The tax year ends at midnight on Wednesday 5 April.
Here are four ways to minimise your tax bill – but you must act by 5 April if you wish to benefit.
This can be particularly important if you are a 40% or 45% rate taxpayer as it is your last chance to reduce your tax bill for the current tax year.
#1. Top up your pension with a lump sum
Each year you can pay in as much as you earn to your pension and gain tax relief.
When you make a contribution to your Self Invested Personal Pension (SIPP), basic-rate tax relief of 20% is automatically added by the taxman.
For example, you pay £800 and the taxman automatically adds £200 so you have £1,000 in your SIPP.
Higher-rate taxpayers can claim back up to a further 20% (£200 in this example) via their tax return, so a £1,000 contribution effectively only costs as little as £600.
Top-rate taxpayers can claim back up to a further 25% (£250 in this example) via their tax return, so a £1,000 contribution effectively costs as little as £550.
Try our tax relief calculator >The exact amount of tax relief you can receive depends on your personal circumstances. To receive full higher or additional-rate relief, you must have paid enough tax at that rate. Tax rules may change.
The amount you can contribute is capped by the annual pension allowance. This is currently £40,000 for most people. This includes all contributions made by you and your employer this tax year. It can be lower if you’re a high earner or if you’ve flexibly accessed a pension. You may be able to ‘carry forward’ unused allowance from previous years to contribute more.
Read about pension allowances >How to top up your SIPP
If you wish to make a contribution, first read the Key Features (including the Contribution Checklist and Important Investment Notes). Remember, money in a pension can normally only be accessed from age 55 (57 from 2028), usually up to 25% tax free and the rest taxed as income. Remember the value of investments can fall as well as rise, so you could get back less than you invest.
Then you can:
- Top up online with your debit card or
- Top up by phone – call 0117 314 1795.
#2. Use your ISA allowance
5 April also marks the deadline for another important allowance – ISAs (Individual Savings Accounts).
If you want to invest further but don’t want to lock your money away in your pension, you could consider investing in a Stocks & Shares ISA.
Your money grows free of capital gains tax and there’s no UK income tax to pay – just like your SIPP. You don’t receive tax relief on contributions, but you can access the money any time, although we suggest investments in the stock market should only be made with the long term in mind (at least 5 years).
This year you can shelter up to £15,240 in an ISA - holding cash, funds, stocks and shares or a combination. You can even view your ISA online alongside your company pension - making your investments easier to manage.
Like pension tax relief, this is a ‘use it or lose it’ allowance. If you do not use your allowance one year, you will lose it forever. Tax benefits depend on individual circumstances and rules change.
Find out more about ISAs >#3. Make the most of a spouse’s or children’s ISA allowances
The ISA allowance is per person.
This means a husband and wife for example, can protect up to £30,480 between them into ISAs this tax year.
Those with children (or grandchildren) can also invest up to £4,080 into Junior ISAs for each of their children under the age of 18.
Junior ISAs can be used for a number of different purposes such as saving towards a child's university fees or a deposit on their first home.
Find out more about Junior ISAs >#4. Make the most of a spouse’s or children’s pension allowances
Did you know you can contribute up to £2,880 into a pension for a non-earning spouse or child?
This will also be topped up by the government to £3,600 thanks to 20% tax relief.
Find out more about Junior SIPPs >Win what you invest – up to £50,000
Open, top up or transfer to our SIPP, ISA, Junior ISA or Fund & Share Account before 7 April 2017 and we will enter you into our prize draw to win the cash amount of what you invest in (or transfer) - up to £50,000. Terms below.
Any questions?
Call our expert Helpdesk on 0117 314 1795 or email us and we'll be happy to help (Mon-Thu 8am-7pm, Fri 8am-6pm, Sat 9:30am-12:30pm).
This article is not personal advice. We have a team of Financial Advisers on hand if you're unsure any action is suitable for your circumstances. They can provide personal advice for a fee.
Prize draw terms
- Open, top up or transfer to a Vantage SIPP, ISA, Junior ISA or Fund & Share Account between 3 February 2017 and 7 April 2017 and we will enter you into our prize draw to win the cash amount of what you invest in or transfer to your account (up to £50,000).
- The draw is open to all UK residents aged 18 years or over. The random draw will take place in May 2017 and the winner (the account holder) will be notified by letter by the last working day of May 2017. The winner will be posted a cheque for the sum they have subscribed or transferred (up to £50,000) across all their Vantage accounts during the offer period (including any employer SIPP contributions and monthly contributions) and excluding any SIPP tax relief. The prize cheque will be posted to the winner within one working day of the end of May. The minimum value of the prize draw is £500, the maximum value is £50,000. Internal transfers from other Vantage accounts are not included in the prize draw. If you are the winner, we may use your name and county of residence to announce you as the winner.
- No purchase necessary for the prize draw. You can also enter the prize draw by sending a stamped, self-addressed envelope to Hargreaves Lansdown, One College Square South, Anchor Road, Bristol, BS1 5HL. Those entrants who enter the draw via such postal route may win a maximum of £500.
The FCA does not regulate the prize draw. Only one entry per person is permitted. Entries received after the 7 April 2017 will not be entered into the prize draw. The prize draw is not open to employees of Hargreaves Lansdown and their families, or agents or any third party directly associated with the administration of the prize draw.
Our decision regarding any aspect of the prize draw is final and binding and no correspondence will be entered into about it. You are deemed to have accepted and agreed to be bound by these terms and conditions upon entry to the prize draw. We reserve the right to refuse entry, or refuse to award the prize to anyone in breach of these terms and conditions. The prize draw will be governed by English law and entrants to the prize draw submit to the jurisdiction of the English courts.
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