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Happy new tax year! How to make the most of your ISA and pension

Spring brings many things but most excitingly (in our opinion) is the start of a new tax year! Here we look at two superstar savings options and explain why you should take advantage of the new tax year and start saving today.

Let’s start with ISAs

Individual savings account – ISAs – are great way to save. They’re easy to set up, are available in different flavours, and you can save money tax-free (unlike many standard savings products, which can leave you liable for capital gains tax or income tax).

Your annual ISA limit

The new 2017/2018 tax year, which started in April, means the tax-free allowance per-person, per tax year has risen from £15,240 in the 2016/2017 tax year to £20,000. That means you can save money and target growth on every penny of that £20,000 without needing to pay tax on the profits.

Start NOW

It’s never too early to start saving, and April is the perfect time: it’s the start of the tax year, so you can take advantage of a full year of growth.

Pensions: Let’s talk about the future

While ISAs are great for medium to long-term savings, pensions are strictly for retirement. As we’re all living longer and putting increasing pressure on state resources, it’s in the government’s interest that we save for a comfortable old age. That’s why pensions are the most tax-efficient savings options around.

Each tax year you can contribute up to £40,000 into a pension scheme without paying tax on it.

Although you can’t start withdrawing your pension until 55 at the earliest, you currently have the option of taking 25% of the total sum tax free when you do.  

Three tips for savings success

  1. Start saving as early as you can. Set yourself savings goals and track your progress.
  2. Prioritise your retirement, regardless of your age or income. It might seem a long way off, but it could account for 30 or even 40 years of your life. It’s important – start putting plans in place now.
  3. Consider talking to a qualified independent financial adviser. Finance rules can be almost as complicated as your own personal circumstances and future goals, so it pays to seek professional, tailored advice.

Guy Myles, Chief Executive of independent financial advice and investment company Flying Colours

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