Tax

New Tax-Free ISA Allowance 2024/25

Why Now Could Be the Ideal Time to Take Advantage of Your New Tax-Free ISA Allowance

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As from 6 April 2024, UK investors have a fresh chance to supercharge their savings and investments with a new £20,000 Individual Savings Account (ISA) allowance.

ISAs represent a golden opportunity for investors to make their money work harder while shielding their returns from the taxman. With tax-free thresholds for dividend tax and capital gains tax being slashed by Chancellor Jeremy Hunt, it’s more important than ever to protect your hard-earned savings and investments within an ISA wrapper.

To maximize the benefits of the new 2024/25 allowance, there’s a strong case for acting swiftly and using at least part of your £20,000 ISA allowance sooner rather than later. This is due to the power of compounding. By investing early, you give your money more time to grow, benefiting from the potential snowball effect of returns generating further returns. So the sooner you invest that £20,000 (assuming you are fortunate enough to have it) the more opportunity it has to multiply over time.

But the good news doesn’t end there. In addition to the ISA allowance remaining at a relatively generous £20,000, the rules surrounding ISAs have undergone a welcome relaxation from this tax year onward. One of the most significant changes is the ability to open more than one ISA of the same type (e.g. a stocks and shares ISA) with different providers in the same tax year. This means investors are no longer limited to a single provider for each type of ISA, giving them greater flexibility and choice in managing their investments.

Previously, investors were restricted to opening one cash ISA, one stocks and shares ISA and one innovative finance ISA (IFISA) per tax year. This restriction could prove frustrating for those seeking to diversify their investments or take advantage of new opportunities as the tax year progressed. Now, with the freedom to open multiple ISAs of the same type, investors can shop around for the best rates, terms, and investment options without being limited to a single provider for each ISA type. They can also move some or all of their money from one provider to another without jeopardising its tax-free status.

  • It’s important to note, however, that while the rules have been relaxed, the overall annual ISA allowance remains fixed at £20,000. This means that any contributions made across multiple ISAs of any type will count towards your total allowance for the tax year. You should still therefore take care not to exceed the annual limit to avoid any potential tax charges.

Cash ISAs offer a secure and accessible way to save, providing a tax-free environment for your savings with the added benefit of easy access to your funds when needed. Meanwhile, stocks and shares ISAs open the door to potential higher returns by investing in a wide range of assets such as equities, bonds, and funds, albeit with a higher level of risk. With a stocks and shares ISA you will never incur any liability for dividend tax, capital gains tax or income tax, even if your investments perform exceptionally well. Of course, there is no guarantee this will happen, but over a longer period stock market investments have typically outperformed cash savings, often by a substantial margin. IFISAs (e.g. from Assetz Exchange) allow you to invest is property crowdfunding and other forms of peer-to-peer finance. They are more specialized, but may appeal to some investors looking to further diversify their portfolios.

  • In recent years I have invested much of my own annual ISA allowance in a stocks and shares ISA with Nutmeg, a robo-manager platform that has produced good returns for me. You can read my in-depth review of Nutmeg here if you wish.

Closing Thoughts

In light of the new 2024/25 ISA allowance and relaxation of the rules surrounding them, now is the perfect time for UK investors to review their savings and investment strategies. Whether you’re looking to kickstart a new ISA or maximize your contributions to existing accounts, taking action early can set you on the path to optimizing your returns from this important tax-saving opportunity. By investing sooner rather than later and taking advantage of the increased flexibility in ISA provider options, savers can make the most of their money while minimizing their tax liabilities. So seize this opportunity to build your wealth and protect it from the taxman today!

As always, if you have any comments or questions about this post, please do leave them below.

Disclaimer: I am not a qualified financial adviser and nothing in this blog post should be construed as personal financial advice. Everyone should do their own ‘due diligence’ before investing and seek professional advice if in any doubt how best to proceed. All investing carries a risk of loss.

Cartoon image by courtesy of Bing AI.

