5 ways to maximise your 21/22 tax year
As we head into the 2022 tax year many people will be taking the time to look at their finances. Here are 5 things we recommend everyone considers that could enhance their financial arrangement.
Max out your ISA (or equivalent)
The UK ISA allowance for this tax year is £20,000. ISAs allow you to save and invest tax free and are worth taking full advantage of. If you are permanently non-UK resident it is likely there will be something similar to an ISA that you can take advantage of.
Revisit your mortgage and get a new quote
This is incredibly important. Last week our mortgage team helped an individual switch their mortgage and saved them £600 per month. This person could have done this 5 years ago and would have saved £36,000 over the last 5 years. There are plenty of people in this situation who simply haven’t taken the time to revisit their mortgage and see if they could save money on it. We have an in-house mortgage team who can help you explore this. They will complete the initial research for free and charge a flat rate of £750 if any work is needed to improve your current mortgage arrangements. Arguably a small amount for what could translate into a huge saving in the long term.
If you need to hold cash, hold it in the best place
Holding cash for emergencies is essential, but not all banks are equal and finding options that actually reward you for your cash savings is a good way to stop its value going backwards. With interest rates in the UK at all-time lows, most bank accounts are offering 0.01%. Inflation for 2022 is forecast at 1.8%, meaning your cash is devaluing by 1.7% over the next year. This may not seem significant, but if you’re holding £85,000, the maximum protected amount in a UK account, then you are losing £1,445 in the year.
Sticking with one bank out of habit is often not the best option. It is not uncommon for people to pick a bank because their parents used it or the branch was local to where they used to live, rather than on what the bank offers them.
Rebalance your investments
This is currently more important than ever. Some asset classes have seen incredible growth, and some have seen losses over the last year. This means it is likely that a higher percentage of your portfolio is made up of the ones that have grown well, typically the higher risk asset. If you are not using an adviser, revisit your investments with your risk tolerances in mind. If you have an adviser but have not spoken with them in the last few months, arrange a review with them. Keeping your portfolio in line with your risk profile is a critical part of the investment process and usually the area most self-investors struggle with. Accessing analytical research tools such as FE analytics is expensive, which is one of the advantages to using an adviser who has access to such platforms.
Top up pensions
The pension allowance for this tax year is £40,000. If you intend on retiring in the UK, it may be worth utilising this amount every year, staying aware of the Lifetime Allowance threshold of course. If you are in one of the popular expat locations such as Australia or the US and are there on a permanent basis, they have similar products that can be used as a savings vehicle for retirement and allowances that can be taken advantage of.
If you have any questions regarding any of the above, get in touch with us and let us do the work for you.