MONEY DRIVER
I’m a financial adviser – here’s why now is the best time to take you care for an MOT… and why you can save hundreds
Financial adviser Brian Byrnes has five key tips for drivers
FINANCIAL advisor Brian Byrnes says now is the ideal time for an MOT on your money with just one week to go until the end of the tax year - and a long weekend ahead.
And by taking a little time to review your finances he believes it could boost your finances by thousands of pounds.
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Words of wisdom include why you should check the interest earned on savings and how to protect them from the tax man.
Other pointers from the personal finance pro at include the steps side hustlers should take to avoid falling foul of rule changes, and how to make the most of the free money available through pension tax relief.
BRIAN BYRNES' TOP TIPS FOR 'REBOOTING' YOUR FINANCES
- Check how much interest you have earned on your savings to ensure you’ve not exceeded your personal savings allowance.
- Are you using the best accounts to help you achieve your goals and protect your savings from the tax man?
- Are you prepared for the government's side hustle crackdown?
- Have you made the most of the free money available via pension tax relief?
- Review your 2024 financial goals and adjust as necessary for the year ahead.
Brian Byrnes said: “The end of the tax year period should be in every savvy saver's calendar with time set aside to check that their money is working as hard as it can for them.
“We can all be guilty of leaving things until the last minute, but our research has revealed that those who spend more time managing personal finances and planning for the future have boosted their net worth by around £15,000.
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“So don't underestimate how much could be gained from following these five simple steps before the end of the tax year on April 5th.”
1. Check how much interest you have earned on your savings to ensure you’ve not exceeded your personal savings allowance.
Most people can earn interest from their savings without paying tax, but there is a point where you will be taxed.
Brian said: “Your personal savings allowance is the amount of interest you can earn on your savings each financial year without paying tax. If you earn less than £50,270 you will fall within the basic tax band of 20 per cent, and so your personal savings allowance will be £1,000.
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“If you earn more than £50,270 and less than £125,140 you will fall within the higher band of 40 per cent and your personal savings allowance each tax year falls to £500.
“Anyone earning over £125,140 moves to the additional 45 per cent tax band and does not have any tax-free personal savings allowance.”
The finance expert added: “The quickest and easiest way to find out how much interest you have earned on each of your savings accounts is to ask your savings provider to let you know.
“For context, you would need to have around £25,000 in savings accounts paying on average four per cent interest or more to cross the £1,000 threshold.
“Spending a little time now to understand how much interest you have earned, could help you avoid an unexpected tax bill later.”
2. Are you using the best accounts to help you achieve your goals and protect your savings from the tax man?
While interest rates on easy-access and fixed-term savings accounts can be slightly higher than those offered on Cash ISAs, to protect as much of your savings from the tax man as possible, you will also need to ensure you are making the most out of your ISAs tax-free savings allowance.
Brian recommends: “ is a tax-wrapped savings or investing account where you can contribute up to £20,000 each year – this is in addition to your personal savings allowance.
“Should your ISA then grow via interest or growth of shares, you won’t be taxed on these gains.
“You can split this allowance across different ISA products depending on your financial goals, including a Lifetime ISA if you’re saving for your first home, a Cash ISA if you’re saving for mid-term financial goals or a Stocks & Shares ISA to grow your money over the longer term.”
However, Brain goes on warn your tax-free ISA allowance doesn’t roll over into the next tax year, so if you don't use it before April 5th, you will lose it.
3. Are you prepared for the government's side hustle crackdown?
More people than ever have turned to side hustles to supplement their income due to the cost of living crisis – but many are unaware earlier this year HMRC declared its intention to crack down on undeclared earnings from selling goods or services online.
The financial advisor revealed: “If you are supporting your income through a side hustle like selling unwanted items, starting an online business, or renting out your driveway, the first £1,000 you earn is tax-free – this is known as your trading allowance.
“If your side-hustle gross income goes above the £1,000 threshold, it can be subject to income tax, depending upon how much taxable income you earn from all other sources.
“If you’re earning income by renting a room via a platform like Airbnb, thanks to the, you won’t have to report it to HMRC, if it's less than £7,500.
“Keeping a log of any side hustle income is more important than ever and if you do need to report taxable side-hustle trading income to HMRC, you can register as a ‘sole trader’ on the gov.co.uk website.”
4. Have you made the most of the free money available via pension tax relief?
Brian said: “Pensions often get left on the bottom of the to-do list when it comes to our finances, but boosting your pension pot can be one of the most tax-efficient ways to save.”
“If you’re a basic rate UK taxpayer, you get 20 per cent tax relief, which you can essentially think of as a top-up on your own contributions. This is because the government offers tax relief on all your pension contributions each tax year.
“Meaning if you are a basic rate taxpayer and you are paid £6,000, you can either pay your 20 per cent tax and get £4,800 into your bank account, or you can put the whole £6,000 into your pension without having to pay income tax on the contribution.
“Similarly, if you contribute £4,800 from your bank account to a private pension, the government boosts your pension savings with an additional £1,200 in the form of tax relief, bringing your total contribution to £6,000.
“This tax relief is worth even more if you are a higher rate or additional rate taxpayer, and even more again if you are in the £100,000 - £125,140 tax range.
“At this income level your personal allowance starts to get withdrawn, meaning an effective 60 per cent rate of income tax – efficient pension contributions can help you avoid the painful tax bracket.
“Now is the time to consider if you might want to boost your pension contributions and make the most of the free money that's up for grabs from the government as part of your pension tax relief allowance.”
5. Review your 2024 financial goals and adjust as necessary for the year ahead.
Brain concluded: “As a former financial adviser, I have seen firsthand the difference that committing to regularly reviewing your goals can have in achieving the best financial outcomes.
“And so, my final tip is to take some time this end-of-tax year period to check on the progress you've made since the beginning of the year.
“Update your budget to see if your spending patterns have changed – has your disposable income increased or decreased?
“Do you need to adjust your savings and investments as a result? Are your financial products still competitive or are there better rates available that you should consider?
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“We all have things we want to achieve with our finances and while it’s easy to set goals, making a plan to achieve them and working towards it consistently can often be the challenge.
“Remember there will always be unforeseen events that can set us off course, but having that end goal in mind is the best way to ensure you’re always moving in the right direction.”
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