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Use Your Tax-Free ISA Allowance Before It's Too Late!

Don’t Miss Out! Use Your £20,000 ISA Allowance Before It’s Too Late

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As the end of the tax year on 5 April 2024 approaches, so too does the deadline to utilize the annual tax-free Individual Savings Account (ISA) allowance.

The clock is ticking, and unless you take action in the next couple of weeks, this opportunity to maximize your tax-free savings for the 2023/24 financial year will be gone forever.

ISAs are a popular choice for savers and investors alike, offering a tax-efficient way to grow your wealth. With a diverse range of options available, from cash ISAs to stocks and shares ISAs and innovative finance ISAs, individuals have the flexibility to tailor their savings strategy to suit their financial goals and risk appetite.

The current ISA allowance stands at £20,000, providing a significant opportunity to shield your savings and investments from tax. This allowance represents a generous sum that, if left unused, cannot be carried forward to future years. In essence, any portion of the £20,000 allowance that remains untapped by the upcoming deadline will be lost, representing a missed opportunity for tax-free growth.

For those who have yet to fully utilize their annual ISA allowance, now is the time to take action. Whether you’re looking to bolster your rainy-day fund with a cash ISA or seeking to invest in the stock market through a stocks and shares ISA, there’s no shortage of options available. But bear in mind that under current rules you can only invest in one of each type of ISA in any one tax year (though this rule is changing from 2024/25). So if you already invested in, say, a stocks and shares ISA this year, you are not allowed to invest in a S&S ISA with a different provider in the current tax year. You will only be able to top up your current S&S ISA to whatever remains of your total £20,000 allowance.

Cash ISAs offer a secure and accessible way to save, providing a tax-free environment for your savings with the added benefit of easy access to your funds when needed. Meanwhile, stocks and shares ISAs open the door to potential higher returns by investing in a wide range of assets such as equities, bonds, and funds, albeit with a higher level of risk. With a stocks and shares ISA you will never incur any liability for dividend tax, capital gains tax or income tax, even if your investments perform exceptionally well. Of course, there is no guarantee this will happen, but over a longer period stock market investments have typically outperformed cash savings, often by a substantial margin.

  • In recent years I have invested much of my own annual ISA allowance in a stocks and shares ISA with Nutmeg, a robo-manager platform that has produced good returns for me. You can read my in-depth review of Nutmeg here if you wish.

With just a few weeks left to take advantage of this valuable tax benefit, procrastination could prove costly. By acting now, you can ensure that your savings and investments are positioned to grow tax-free, setting yourself up for a better financial future.

In summary, the £20,000 annual ISA allowance for the 2023/24 tax year presents a golden opportunity for UK residents to maximize tax-free savings and investments. Time is of the essence, though, and unless you act before the impending deadline on 5th April 2024, this valuable allowance will be lost forever. If you have the money available, therefore, seize the opportunity now to help secure your financial future.

As always, if you have any comments or questions about this article, please feel free to leave them below.

Disclaimer: I am not a qualified financial adviser and nothing in this blog post should be construed as personal financial advice. Everyone should do their own ‘due diligence’ before investing and seek professional advice if in any doubt how best to proceed. All investing carries a risk of loss.

 

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HMRC Crackdown on Side Hustles - Truth and Fiction

HMRC Crackdown on Side Hustles – Truth and Fiction

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As you may have heard, from January 1, 2025, digital platforms like eBay, Etsy and Airbnb will be required to collect additional information from sellers, including number of sales and amount of income generated.

This data will be automatically shared with HM Revenue & Customs (HMRC) by January 31, 2025, covering the 2024 calendar year. HMRC will then compare this against their records to see if any tax may be due.

This news has caused some consternation on messageboards and social media, with many who have ‘side hustles’ to help pay the bills worried they may be hit by an unexpected tax demand. Some of this concern may be justified, but (thankfully) much of it isn’t.

