The festive period is a good opportunity to get your loved ones together. And the start of the year…well, what better time to get your finances together?
Tackling some life admin now could help you feel more confident about your money. Use this to-do list to get your tax and pension plans in order – and prep for the end of the tax year on 5 April 2024.
1. Track down old pension plans
Just like it’s easy to lose track of time between Christmas and new year, it can be easy to lose track of your pension plans.
Make sure you know where to find your old plans. You can use the government’s Pension Tracing Service to help you hunt down any you might’ve lost track of.
You could then consider combining them into a single plan. This can help you see how much you have in pension savings and cut down on paperwork. It isn’t right for everyone, though, so make sure you won’t be losing any valuable benefits or guarantees.
2. Get your tax return in now
Time’s ticking! The deadline for submitting your self-assessment tax return online for the 2022-23 tax year – and paying any tax due – is midnight on 31 January. If you’re in one of the categories of people who need to send a tax return, such as self-employed or earning a taxable income over £100,000, now’s the time to act.
MoneyHelper has a guide on who needs to submit a tax return and how to register.
3. Boost your State Pension
Gaps in your National Insurance (NI) record can impact whether you qualify for the State Pension and how much you’ll get.
If you’ve got gaps, voluntary NI contributions can potentially boost your State Pension. You now have until 5 April 2025 to plug gaps going as far back as 2006. After that, you’ll only be able to fill them for the past six years.
It could be worth starting to think about whether making voluntary contributions is right for you. You can find out more in our article.
4. Brush up on the new pension allowances
The pension annual allowance is the total that can be paid in across all your pension plans in a tax year without you facing a tax charge. The standard annual allowance rose from £40,000 to £60,000 in April 2023. If your yearly salary is less than this figure, your annual allowance is usually 100% of your earnings instead.
The money purchase annual allowance (which affects people who have already taken money from their plan) and minimum tapered annual allowance (which impacts high earners) both increased from £4,000 to £10,000.
Overall, people can now pay more into a pension plan than they previously could before the end of the tax year without facing a tax charge. Keep in mind that a pension is an investment. Its value can go down as well as up and may be worth less than was paid in.
To learn more how pension allowances may affect you, visit MoneyHelper.
5. Get familiar with other allowances
There are other allowances to be aware of. These include your capital gains tax allowance. Some assets are subject to capital gains tax when you ‘dispose’ of them (find out what this means on GOV.UK). You may need to pay this if the profit made on those assets is above the capital gains tax-free allowance. This allowance is going down from £6,000 to £3,000 from 6 April, so you may want to consider making the most of it before it reduces.
Now onto Individual Savings Account (ISA) allowances. You can save up to £20,000 in a Cash or Stocks & Shares ISA (or a combination of both) per tax year. Keep in mind the value of investments can go down as well as up and may be worth less than was paid in.
If you are aged between 18 and 40, you can open a Lifetime ISA (LISA) and pay up to £4,000 per tax year into it, up to the age of 50. The government will add a 25% bonus to your savings (capped at £1,000) per year. Don’t forget, the £4,000 you can pay in does count towards your £20,000 allowance.
If you earn dividends (which is when a company makes a profit and gives shareholders some money back), don’t forget the tax-free dividend allowance is reducing from £1,000 to £500 in April. Remember, you don’t pay tax on dividends you may get on shares in an ISA.
6. Consider a Midlife MOT
This time of year can be ideal for thinking about whether you’re currently where you want to be in life. If you’re in your 40s, 50s or 60s, why not visit the government’s Midlife MOT website? This can help you get support with your health, money and work. For example, it can help you get a full analysis of your financial situation (including pension plans) and can help you find a retirement adviser if you want one.
The information here is based on our understanding in January 2024 and shouldn’t be taken as financial advice.
Your own personal circumstances, including where you live in the UK, will have an impact on the tax you pay. Laws and tax rules may change in the future.
Standard Life accepts no responsibility for information in external websites. These are provided for general information.