Top 10 end of year tax errors to look out for

THE END of the current tax year - April 5 - is fast approaching, and careful planning now could save you a surprising amount of money later, says Laura Suter, director of personal finance at AJ Bell.

- By HARVEY JONES

“From savings interest and ISAs to pensions, investments and family finances, small decisions can have a lasting impact on your tax bill.”

Suter lists 10 of the most common end-of-year tax mistakes and simple steps for savers to protect their cash.

Assuming savings are tax-free. Rising interest rates and frozen thresholds have changed the picture considerably. The tax-free personal savings allowance (PSA) has been frozen at £1,000 since 2016, falling to £500 for higher-rate taxpayers.

Today, the income tax threshold freeze is pushing millions into higher tax brackets, where their PSA falls or disappears altogether.

Suter says: “As interest rates have risen and people earn more on savings, many are exceeding PSA limits and paying tax on their interest.”

Moving savings into a Cash ISA shields them from tax, while a Stocks and Shares ISA offers potentially higher tax-free growth and dividend interest in the long run.

Wasting ISA allowances. The annual £20,000 ISA allowance is issued on a “use-it-or-lose-it” basis. It cannot be carried forward into the next tax year. “Failing to use your ISA allowance before April 5 means permanently losing tax-free protection on savings and investments, which could cost thousands in future tax on interest, dividends and gains,” Suter says.

Allowances apply per person, allowing couples and families to shelter large sums.