So today I thought I’d explain what’s actually happening and how you can minimize your tax liability from side hustles and reduce the risk of unwanted attention from the taxman (while staying within the law, of course).

So What’s Happening?

Digital platforms will automatically share seller information with HMRC if a seller has made 30 or more sales a year or earned over €2,000 (approximately £1,700).

The reporting threshold is set in Euro as this is a multi-national initiative by the Organisation for Economic Co-operation and Development (OECD) which aims to tackle tax evasion globally. The new rules apply to various digital platforms, defined as any app, website or software connecting sellers to consumers of goods and services.

It’s important to understand that this is a reporting change and not a change in tax law. If you didn’t have to declare certain earnings or pay tax on them before, that remains the case now. In particular, if you are selling personal possessions you no longer want/need – as opposed to items you bought with a view to selling them for profit – that wouldn’t normally count as trading and no tax would be due.

The other important exemption is that everyone in the UK has an annual trading allowance of £1,000. This means you are allowed to make up to £1,000 (gross) per year from self-employed work including side hustles. If your total annual income by this means is below £1,000, there is no need to declare it to HMRC or pay tax on it (even if you have a separate day job). Note, however, that in the case of online auction trading, that £1,000 is income before any platform fees and other selling costs are deducted.

If your taxable earnings from a side hustle are over £1,000 a year, you will need to notify HMRC via a self-assessment tax return. You will then be required to pay income tax on this, unless your total taxable earnings from all sources are below the personal tax-free allowance (currently £12,570).

Top Tips

As promised, here are some tips to help you negotiate the rules surrounding side hustles, minimize any potential tax liability, and reduce the chances of attracting unwanted attention from HMRC, all while staying within the law.

  • Keep careful records of all your business activities. That includes activities that you don’t believe count as trading, e.g. selling your unwanted possessions. You may need this info if you are challenged by HMRC.
  • In particular, keep a running record of total sales and number of transactions on platforms such as eBay. If you’re having a clear-out, it won’t be hard to exceed the 30-item or €2,000 limit that will trigger a report to HMRC. As mentioned above, if you’re just selling your old stuff, there shouldn’t be any tax liability. But you might understandably prefer to avoid having to field queries from HMRC about your selling activities.
  • It might therefore be a good idea to use a variety of platforms for selling your stuff rather than just one. So instead of just eBay, use other similar sites such as Facebook Marketplace, Gumtree, Vinted, Craigslist, Ziffit, eBid, and so on. Aim to keep your total sales on any one platform to under 30 and under €2,000 in total.
  • If you are selling items you have made yourself (e.g. clothing or jewellery) on websites like Etsy, be aware that this will also usually count as trading and any profits may be taxable. Again you can claim the £1,000 trading allowance, though.
  • If you think what you are doing counts as trading, monitor when your gross annual income (or turnover if you prefer) is approaching £1,000. At this point you might prefer to ‘shut up shop’ until the following year. Otherwise you will need to declare your earnings to the taxman and (if required) pay tax on them.
  • Be aware that cashback earned through websites such as Quidco and Top Cashback is not taxable. Neither is the cashback paid with certain bank accounts.
  • Note also that lottery and competition prizes are not generally taxable in the UK. Neither are gambling wins (not that I recommend this) or any profits made through matched betting.

I hope this article will have clarified the situation for you if you’re pursuing a side hustle or considering doing so. As I said earlier, the tax rules haven’t changed, but with the new reporting regime it’s more important than ever to understand what the tax and trading rules are and ensure you stay within them.

If you have any comments or queries, as always, feel free to leave them below. Please note that I am not a tax professional, however, and cannot answer detailed questions about your personal financial circumstances. As I said in this blog post a while ago, if you need advice with tax matters, in my view a qualified accountant should always be your first port of call.

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New ISA Rule

Important Change to ISA Rules in the 2023 Autumn Statement

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As you will doubtless know, yesterday the Chancellor delivered his 2023 Autumn Statement. This included various economic measures, which you can read about on the Moneysaving Expert website (among other places).

