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What to do before the end of the tax year

What to do before the end of the tax year

Search: End of the tax year tips

- Tax tips, tools and guides
- Best cash ISAs and more

By Jasmine Birtles, financial expert from moneymagpie.com

The end of the tax year looms so make sure you've made the most of all the tax-saving vehicles you possibly can. Why give Chancellor Darling your hard-earned cash? Follow our tips now while there's still time.

1. Make use of your ISA allowance

Use it or lose it. You've got a £7,000 tax-free allowance to use before April 5th, so use it if you possibly can.

You can either put up to £3,000 of that into a Mini Cash Isa and up to £4,000 in a Mini Shares Isa, or you can put the whole lot into a Maxi Shares Isa.

If you go for the Mini Cash Isa, we think that the best all-round internet deal with instant access comes from Icesave (www.icesave.co.uk), currently 6.10% AER which is guaranteed until 2013. Alternatively, the Barclays Tax Haven cash ISA currently pays 6.31% AER. However they are only offering this rate until May 2009 when it goes down to 5.31%, so you'll have to remember to transfer your funds over to a better deal in a year.

Shares ISAs are far more complicated as they rely on the performance of shares. If you can handle the risk involved (ie you could lose all your money) then they might be for you, but the best thing to do to get to understand more about them is visit the Tiscali ISA centre.

2. Add to your pension

The rate of tax relief on pensions is dropping next tax year so put in as much as you can now to get the most tax relief. Currently, if you are a basic rate taxpayer (i.e. you pay 22% tax) then you get 22% tax relief on the money you put into your pension.

However, as the basic rate of tax is going down next month to 20% that means that you will only get 20% tax relief on your pension investments. So put money in now to take advantage of the extra 2% relief.

If you have a company pension already but you would like to have an extra pension then there's nothing to stop you setting up a private pension. We like stakeholder pensions because they're simple and cheap. However, SIPPs (Self-invested Personal Pensions) have become cheaper and easier to invest in too so why not consider opening one of those for yourself?

3. Share investments with your spouse

Now is a good time to share out some of your investments with your spouse or civil partner, particularly if they earn less than you. This way you can reduce your income tax and possibly benefit from their Capital Gains Tax allowance if you sell something big that you have invested in (like a house or a bunch of shares) in this tax year.

4. Cut down on Inheritance Tax

If you think you (or your parents) are in the Inheritance Tax bracket then use up (or get them to use up) the small tax-free gift allowance that you have each tax year. You can give up to £3,000 per tax year tax-free and it isn't taken into account for Inheritance Tax when you die.

Alternatively you could give much more than that and decide that you are going to stay very healthy for at least the next seven years - just to annoy the tax man. Any money that is given away at least seven years before you pop your clogs is discounted for inheritance tax purposes. So make that pledge now!

5. Check your tax code

The new tax coding notices tend to go out in February and March in time for the next tax year in April. Make sure you have the right code because if you don't you could either be paying too much tax or too little which will mean that you will be slapped with a nasty bill later on.

For most people in work there should be an 'L' at the end of your code. If you have something different then phone the Revenue (you can get their contact numbers at their website www.hmrc.gov.uk) and check it out. For example, if you have 'BR' at the end of your code that means you are on Basic Rate tax which means you are being taxed on the whole amount that you are earning.

If this is your second job then that might be quite right but if it isn't then you are losing out on a lot of money.

If you are turning 65 this year you should have a different code which gives you a higher personal allowance. Again, check with the Revenue if this is not the case. Hundreds of thousands of people in Britain have mistakes made by the Revenue on their tax coding and one of them could be you.

Make sure you check it and don't lose out. Remember, you can claim overpaid tax from the last six years so you might be able to claw back a good amount of cash just from a phone call to the Revenue!

Jasmine Birtles is from moneymagpie.com - the website that gives you a richer life.

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