Tax does not just involve payments, but it also involves a person using the allowances that are available to them within a tax year. This includes saving into a pension or using an ISA as a vehicle to progress returns, whether this be through cash or investments. Regardless of what method Britons choose, taking pre-emptive action ahead of tax year end deadlines can be a sensible decision.
“If you have got a £20,000 ISA allowance for argument’s sake, or a £40,000 pension allowance, and if you have the money and can afford it, you really should be doing it now.
“Why wait? Why wait 12 months and potentially lose one year’s worth of return.
“Assuming you get a five percent return on a £20,000 ISA, that’s £1,000, so it really is an early bird saver for doing it at the beginning of the tax year, and you should be doing it as soon as possible.
“People who are savvy should be getting on and doing this, rather than waiting until the end of the tax year.”
Savings update: Good news for Britons as provider offers 1% interest [INSIGHT]
TV Licence: Are you eligible for a free licence? Check now [EXPLAINED]
Pension: Inflation could have ‘disastrous impact’ on retirement [ANALYSIS]
But while the returns on an early investment are important to consider, there are also other factors which make such a move beneficial.
One of these, Mr Norton highlighted, is the time which Britons will be afforded if they begin to think about the issue now and address it throughout the year.
He continued: “I think the other thing which doing it early affords you is having time to think, rather than hurrying and rushing.
“At the end of the tax year, you’ll get a lot of recommendations about investments and the like, telling you what to do, and there is a huge amount of noise.
“That is not a good way to save or invest at all, and can confuse some people unnecessarily.
“Taking action at the beginning of the tax year will give you the ample time to reflect properly while you are choosing what to do with your finances.”
Another important point to consider when planning finances throughout the tax year is one’s goals and what a person hopes to achieve.
If a person’s goals have changed recently, as many have due to the pandemic, then they may benefit from altering their investments.
Similarly, Mr Norton stated, rebalancing an investment portfolio can also be beneficial, particularly at the beginning of a tax year – as a person will want as few transactions as possible.
When a person looks at their investments, such as a pension, it may be the case it is easy to lose track.
As such, Mr Norton said, considering consolidation might be the best option, as there is benefit in this kind of action.
He added: “Moving from job to job can mean you lose track of your pension and you don’t know exactly what you’ve got.
“It’s difficult to know and understand what your real position is when you’ve got stuff scattered around, so take stock of what you have.”
Finally, Mr Norton stated, taking a general “cold, hard look” at one’s finances throughout the year will be key.
This could involve looking at the options one has on a number of payments, as well as getting rid of Direct Debits one is no longer using.