I thought today I would highlight one particular change to the rules about tax-free ISAs (Individual Savings Accounts) which caught my eye. From April 2024, you will be allowed to open more than one of any particular type of ISA in a single tax year. This is a change I was particularly pleased to see, and have in fact been advocating on Pounds and Sense for some time.

As you may know, there are various types of ISA, including the stocks and shares ISA, cash ISA and IFISA. The latter stands for Innovative Finance ISA and allows people to save tax-free with peer-to-peer lending and similar platforms. Everyone has an annual tax-free ISA allowance, which currently stands at £20,000. Despite rumours to the contrary, this limit was not changed in the Autumn Statement.

So why do I think the change in the rules announced yesterday is so important? Well, for one thing, it brings about much greater flexibility in ISA transfers. Investors will now be able to transfer funds freely between different types of ISA without jeopardizing their tax-free status. They will also be able to transfer just part of a holding to a different provider, regardless of when they paid in the money.

This will empower investors to optimize their investment strategy by making it easy to move money between cash, stocks and shares, and Innovative Finance ISAs. This enhanced transfer flexibility should enable investors to adapt to changing market conditions, seize new opportunities, and align their portfolios with their evolving financial goals.

A further benefit of the rule change is that it will make it easier for investors to build a well-diversified portfolio. Rather than having to put all their money into just one stocks and shares ISA per year (for example) they can divide it among a range of providers. Regular readers will know that I am a big fan of diversifying your portfolio as much as possible to help manage risk, and this rule change certainly facilitates that.

The change will also make it easier for investors to try out new platforms with relatively small investments initially. Previously they may have been deterred from doing this by the realization that once they had committed to one particular provider, they would have to stick with that provider for the rest of the financial year. FOMO (fear of missing out) may even have inhibited some people from investing at all.

  • This is certainly something I’ve experienced myself. At the start of a new financial year, I was wary of investing in any type of ISA, because I knew that once I did so, I would then have to stick with that provider for that type of ISA for the rest of the financial year.

So those are just some reasons I particularly welcome this rule change. From a broader perspective, I think it will also encourage more people to start investing, which has to be good for UK PLC in general. Apart from a few admin costs, it seems to me this measure will cost the government nothing, while bringing major benefits to the economy and individual investors. Really, the only thing I don’t understand is why it wasn’t done sooner!

So those are my thoughts anyway. But what do you think? Will the new rule encourage you to make more use of ISAs in future? I’d be interested to hear any views.

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Where to Turn for Tax Advice

Two Places You Really Shouldn’t Turn for Tax Advice (and One You Definitely Should)

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Today I thought I’d set out my views on where best to seek advice on tax-related matters. From feedback received I know that this is a topic that concerns a lot of people, especially the growing number who are turning to ‘side hustles’ to help make ends meet.

I’ve been self-employed for around 30 years now and have quite strong opinions on this subject, especially as I see a lot of dodgy advice about tax being bandied about. So let me start by setting out the two places that in my view you shouldn’t generally turn for tax advice (and you definitely shouldn’t rely on).

1. Social Media

I am thinking especially here about Facebook groups and online forums (or messageboards). These are popular places for people with a shared interest to ask (and answer) questions about subjects that concern them.

I belong to various groups and forums aimed at UK writers and bloggers, and get a lot of useful information and support from them. However, I regularly see people asking questions on them about tax matters, and I’m not at all convinced that this is useful or sensible.

What typically happens in these cases is that other members weigh in with their advice and opinions. Although these are offered with the best of intentions, they are often contradictory and sometimes downright wrong. I imagine that in many cases the original questioner ends up more confused than when they started. Or – perhaps worse – they proceed on the basis of dubious advice which could result in them facing fines and penalties or, conversely, paying more tax than they need to.

