The start of a new tax year is a perfect opportunity to reflect on your long-term investing goals and spring clean your finances.
Not only are we dealing with a cost-of-living crisis. We’ve also had to witness some severe ups and downs in stock markets during the pandemic, and more recently as a result of the war in Ukraine.
It might feel like a difficult time to think about our finances but the more you can put away for longer, the better it could be.
Get to grips with your allowances
- The ISA allowance this tax year is £20,000, meaning you can save up to £20,000 in a Cash ISA or Stocks and Shares ISA, or both for example. The Junior ISA (JISA) allowance is £9,000.
- ISAs let you shelter your money from UK income tax and capital gains tax. If your investments go up in value, you get to keep 100% of the profits when you sell them. And if your ISA investments make an income, it’s all yours to keep as well.
- Pensions are another tax-efficient way to save for retirement. You have the potential to lower your tax liability by sheltering long-term investments from income tax and capital gains tax.
- You can normally get a top up from the government in the form of tax relief on contributions into your pension. You’ll get tax relief on personal pension contributions up to 100% of your UK earnings, or £3,600 if this is greater (if you’re a low or non-earner).
Start as early as you can
- Short-term news or market ups and downs can be unnerving. The way our emotions change during the highs and the lows is why lots of us decide to invest when markets are doing well and sell when markets are falling.
Set or review your investment goals
- Regardless of one tax year to the next, you should be thinking long term when you invest, so your investment goals shouldn’t look too different. But the start of the tax year is a perfect opportunity to review and rebalance your portfolio to make sure it still aligns with your investing goals.
- Does the level of risk you're taking match what you’re really comfortable with?
- Have your investment goals or your personal circumstances changed?
- Rebalancing is about restoring the original weightings of the investments in your portfolio. It helps make sure you’re matching the level of diversity and risk you planned on when you started out.
Check in on your overall financial health
- Having a healthy investment portfolio is only part of your overall financial wellbeing.
- It’s important to make sure you check your overall financial health too. So, while starting afresh for the start of the new tax year, start by checking your other pillars of financial resilience too.
- Even though we can't always control what happens in life, we can prepare ahead to improve our financial security over the long term.
