New financial year, new financial allowances

A new financial year can bring a fresh start, while the end of the previous year is a chance to tie up loose ends

Why does our financial year start in April?

A combination of errors by Roman priests after Caesar died and the English Protestants’ refusal to follow Rome and switch in the 16th century, meant calendars in the UK were out of sync with the rest of Europe. By 1752, many celebrated the New Year and paid their taxes on March 25. To keep it a full tax year and not lose income, the financial year was moved to April 5. The extra “leap” day added in 1800 moved it to April 6, where it has stayed.


Use this year’s Cash NISA allowance

The amount you can pay into your new individual savings account (NISA) each year was increased to £15,000 last summer, and you have until April 5 to pay in as much as you can up to that limit. Once the new tax year starts on April 6, you can either put money into an existing NISA or open a new one—this time with an annual allowance of £15,240.

Keep an eye on the interest rates of any ISAs from previous years too. If rates have dropped or bonuses ended, you can often move your money to better-paying accounts. Just remember to ask your bank to transfer the money for you rather than withdrawing it yourself to make sure you don’t eat into the new tax year’s allowance.


Give gifts to protect your inheritance

If you think your estate might have to pay inheritance tax, there are some simple things to consider doing to help reduce it. Normally, any money you give to other people in the seven years before you die is subject to inheritance tax, but each financial year you can give away up to £3,000 and it’s exempt. If you didn’t do this the previous year, you can carry it forward for one tax year. In addition, you can gift up to £250 to as many people as you want per tax year and, again, your estate wouldn’t have to pay inheritance tax on any of these.


Spread your profits across both years

When you sell certain assets, such as a second property, shares, jewellery or piece of art, you usually have to pay capital gains tax on any profits. Each tax year you get an allowance of £11,000 in profits before the tax is due. Some things are exempt, such as cars, and there are other exclusions such as a £6,000 cap on some personal items. It’s charged at two rates, 18% or 28%, depending on whether you’re a basic or higher-rate income-tax payer.

If you’re planning to sell some valuable assets soon, see if you can take advantage of the £11,000 profits threshold for this financial year. Then from April 6, you’ll have a fresh allowance before any tax is due if you sell again.