Most people in these groups are not trained accountants, but that doesn’t stop some of them airily dishing out tax advice anyway. Replies beginning with phrases such as ‘I’ve always understood’ or ‘I’m pretty sure that’ or ‘As far as I know’ or ‘I could be wrong, but’ should always be regarded with considerable scepticism.

Groups also often have ‘gurus’ who claim (and may or may not have) a deeper knowledge of these matters. Their pronouncements may be treated as akin to holy writ by other members. Again, be cautious about blindly following advice from these individuals, even if they apparently have qualifications and/or professional experience. I have seen advice from such people that is definitely wrong or at least highly questionable, but nobody in the group dares challenge them about it. This happens in other fields as well as tax, incidentally.

I would also extend my caution about getting advice from social media to blogs (yes, including mine). I have seen some good advice on blogs, but also plenty I would regard as debatable to say the least. Definitely don’t take anything you read about tax on a blog as gospel, even if the person in question does have thousands of followers!

2. HMRC

Yes, you read that correctly. In my view, HMRC should seldom be your first port of call for tax advice.

There are various reasons for this. One is that, when you phone HMRC, the person you will generally speak to is a call handler. They will (or should) obviously have a reasonable working knowledge of how the tax system works, but they are definitely not expert in every aspect. If you ask them complex questions about (say) what expenses you can and can’t claim against income or what counts as a capital gain as opposed to taxable income, you are likely to get different and contradictory advice according to whom you speak to. Or they may simply tell you that advising you about this is outside their remit.

In addition, it’s important to bear in mind that HMRC are not in business for your benefit. Their job is to maximize tax revenues for the government. They can’t and won’t advise you on how to legally organise your affairs in such a way as to minimize your tax liabilities (which every taxpayer is perfectly entitled to do).

That being said, there are certain occasions when you can and should contact HMRC. This is when you have specific questions about your taxes, e.g. whether a certain tax payment has been received, what is your tax code, when is your next tax payment due, and so on. The call handlers should have this information easily accessible on their computers and will be happy to pass it on to you.

So Where Should You Turn for Tax Advice?

You may have guessed already, but if not I won’t keep you in suspense. The answer is a professional accountant.

Accountants are trained and experienced in all aspects of the tax system. They have both theoretical and practical knowledge of how the system works and how the (complex) rules are typically interpreted by HMRC. And they have to keep themselves up to date with the endless legal and procedural changes.

Also, unlike HMRC, an accountant is four-square on your side. They will advise you on the best way to organize your affairs to minimize your tax liability. They will answer any questions you may have, e.g. what records you need to keep. When the time comes, they will (if you want them to) compile your accounts and submit the relevant figures to HMRC in your tax return. And if any queries or problems arise, they will act on your behalf to try to resolve them.

A further benefit of having your accounts prepared by an accountant is that HMRC will know that a finance professional – someone who speaks their language – has compiled them. Other things being equal, this is likely to mean they will be more inclined to accept the figures and not dispute them.

Even if you prefer to prepare your own accounts (perhaps using accounting software online), having an accountant check your work (and maybe submit it on your behalf) can be a shrewd policy and reduce the risk of HMRC querying your tax return.

Even if you aren’t running any sort of business, there may still be a case for getting an accountant to help with your taxes. Many older people, for example, have multiple streams of income, from stocks and shares to ISA accounts, property rentals to pensions. Some of this income may be taxable and some not, and varying tax rates and tax-free allowances may apply. Most accountants are more than happy to provide a service to people in this situation as well.

There is, of course, one drawback to engaging an accountant, and that is the cost. This will probably amount to a few hundred pounds a year (maybe more in some cases). Not to pay this, however, is in my view a false economy. A good accountant is likely to save you at least as much in unnecessary tax as they cost you. And the reassurance (and relief) of having a finance professional available at the end of a phone when any queries with taxation arise is impossible to put a price on (but extremely valuable).

