Do you want to give your finances a fresh start in the new financial year? Is getting on top of money matters one of your new year’s resolutions?
Now is the perfect time to give your personal and business finances a fresh start ahead of the new financial year. Tick off this checklist to get your tax and pension plans in order and prepare for the end of the tax year on 5 April 2024.
4 things to do before 5 April to give your personal finances a fresh start:
1. Are you on track to receive your full State Pension?
The number of years you pay National Insurance (NI) for can affect whether you qualify for the State Pension and how much you’ll get. So now could be a good opportunity to make up for any lost time.
The deadline for paying any voluntary National Insurance (NI) contributions to make up for any lost time is 5 April each year. You can usually pay voluntary contributions for the past six years. Employee National Insurance Contributions (NICs) have reduced by two percentage points to 10% from 6 January 2024 for earnings between the primary threshold and the upper earning limit, giving employees a small boost to their take-home pay.
You can check your NI record or find out more about voluntary NI payments on the government’s website.
Can you top up your pension?
Pension plans are a tax-efficient way to save for your future. It normally costs £80 for a basic rate taxpayer to save £100 into their pension plan, thanks to pension tax relief. So, if your budget allows, why not top-up your pension before the tax year ends on 5 April.
Remember, you, your employer and any third party can pay in across all your pension plans £60,000 or 100% of your salary (whichever is lower) in any given tax year – this is called Annual Allowance.
2. Make the most of your capital gains tax exemption… before it reduces
Capital gains tax (CGT) is the tax you pay on the profit when you sell something that’s increased in value. The annual exemption on capital gains tax is reducing significantly in the new tax year – from £6,000 down to £3,000. So, if you have something worth selling, you may want to consider doing it before the end of the tax year.
3. Maximise your ISA allowances.
Your ISA (Individual Savings Account) allowance is £20,000 for the tax year. This means you can save up to £20,000 in a Cash or Stocks & Shares ISA, or a combination of both, and not pay any tax when you take your money out.
It’s a tax-efficient way to save, so make the most of this allowance if you can.
4. Get gifting!
You can give away a total of £3,000 worth of gifts each tax year without them being added to the value of your estate. This is known as your inheritance tax-free gift allowance. This can be carried over to the next tax year but if you don’t use it by the end of that year it’ll be lost.
So, if you’re planning to make a gift to someone, or have an unused allowance from last year, it might be a good idea to do this before the the tax year ends.
3 things to do before 5 April to give your business finances a fresh start:
1. Assess if pension salary sacrifice is right for your business
Implementing pension salary sacrifice can enable you to lower employer NICs – which you can either pass on to your employees in the form of additional pension contributions, reinvest back into the business or save it to strengthen net profits. Implementing salary sacrifice can also help attract and retain the best talent as part of a strong benefits package.
2. Look around at your options for payroll processing
Traditional outsourced payroll providers like to take on new clients for the start of the new financial year – it’s less work for all. It’s a good time to check your existing contracts or arrangements and see if you’re still getting value for money – what extras are included that you don’t get elsewhere?
If you process payroll in-house, is this limiting the growth of the business by burdening great staff with tasks that can be outsourced.
3. Double check for pension auto-enrolment inaccuracies
It’s a good time to check in with your HR and/or payroll team to see how confident they feel about your business meeting its auto-enrolment ‘employer duties’. It is commonplace for employers to overlook and/or not fully understand some of the initial and ongoing ‘employer duties’ under auto-enrolment leading to The Pensions Regulator issuing 20,382 compliance notices during the period January-June 2022 alone, for example.
Common errors we see include, but not limited to:
- Issuing letters to those who are classed as ‘eligible’ workers (and auto-enrolled into the pension scheme) but not issuing communication to those postponed and/or classed as ‘not eligible’ about their right to join/opt-in to the pension scheme.
- Issuing communication past the Regulator’s deadline of six weeks from when the duties applied.
- Re-enrolling those who opted-out of the pension scheme every three years as part of their auto re-enrolment duties.
- No record keeping.
- Not being aware of the components of pay to be included in ‘pensionable pay’ or excluding certain components of pay, such as bonuses, commissions, overtime etc, but not amending the employer minimum contributions as prescribed by the legislation
How we can help
We’re passionate about making employers’ and employees’ lives easier, happier, and healthier so businesses can grow. Our experts in pay and pensions can offer information and guidance on how to improve the financial wellbeing of your business and that of your employees.
For more information about unburdening your business from payroll and pension compliance visit our SMART Employment page or read more about supporting your employees’ financial wellbeing, emotional wellbeing and physical wellbeing here or get in touch
Amrik Birdi, Head of Operations at Growth Partners
Amrik has a wealth of knowledge in pensions having joined Growth Partners from KPMG where he was responsible for advising companies and trustees on independent DC provider procurement exercises, DC investment strategy review, DC pensions strategy review, automatic enrolment compliance, and meeting ongoing governance requirements. Amrik spent three years before this as a Pensions Guidance Specialist at Pensions Wise helping members understand their pension and retirement options, empowering them to take control of their retirement journey. With a Diploma in Regulated Financial Planning and Certificate in DC Governance, combined with a Degree in Economics, Amrik is a fully qualified pensions consultant and able to offer strategic support to our clients on their options for workplace pension schemes and auto-enrolment.