them forever.

To make sure you don’t miss out, we’ve put together a five-part checklist for you to use.

Compare rates on Cash ISAs with loveMONEY

Start with ISAs

You’re allowed to put £20,000 per tax year in an ISA, which means you won’t have to pay tax on these savings or investments.

Using your allowance every year means you could build up an enormous savings pot that the Government can’t touch.

That £20,000 allowance doesn’t roll over, so it’s worth looking at your non-ISA savings accounts now, to see if there’s money you can move.

You can put that money into an existing ISA account, or open a new one, providing you haven’t opened one of the same type (i.e. Cash ISA) since April 2019.

For Cash ISAs, you can currently get an expected profit rate of 1.35% with Shariah bank Al Rayan, the best rate of any easy access account.

If you’re looking for a guaranteed rate, the second highest paying easy access Cash ISA is Virgin Money’s Double Take E-ISA offering 1.31%.

But you can only make two withdrawals a year, so it’s questionable whether it’s an easy access account.

You can find out more about Stocks and Shares ISAs here, save for your kids with Junior ISAs or for your first home with a Lifetime ISA.

View your options in the loveMONEY investment centre (capital at risk)

Pay into your pension

Each tax year, you can get tax relief on pension contributions of up to £40,000, or 100% of your earnings, whatever is lower.

If you’ve already got an emergency savings fund, it’s time to consider putting more money into your pension before 6 April to benefit from considerable tax relief, depending on your tax bracket.

Just be aware of the Pension Lifetime Allowance, currently £1,055,000 (rising to £1,073,100 from 6 April), above which you get hit by considerable charges.

For more on pensions, read our complete guide.

Clear out your investments

It's also worth paying attention to your Capital Gains Tax (CGT) allowance.

You’re able to earn £12,000 per year in profits from selling assets, including shares (excluding those in ISAs), second homes and very valuable possessions.

So, if you were planning on selling any of these anyway, and haven’t used much of your CGT allowance, it could be worth doing so before April.

If selling isn’t an option, there are other ways to reduce your CGT bill: read our specialised guide for more information.

Give £3,000 to your kids

Yes, we realise that spontaneously giving children vast amounts of money isn’t necessarily a good idea.

That said, making gifts of money to your children is one of the easiest ways to reduce your Inheritance Tax bill.

You can give away £3,000 each year, and even more if you didn’t use the allowance the previous year, or if your children are getting married.

You don’t have to hand over cash – you could put the money into a Junior ISA – which has an allowance to use up before 6 April.

Inheritance: how to pass on your wealth and property whilst minimising tax

Top up your National Insurance contributions

The last month of the tax year is a good opportunity to plan for your own future.

Crucially, you should look at your National Insurance contributions and whether you’ve made enough to qualify for the full State Pension.

It is possible to fill the gap by making voluntary payments, although the cost of doing so rose significantly last April.