A tax year is simply the 12-month period that HMRC looks at to work out how much tax you should pay. In the UK, the tax year always runs from 6 April to 5 April the following year.
At the start of the tax year, all your tax allowances restart. That includes how much you can earn before being taxed and how much money you can put into an ISA or tax-exempt savings plan.
Who does the tax year affect?
The tax year affects everyone who pays tax, but most people won’t need to do anything different when a tax year ends and a new tax year starts.
If you’re employed, you’ll simply continue to pay tax as usual. In the UK, you don’t need to work out how much tax you’re due to pay unless you’re self-employed or have additional, taxable income.
There are two main groups of people who might need to be aware that the tax year is changing:
How can savers be tax-year savvy?
If you want to make the most of tax-free saving and investing, it makes sense to be aware of when the tax year restarts so you can save or invest as much money tax-free as you can each year.
The overall ISA limit per tax year is £20,000 (including any lifetime ISA contributions). If you'd like to put more money into a OneFamily ISA or Lifetime ISA before the end of the tax year, you can top-up by logging in here.
The end of the tax year is particularly important if you have a lifetime ISA as the more you pay in, the bigger your government bonus. If you manage to reach the £4,000 allowance limit by the end of the tax year, you’ll get the maximum available government bonus, which is £1,000.
You can’t carry any unused limit into the next year so any government bonus you miss out on will be permanently lost.
For many people, it’s just not possible to save right up to the allowance limit. But it’s important for everyone who invests in ISAs to be aware of it and to understand how the tax year affects how much you can save.
If you do receive a lump sum – perhaps through inheritance or a work bonus – this information can help you work out when, and where, to invest it.
OneFamily's Stocks and Shares ISA
Our Stocks and Shares ISA invests in the stock market on your behalf, so it could be a good way to start exploring investing, especially as it comes with just three simple fund choices. We charge 1.1% Annual Management Charge and no platform- or fund-level fees.
Like with all investments, the value is likely to go up and down over time so there is a risk that your investment could be worth less at the time you choose to withdraw your money.
OneFamily's Lifetime ISA
Our Lifetime ISA comes with a government bonus of up to £1,000 each tax year. Every time you pay in, the government adds another 25%. You can pay in up to £4,000 each tax year, meaning there's up to £1,000 a year of bonus money up for grabs!
Lifetime ISAs are designed exclusively for first-time buyers, or for saving for life after 60. If you withdraw money for anything else, you'll be charged a government withdrawal charge.
Our Lifetime ISA also invest in stocks and shares so the value is likely to go up and down over time. There is a risk that your investment could be worth less at the time you choose to withdraw your money.
