Tax Planning Strategies To Avoid Tax-Year-End Panic

There tend to be two types of people when it comes to the end of the tax year. Those for whom it passes as little more than a date that marks a certain part of the year. And those for whom it’s a last-minute scramble. If you are the latter, the end of the tax year is probably a panic about getting everything done before the deadline. Finding all the right paperwork, topping up your ISA, checking your pension contributions, and getting everything in order.

The chances are you’ll then forget about it all – until the next tax-year-end deadline rolls around, when you’ll do it all again. However, with just a little bit of planning and organisation now, you can build better financial habits and plan for growth. You can avoid the annual stress as well as the very real possibility you’ll lose out on opportunities to maximise your wealth.

These are some of the strategies you can use to avoid that end-of-tax-year panic:

1. Make the most of your ISA allowance throughout the year

You can make a lump-sum payment into your ISA at the end of the year, and many people do. However, if you arrange a regular monthly contribution instead, it can have a couple of benefits. You can arrange a standing order to do this and then you don’t need to think about it again. You won’t run the risk of missing the deadline altogether, or not having the money to pay in.

This is helpful whether you are investing in a cash or stocks and shares ISA. You won’t spend or ‘miss’ the money each month because it will go out of your account automatically. Regularly paying into a stocks and shares ISA can also help smooth out any market volatility. Investing over a period of time means you’ll average out the unit cost and help avoid the possibility of only investing at a market high.

2. Increase your pension contributions when you can

When you are regularly paying into your pension fund it can be easy to think it’s in hand and you don’t need to think about it again. Often, when we get a pay rise, we don’t think about our pension too. A pay rise is the perfect time to increase your regular pension contributions. We tend to spend what we have. Therefore, if you increase your pension contribution as soon as possible, you are less likely to get used to having the extra money – and spending it. In other words, what you never had, you won’t miss.

This way your contributions grow over time. Each time you start to earn more you will be less likely to notice your pension contributions are increasing too. It also means you still get the tax relief, but without the year-end panic.

3. Get your tax return done early

If you can get all your documents up together early, you can file your tax return as soon as you have all the information you need. Once you have completed and filed your tax return you will know if you are owed a refund or how much you need to pay in tax. Therefore, if you can do it before the end-of-year deadline and you are eligible for a refund, you will get it sooner. Equally, you will know sooner how much money you will need to put aside to pay your tax bill. This gives you more opportunities to budget for payment and avoid any nasty surprises. Get your tax return done as soon as possible and improve your mental and financial wellbeing.

4. Don’t think about tax planning as a once-a-year exercise

We can tend to only think about tax when we have to fill in a form or pay it. However, thinking ahead and approaching tax planning as an ongoing exercise can help you ensure you’re not paying over the odds. It is a good idea to regularly review your income and allowances and see where you could apply reliefs or make changes.

Leaving it all until the last minute can cost you a lot more than just stress. It can cost you money that could be preserved for you and future generations of your family to enjoy. Making slow but steady progress tends to get you further in the long run than covering a lot of ground in very little time. You are also less likely to trip up by missing opportunities or making mistakes.

5. Start building good financial habits now

If you are used to doing everything in a rush right before the end of the tax year, it doesn’t mean next year can’t be different. Now is the time you can start afresh. Start small and build from there:

• Make a checklist so you know what you should do when and can ensure you have all the paperwork to hand when you need it.
• Automate any contributions to ISAs or pension funds where possible.
• Book in a review with your financial adviser – and if you don’t already have one, find out what happens at your first meeting with a financial adviser and book one in.

A successful financial plan that takes into account the end of the tax year, and plans for it, can be built on steadily. Act early, plan regularly, and develop good financial habits to make your tax-year end as stress-free as possible. The annual deadline will still exist, but you’ll approach it differently and get better results.

Help with tax planning from Paula Bicknell Wealth

At Paula Bicknell Wealth we’re strong believers in ensuring you get the most from your money. We’ll help you make it work harder for you – and help you stop the otherwise inevitable panic as the end of the tax year approaches. Get in touch to see how we can help you build a more consistent and robust financial strategy. If you are based in the Theale or Reading area we can meet with you in person, or we can work with you remotely, wherever you are based in the UK.

The value of an investment with St. James's Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.

The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief is generally dependent on individual circumstances.

Cash ISAs are not available through St. James's Place.

Although the content of the article was correct at the time of writing, the accuracy of the information should not be relied upon, as it may have been subject to subsequent tax, legislative or event changes.