Make your finances a new year resolution

January 5, 2022

With a new year comes new goals and objectives, with many of us embarking on exercise regimes to lay the foundations for a fitter 12 months. But, as Trevor Clark, Chartered financial planner and director at Perspective (North East) Ltd explains, ensuring we are in good shape financially is just as important.

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Welcome to 2022; The year of the Tiger according to the Chinese.

Like many of us, you’ve probably made some resolutions for the 12 months ahead. But, like many of us, you’ve probably already seen them fall by the wayside. Has Dry January turned a little damper than planned? Has the gym lost its lure? If so, why not consider some resolutions of a different kind, ones that put your finances in order for 2022 and beyond? They might not provide the same feeling of instant wellbeing as a drink-free month, or a sustained spell on the treadmill. What they will do, though, is deliver crucial financial fitness that allows you to plan for the future with real confidence.

Complete that tax return

We suggest completing two tax returns in 2022. The first one, relating to the 2020/2021 tax year, needs to be carried out before January 31, as the penalties are quite severe, starting with an initial fixed sum of £100. Then, once that is done, put a note in your diary to get the 2021/2022 return done before January 2023.

Claim higher rate tax relief on pension contributions

This is also the time to use your tax return to claim back any higher rate or additional tax relief you are entitled to on pension contributions you have made during the year. If you’re a 40 or 45 per cent taxpayer, it could significantly reduce your bill. Your pension provider should give you a statement confirming the amount you have contributed – this value then needs to be entered in the tax reliefs section of your return. If you’ve already completed your return online but didn’t claim your tax relief, you can log back in and amend it before January 31. If you don’t, you could end up paying more tax than is necessary.

Consider tax efficient savings and investments

There is often some confusion around the difference between tax avoidance and tax evasion. Broadly, tax avoidance is legally arranging your affairs to ensure only the minimum amount of tax is paid. Tax avoidance works within the letter of the law and takes many different forms. Tax evasion, on the other hand, is the criminal act of paying less tax than is legally due, usually by deliberately understating income or overstating expenses.

How we help

Some of the simplest, and most common, forms we use to support clients through tax avoidance include:

• Holding assets, such as shares, in your spouse’s name, to make use of their capital gains allowance

• Making use of unused allowances when they cannot be carried forward

• Holding savings and investments in an ISA, to benefit from tax-free interest

Rely on our expert support

So, with the above in mind, let us help you take advantage of the legitimate opportunities to invest your money in tax efficient wrappers and make 2022 the year when your financial resolutions last longer than that gym membership.

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