If you’re thinking about starting to save, April is an excellent time to start. In our guide, we look at three reasons why the new tax year is the perfect moment to start putting cash aside.
1. You can maximise your ISA allowance
Each year, adults in the UK benefit from a tax-free savings allowance. Any income, interest or growth from an Individual Savings Account (ISA) is tax-efficient, making it a great way to build up your savings.
The annual ISA allowance is currently £20,000, meaning that this tax year you can invest up to £20,000 tax-free in a cash ISA, a Stocks and Shares ISA, or a combination of the two.
Fiona Robinson, a financial adviser for Chase de Vere, believes it is an excellent idea to invest as close to the start of the new tax year as possible, if you can afford to.
She says: “April is always a good time to review your finances, because it is often when new allowances and tax rates come into force. The sooner you invest, the sooner you can benefit from tax-efficient growth and/or income.”
If you don’t have a lump sum to invest immediately, most ISAs will let you make contributions on a regular basis. Our Stocks and Shares ISA lets you save as little as £30 each month. And, starting soon after the tax year means you can maximise your regular contributions into this tax-efficient plan.
2. You’ll have a little bit more money each month
Each year, the government increases the amount that you can earn before you pay income tax. Your Personal Allowance changes each tax year and in 2018/19 it will be £11,850, up from £11,500 in tax year 2017/18.
What this means is that you will earn an extra £350 without paying tax. This will increase the amount of take-home pay you receive, and a basic-rate taxpayer will be £70 better off.
So, why not take this opportunity to put some money aside? Even if it is only a small amount, use this increase in net salary to start your savings regime.
The Money Advice Service says that most people should be able to save on a regular basis, even if it’s just a small amount. Money expert Nick Hill says: “Regular saving is key to building up that buffer against those life surprises.
“If you earn enough to set even a little aside each month that’s great – a direct debit into a savings account might be an easy way to do this, even if you start small and increase the amount with time.”
3. Saving will make you happier
The simple fact of knowing that you are saving can improve your quality of life. Thinking about your future and putting money aside will help you to achieve your savings goal and avoid financial stress in the future.
A survey in 2017 found a strong correlation between savings and happiness. Those who are in the happiest 10% of people in the UK are more likely to have savings (81%) than those in the bottom 10% of happiness, where just 47% have any savings.
The happiest people are also more likely to be saving for specific items such as holidays and home improvements, while the least happy people are less likely to have a purpose for saving.
As well as being more likely to save and have specific reasons for saving, the happiest people in the UK are also more likely to have protection (insurance) in place.
Please remember, when you take out an investment product with us your capital is at risk and you may get back less than you have put in. All references to taxation are to UK taxation and are based on Shepherds Friendly Society’s understanding of current legislation and H M Revenue and Customs practice which may change in the future.
