Time to get your financial ducks in a row

And you still have a few weeks until the 2024-25 tax year ends on 5 April to take advantage of the allowances the Treasury extends to us.

First on the checklist are the bread-and-butter elements of financial planning – ISAs and pensions.

Before doing anything drastic, however, always bear in mind that actions never take place in a vacuum – the overview is crucial. That’s why financial planners and accountants will always ask you to give them your full financial picture. Things can get complicated, and expensive, pretty quickly. Please take appropriate advice.

Make sure that you’ve used your ISA allowance.

This tax year, you can contribute up to £20,000 across all the ISAs you hold. The various types of ISA function as wrappers to shelter your money from different kinds of tax.

You don’t pay tax on the interest gained in a Cash ISA; dividends paid within Stocks and Shares ISAs aren’t subject to Capital Gains Tax (CGT); you don’t pay tax on withdrawals from your ISA.

It’s a small but almost perfectly formed alternative universe. You do need to find the right type of ISA for your goals and investment timeframe – take your pick of LISA, JISA and other animals. Be sure to read the conditions carefully and remember that Little Johnny’s Junior ISA comes under his control at 18 years of age.

Check how much you have paid into your pension this year against your annual allowance.

It is important to check your allowance so that you don’t end up with a surprise charge, and you should note that the way the allowance is calculated depends on the kind of pension you have.

That said, most people earning a salary and aged below 75 are entitled to a whopping 100 per cent income tax relief on payments into their pension of up to £60,000. So, if you earn less than this sum and you are able to maintain your lifestyle by other means, you could pay 100 per cent of that salary into your pension without paying income tax on it.

However, high earners should be aware that taper rules apply. In certain circumstances, the allowance can be carried forward. If you have started to draw from a defined contribution pension or are over 75, your allowance may be affected.

Your CGT allowance is for £3,000 of gains this tax year. It cannot be carried forward, although it can be shared between spouses. Professional advice is recommended here.

There are a variety of gifts you can make each tax year. These allow you to pass on cash without it becoming subject to inheritance tax, even if you were to die within seven years of making them. The annual exemption allows you to gift up to a total of £3,000 in cash or assets to one or more individuals without it being assessed within your estate. If you don’t use the whole £3,000 in one tax year, you can carry the remainder forward from one year into the next.

You can also make as many small gifts of up to £250 to whomever you like, so long as one of the recipients isn’t also getting something from another allowance.

I’m sure that if you have children getting married or entering a civil partnership the happy couple are likely to have already reminded you that you can give tax-free gifts of £5,000 to a child, £2,500 to a grandchild or £1,000 to anyone else before the wedding.

An especially lucky child could therefore be eligible for £5,000 for their wedding and £3,000 as a gift in the same tax year.

Birthday and Christmas gifts paid out of regular income are allowed for separately. Your adviser wouldn’t be bound by the regulator to point out that this might count as favouritism – that’s reserved as a family matter.

If you aren’t able to take advantage of these allowances this year, then don’t waste too much energy on self-flagellation. There’s no time like 6 April to start a new financial year with a fresh set of resolutions. If you start getting your ducks in a row this spring, next winter will feel much better.

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