Many suggest that January is the worst month of the year. The rationale behind this is that it is one of the most cold and dark months that there is in the UK whilst also contending with “Blue Monday” and it seems like an age since last pay day!
“Blue Monday” is something the media LOVE to talk about - It falls on the 3rd Monday of January each year, but do you know how this day came about? Let me enlighten you - it was a gimmick. It was a way to generate sales for a well-known travel company. It was dreamt up by a psychologist by the name of Dr Cliff Arnall in 2004. The idea was that January is so “blue” that you should go and book a holiday.
Quite clever actually as we are still talking about it 20 years after its creation - even despite the fact that most people agree that it’s nonsense. Personally I like to focus on positive and impactful dates in the New Year and one date in particular that I feel is important is the 5th of April.
The financial year falls between 6th April to the 5th April the following year and whilst some don’t see the importance, allow me to highlight why it is important to take note.
At the start of each financial year, our personal allowances for various things refreshes. Everything is reset in this regard. Here are some of the key personal allowances that may be relevant to you:
- Pension Contribution – up to £60,000 per annum (subject to income earnings).
- ISA allowance - £20,000 per annum.
- Capital Gains Tax (CGT) Allowance - £6,000 per annum.
- Savings Allowance - £1,000 per annum for non-taxpayers and basic rate taxpayers, but will reduce to £500 for higher-rate tax payers.
- Dividend Allowance - £1,000 per annum.
Other than Pension Contributions, you cannot carry forward any unused personal allowance, so the phrase “use it before you lose it” is very appropriate here.
For those of us who are self-employed or directors of a limited company, these dates are important as it enables you to make contributions which could help you not only plan for your future, but also reduce your tax liability. We’re all aware tax returns need to be filled by the 31st January for the previous tax year which means it is too late to affect the tax liability for the previous year.
To highlight the importance of the looming ending tax year, the CGT allowance for the tax year 2022/23 was £12,300, but as you can see, it is currently £6,000 for 2023/24 and to compound this further, it will reduce again to £3,000 from the new tax year commencing 6th April 2024.
Working with a Financial Adviser can be a substantially beneficial experience as they can help you utilise these personal allowances in a way which can help you not only reach your financial goals, but also ensure you aren’t paying any unnecessary tax.
It is important to note that the FCA does not regulate tax planning.
