FOMO – Fear Of Missing Out
12/02/2021
12/02/2021
With the end of the tax year approaching FOMO might not be a phrase that would spring to mind, but with a number of allowances being time critical, FOMO is exactly what you should be thinking.
The obvious one is your ISA allowance. You can add up to £20,000 into an ISA each tax year, whether this is into a cash ISA or investment ISA helping to provide you with a tax-free return. Whilst cash savings rates aren’t great at the moment, an Investment ISA is protected against Capital Gains Tax on growth, or income tax, from income withdrawals. This is a benefit you don’t want to miss! The ISA allowance is a ‘use it or lose it’ allowance, so if you don’t put money in before 5th April, you have unfortunately lost that opportunity forever.
Pensions also have allowances and for the end of the tax year, most people can add £40,000 each year into their pension if their earning supports this (some high earners may have a reduced Annual Allowance). If you are a higher-rate tax payer, not only do you get 20% of your contribution added to the pension, but you can reduce your tax liability by a further 20% of your contributions for each tax year.
If you need assistance with these calculations, be sure to give us a call.
Most pension contributions are made on a monthly basis, but there is nothing to stop you at the end of the tax year adding a lump sum to your pension, therefore boosting your retirement savings and reducing your tax bill – something most definitely not to miss out on!