After thirty years of self-employment (and being semi-retired now), I still wouldn’t dream of not having an accountant. And since I’m mentioning this, a shout-out here for my own accountant, Rob Ollerenshaw, who has looked after my tax affairs for over twenty years. I recommend him without reservation to anyone in the North Birmingham/South Staffordshire area, or indeed further afield (he tells me he has clients as far away as Cornwall!).

So those are my thoughts about where best to get tax advice, but what do YOU think? Please post any comments or questions below as usual.

This is a revised and updated version of my original post.

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Are you making the most of your annual ISA allowance?

Are You Making the Most of Your Annual ISA Allowance?

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In just a few weeks (5th April 2023) it will be the end of the financial year. And that means if you want to make the most of your 2022/23 ISA allowance, you will need to take action soon.

As you may know, ISA stands for Individual Savings Account. ISAs are saving and investment products where you aren’t taxed on the interest you earn or any dividends you receive or capital gains you make. An ISA is basically a tax-free ‘wrapper’ that can be applied to a huge range of financial products.

With ISAs you don’t get any extra contribution from the government in the form of tax relief as you do with pensions. But – except in the case of the Lifetime ISA – you can withdraw your money at any time (subject to any rules about the term and notice period required) and you won’t be taxed on it.

Everyone has an annual ISA allowance, which is the maximum amount you can invest in ISAs in the year concerned. In the current financial year (2022/23) this is a generous £20,000.

There are four main ISA categories: Cash ISA, Stocks and Shares ISA, Innovative Finance ISA (IFISA) and Lifetime ISA (LISA). You can divide your £20,000 ISA allowance among these in any way you choose, though the most you can invest in a Lifetime ISA in a year is £4,000. Note also that you are only allowed to invest in one ISA in each category per year.

Let’s look at each ISA type in a bit more detail…

Cash ISA

Cash ISAs are like standard savings accounts, except the interest you receive doesn’t incur tax.

While interest rates for cash ISAs have been rising over the last few months, they are still pretty unexciting. According to the Money Saving Expert website, the best rate for an instant-access cash ISA is 2.91% with Shawbrook Bank. With inflation currently running at 10.1% that means even in the best-paying cash ISA your money will still be losing spending power when invested this way.

What’s more, the Personal Savings Allowance (PSA) means that basic-rate taxpayers can earn up to £1000 in savings interest without paying tax anyway (higher-rate taxpayers get a £500 tax-free allowance and additional-rate taxpayers earning over £150,000 a year nothing at all).

And as if that wasn’t enough, you can actually get higher rates of return from instant-access accounts that are NOT cash ISAs. For example, at the time of writing Money Saving Expert say the best rate on offer for an instant-access savings account is 3.11% from Cynergy Bank.

As a result of these things, cash ISAs have lost much of their appeal, unless perhaps you’re in the relatively small group of people who have to pay interest on their savings. But if interest rates continue to rise, they may of course become more attractive again. In addition, money invested in a cash ISA remains tax-free year after year, so if in years to come interest rates on cash ISAs rise, the benefit of having money in one will increase as well.

Nonetheless, I decided not to invest any of my ISA allowance in a cash ISA this year, as I have (in my view) better uses for my money. You might see this differently, of course 🙂

Stocks and Shares ISA

Stocks and shares ISAs are a good choice for many people saving long term. Over a longer period the stock market has outperformed bank savings accounts, often by a considerable margin. You do, though, have to expect some ups and downs in the value of your investments in the short to medium term.

You can opt for a standard stocks and shares ISA offered by a wide range of financial institutions and let them choose your investments for you. Alternatively you can use self-investment platforms such as Hargreaves Lansdown to choose your own investments from the wide range of shares and funds available.

Innovative Finance ISA

IFISAs are on offer from a growing range of peer-to-peer (P2P) lending platforms. P2P platforms allow people to lend money to businesses and private individuals and get their money back with interest as the loans are repaid. If you invest in the form of an IFISA all the interest you receive from P2P lending is paid tax-free, otherwise it is taxed as income (though interest from P2P lending does qualify for the Personal Savings Allowance of up to £1,000 a year, mentioned above).

