The new tax year is an opportunity for savers to use up their current tax-free personal allowance, and to think about their savings plans for next year.
If you’re confused about what any of that means, we’re here for you.
We’ve pulled together the key information about the tax year and what it could mean for you and your savings below.
When does the tax year end?
The tax year begins on 6th April and runs until 5th April the following year. For 2022 the tax year will therefore finish on 5th April 2022.
What does the end of the tax year mean?
The end of the tax year – and the start of a new one – essentially reboots how much tax is taken out of your pay if you are an employee. The tax-free personal allowance is for the current year is £12,500 and remains frozen until 5th April 2026.
While most individuals’ income for a tax year is deducted at source through their employment, the self-employed and those with other untaxed income and gains need to complete a self-assessment tax return.
Tax Free Personal Allowance
Income tax is payable on your taxable income received during the tax year. This comes in many forms such as earned income from employment, interest from savings or dividends from investments.
However you are entitled to a “personal allowance” each tax year, currently £12,500, to offset against their income before tax is calculated. Income within the personal allowance is tax-free but you can’t carry forward any unused amount to a future tax year.
Individual Savings Accounts (ISAs)
Cash ISAs are a type of savings account in which you do not pay tax, regardless of your account balance and have a limit of £20,000 per year. There are both fixed rate and instant access options available, so you can manage your own savings needs.
You don’t need a large lump sum to get started with cash ISAs. You can open some ISAs with as little as £1. And with instant access ISAs, you can put money in whenever you like.
How we can help you
If you’re thinking about managing your savings differently this new tax year, we have more information below on how we could help you.