Why you should never leave tax planning until March

As we approach the end of the tax year on 5th April, there’s always a scramble to ensure we use up our tax-free allowances. As independent financial advisers, we question ‘Why would you leave tax planning so late?’ We would much rather take instructions from clients in April or May than in March. When we have 365 days a year to consider our tax affairs, why do so many of us leave it until March or even early April to maximise our contributions?

Some of us like to be organised and plan ahead. Are you one of those people that submits their self assessment months before the January deadline? If that’s you, you probably also maxed out your ISA (Individual Savings Account) allowance months ago!

This blog is for people who aren’t blessed with the forward-planning gene. It highlights the benefits of investing in an ISA early in the tax year. Read to the end to discover three top tips to help you take action today.

What is tax planning?

Tax planning is simply making the most of the tax-free allowances available to you throughout any financial year. An independent financial adviser can help you to identify the relevant allowances and guide you to make decisions to maximise these. Tax-efficient planning usually applies to savings and investments, and pension planning. It’s all about making your money work hard for you.

The current annual ISA allowance is £20,000 (2024/25). This means you can save up to £20,000 tax-free in one financial year, either in a Cash ISA or a Stocks and Shares ISA, or split the amount between the two. It’s not something to ignore. Everyone who is eligible should be taking advantage. These are the three reasons why you should act early to maximise your allowances.

1. Tax planning gives you peace of mind: You will feel confident and reassured knowing your tax affairs are taken care of and your personal wealth is protected. By acting at the earliest opportunity you avoid the last-minute stress that affects so many people – and their financial advisers! By contributing early you can plan your financial affairs with care and consideration and avoid any last-minute panics.

2. It pays to plan ahead with tax planning: The annual ISA allowance is fixed at £20k. If you wait until the end of the tax year, you may not be in a position to take advantage of your full personal allowance. By investing early, you ensure that you use your full tax-free allowance for the whole of the year, without rushing to add funds at the last minute.

If you leave your tax planning until March you are effectively missing out on eleven months worth of interest or growth. Imagine what you could use those extra funds towards – a holiday, a deposit to help your children get on to the property ladder, additional pension contributions or even investments that could increase your ISA balance further down the line.

Of course, you might not want to tie up all your funds at the start of the tax year. If this sounds like your situation then a more calculated approach to savings and investments might be more appropriate. Contact us to ask how we can help.

3. Early deposits could reduce your tax liabilities: Every adult aged 18 and over has a personal ISA allowance of £20k year. By using your allowance at the earliest opportunity, i.e. in April, not March, you are taking full advantage of its tax-free benefits. 

What if I don’t have £20,000 to invest at the start of the tax year?

Most of us don’t have this amount of cash sitting around in a bank account waiting to be invested! You can still benefit from compound returns by investing small amounts regularly, starting at the beginning of the tax year. An extra £50 or £100 per month can make a significant difference to your overall returns.

Our top tips for tax-efficient planning 

• Start early: you may have all year to do tax planning, but tackling it at the earliest opportunity is the best way to maximise returns. Once it’s done, it’s done and out of the way for another 12 months.
• Get organised: pull together all the paperwork you have for your existing savings accounts. Knowing how much money you have and where it’s located will help your financial adviser to offer the best options available to you.
• Talk to an independent financial adviser: no surprises here! An independent financial adviser is not influenced or tied to any one financial provider. This means that you receive robust, professional advice and best-in-market solutions to match your needs. Find out more about us and how we work.

Ask us about how to maximise your ISA allowance

End of tax year is a busy time for financial advisers as investors look to make use of their allowances before the year-end deadline. We can advise on stocks and shares ISAs, investment portfolios, and pension planning to maximise the full personal tax allowances and protect your personal wealth. Get in touch to book a complimentary call with one of our advisers.