Peer-to-peer platforms generally offer more attractive interest rates than bank and building saving accounts (or cash ISAs) – from around 3% to 12% or more. They aren’t covered by the same guarantees as the banks and are therefore riskier, though. And if you need your money back urgently there may be delays and/or extra charges to pay.

Nonetheless, in the current climate of low-interest savings accounts and volatile stock markets, growing numbers of people are looking to IFISAs as a home for at least some of their savings.

One such option I have used myself is Kuflink, a P2P property investment platform. They offer an IFISA with automatic diversification over a 1, 3 or 5 year term (you can also choose your own self-select loans within an IFISA wrapper). Note that until 30 May 2023 Kuflink are offering an enhanced promotional rate of up to 9.73% a year (gross annual interest equivalent rate) for their Auto-Invest offers. You can read my full review of Kuflink here..

Another potential IFISA option (which I am using myself this year) is Assetz Exchange. They prioritize lower-risk property investments, which you can invest in through a self-select IFISA. You can read my full review of Assetz Exchange here.

Lifetime ISA

Lifetime ISAs or LISAs are a new-ish initiative from the government to encourage younger people to save. They do have one big drawback for many readers of this blog – you have to be under the age of 40 (though over 18) to open one.

LISAs are designed for two specific purposes: buying your first home and saving for retirement. How they work is that you can pay in up to £4,000 a year (lump sums or regular contributions) and the government will top this up with another 25%. As long as you open your LISA before the age of 40 you will continue to receive the bonuses on your contributions until you reach 50.

So if you pay in the maximum £4,000 in a year, the government will top this up to £5,000. If you pay in the full £4,000 every year from the age of 18 to the upper limit of 50, you will therefore get a maximum possible bonus from the government of £32,000.

LISAs are therefore somewhat different from the other types of ISA mentioned above, but nonetheless any money you invest in one comes out of your annual ISA allowance (currently £20,000). So if you pay the maximum £4,000 into a LISA this year, that comes out of your £20,000 ISA allowance, leaving you with ‘just’ £16,000 to invest in other sorts of ISA.

Your money will grow without any tax deductions in a LISA, and you can also withdraw without having to pay tax. However, there are certain restrictions. In particular, you can only use the money in your LISA for one of two purposes: paying a deposit on your first home or saving for retirement. While you can access your money for other reasons, you will then lose 25% of the total, including your own contribution and the government bonus along with any investment growth. That means in many cases you will get back less money than you put in.

Summing Up

The 2022/23 ISA allowance is a generous £20,000 and offers the potential to save a lot of money on tax, assuming you are lucky enough to have this amount to save or invest. But, very importantly, it cannot be rolled over. So if you don’t use your 2022/23 ISA allowance by 5th April 2023 at the latest, it will be gone forever. It is therefore important to attend to this now and ensure you get as much benefit as possible from this valuable tax-saving concession.

As always, if you have any comments or questions about this post, please do leave them below.

This is a fully updated post from last year.

Disclaimer: Please note that I am not a professional financial adviser and cannot give personal financial advice. You should do your own ‘due diligence’ before making any investment, and seek professional advice from a qualified financial adviser if in any doubt how best to proceed. All investments carry a risk of loss.

Note, also, that posts on Pounds and Sense may include affiliate links. If you click through one of these and go on to perform a qualifying transaction at the website in question, I may receive a fee for introducing you. This will not affect any fees you may be charged or the product or service you receive.

Kuflink

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Simply Tax review

Simply Tax: A Low-Cost Online Service for Anyone Having to Complete a Self-Assessment Tax Return

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Regular readers of Pounds and Sense will know that I am not a fan of the DIY approach in matters related to tax.

In my blog post Two Places You Should Never Turn for Tax Advice Advice (and One You Definitely Should) I caution against relying on advice about tax from social media or even HMRC. And I strongly recommend getting help from a professional accountant if you are self-employed (even part-time) or run a business. As I said in that post:

Accountants are trained and experienced in all aspects of the tax system. They have both theoretical and practical knowledge of how the system works and how the (complex) rules are typically interpreted by HMRC. And they have to keep themselves up to date with the endless legal and procedural changes.

Also, unlike HMRC, an accountant is four-square on your side. They will advise you on the best way to organize your affairs to minimize your tax liability. They will answer any questions you may have, e.g. what records you need to keep. When the time comes, they will (if you want them to) compile your accounts and submit the relevant figures to HMRC in your tax return. And if any queries or problems arise, they will act on your behalf to try to resolve them.

A further benefit of having your accounts prepared by an accountant is that HMRC will know that a finance professional – someone who speaks their language – has compiled them. Other things being equal, this is likely to mean they will be more inclined to accept the figures and not dispute them.

Even if you aren’t self-employed or running a business, there may still be a strong case for getting an accountant to help with your taxes. Many older people, for example, have multiple streams of income, from stocks and shares to ISA accounts, property rentals to pensions. Some of this income may be taxable and some not, and varying tax rates and tax-free allowances may apply. Most accountants are more than happy to provide a service to people in this situation as well.

There is, of course, one drawback to engaging an accountant, and that is the cost. This will probably amount to a few hundred pounds a year (maybe more in some cases). Not to pay this, however, is in my view a false economy. A good accountant is likely to save you at least as much in unnecessary tax as they cost you. And the reassurance (and relief) of having a finance professional on your side when any queries with taxation arise is impossible to put a price on (but extremely valuable).

Of course, finding a good accountant who offers a service suitable for your needs isn’t always straightforward. And the amount they charge varies considerably. If you are looking for a keenly priced and easily accessible service, you might therefore like to check out what my friends at Simply Tax have to offer.

The Simply Tax Option

Simply Tax is a service run by professional accountants that provides a simple and inexpensive method for preparing and submitting tax returns to HMRC. They operate mainly online and are therefore able to keep charges to a bare minimum (starting from as little as £90). They say their service is for:

  • First time tax filers
  • Sole traders
  • CIS subcontractors
  • High earners (£100K+)
  • Landlords
  • Investors
  • Company directors
  • People living abroad
  • Anybody who needs a tax return

As the name indicates, Simply Tax aim to make the process of drawing up and submitting a tax return as simple as possible. In a nutshell, they say their procedure is as follows:

  • Create your free online account (just need your full name and email address)
  • Once verified, go into your user area and complete your personal information
  • Select the button to start your tax return (you’ll be taken to a screen to answer a few questions)
  • Once you’ve paid and been checked for your identification, simply drag and drop the information requested
  • We will do all the leg work and prepare the tax return for you
  • We’ll upload a draft tax return for you to review and approve electronically
  • Once you’ve approved, leave it to us to submit to HMRC

Although all of this is done online, you will be allocated a personal tax adviser whom you can contact at any time with any questions.

Simply Tax say their service will save you lots of time (they estimate between 70-80%) compared with filing your return yourself. They also estimate that their service is up to 50% cheaper than using a traditional high street accountant or tax advisor.

Finally, Simply Tax are fully regulated by the ICAEW (Institute of Chartered Accountants in England & Wales), providing added reassurance.

If you are looking for a straightforward, cost-effective way of preparing and submitting your annual tax return, in my view Simply Tax is well worth checking out. Okay, if you run a multi-million pound business empire it may not be for you. But if you are like most of us and just need a friendly, professional accountancy service who won’t charge an arm and a leg, they could certainly fit the bill.

As always, if you have any comments or questions about this post, please do leave them below.

Disclosure: This is a sponsored post on behalf of Simply Tax. If you click through any of the links and make a purchase, I will receive a commission for introducing you. This will not affect the fee you pay or the service you receive.

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