As we head into the new tax year, and with lots of new changes coming from 6^th April, it’s important to stay clued up on how to make your money work as hard as possible.

From making sure you’re maximising available allowances to having your financial plans in order, David Murray, Financial Planning Expert at abrdn, shares his top tips on how to manage your money and make adjustments for the end of the tax year.

1. Get to know your spending and saving habits

First things first, be clear about what you’re looking for financially in the new tax year. Setting financial goals might seem a bit daunting but having a rough idea of what you’re saving for will mean it is more likely to happen. This doesn’t have to be your whole life plan written out – just some goals in mind to work towards and aim for.

A good budget is the cornerstone of any strong financial practice – understanding exactly where your money is going is essential when it comes to successful saving and can also help map out any debt repayments you may have.

There are many free money management apps you can download onto your phone that could be a convenient and powerful way to track your saving and spending habits and think about money in the right way. Alternatively, some banks provide useful online tools to keep tabs on your spending, so it’s worth seeing what your bank offers.

2. Make the most of your ISA allowances – before the new tax year

ISAs are one of the most tax-efficient ways you can save and invest as there’s no income tax, personal tax on dividends or capital gains tax to pay on any investment growth, interest you earn or money you take from it.

Currently you can save up to £20,000 in ISA products completely tax free in any tax year – meaning they are a very tax-efficient option for your savings and investments. While savers have been able to open and contribute to multiple ISAs in one tax year, they’ve never been able to do so through more than one of the same type of ISA.

But from 6^th April 2024, the new tax year, ISAs will become a bit more flexible. This includes the ability to be able to open and contribute to more than one of the same type of ISA. So, you could open and contribute to two stocks and shares ISA offered by different providers in the same tax year, for example. This wasn’t allowed before.

The annual allowance – which works on a ‘use it or lose it’ basis – will remain unchanged at £20,000 across all of the ISA products. So, if you’ve not invested more than £20,000 into an ISA in the last 12 months, or you’ve not opened or used one at all, you’re at risk of missing out on the tax-free benefits they bring. If you’re able to put some money away into savings before 6^th April this year, it’s a good idea to save into ISAs. After 6^th April, the new tax year starts, and the £20,000 tax-free limit begins again.

Whether it be a Cash ISA for an emergency fund, a Lifetime ISA which could help you save for your first home (and save for retirement), or a Stocks & Shares ISA for slightly longer-term goals, there are various options to choose from.

Also, if you want to save for your children or grandchildren, they get their own Junior ISA allowance of £9,000 in addition to the £20,000 allowance you’ll have. So a family of four could shelter up to £58,000 of their savings and investments each year from the taxman.

And keep an eye out for more announcements on the brand new UK ISA. While we’re yet to find out how this will work in practice, this will offer an extra £5,000 tax-free allowance each year alongside the usual tax advantages of an ISA to give savers a further boost.

3. Don’t forget about your pension

Your pension is a tax-efficient way to save for your future thanks to the tax relief you receive on any of the contributions you make to it. It’s also a good way to reduce your taxable income, and you may even be able to benefit from matching contributions from your employer.

You can normally contribute as much as you earn each tax year into your pension, up to the annual allowance of £60,000, and benefit from tax relief on your contributions.

The way tax relief is applied depends on the type of pension scheme you’re in and how you make payments. In a lot of workplace schemes, your employer deducts your pension contributions from your salary before tax is collected – known as salary sacrifice.

So there’s no need for you to claim tax relief yourself. But in other schemes you may need to claim the tax relief from HM Revenue and Customs. If you’re not sure how your pension plan works, speak to your employer, your provider, or a financial planner.

As of 6th April 2024, there will no longer be a maximum amount of pension savings that you can build up over your lifetime. The limit, known as the Lifetime Allowance (LTA), is currently £1,073,100. Any excess was previously taxed at a maximum of 55% but from the new tax year this will no longer be the case.

4. Get to grips with new changes to the CGT allowance

Don’t forget about your capital gains tax (CGT) allowance and how this will change. CGT is paid on any gains you make when you sell an asset – for example, if you make a profit when you sell a second property or investments that aren’t held in an ISA or pension.

However, you have an annual CGT ‘exempt allowance’ within which no tax is due. The government has announced that the CGT annual exempt amount will reduce from £6,000 to £3,000 from 6^th April 2024.

If you’re affected by the change at the turn of the tax year, you might consider holding any investments within a tax-efficient option, like a stocks and shares ISA or your pension, so that the value can grow without attracting CGT. Tax planning can be complex and in a world of shrinking allowances, knowing all the allowances and reliefs you could make use of and the best way to do that, can be easier with specialist advice.

Remember too that how much income tax you pay in each tax year depends on how much of your income is above your Personal Allowance and how much of your income falls within each tax band.

5. Stay ahead of the game!

It’s very easy to fall into the trap of not prioritising taking control of your finances and tax planning.

However, it’s worth considering how you, and your finances, might benefit from being an early bird in the new tax year. For example, you may achieve better outcomes if you feed money into a Stocks & Shares ISA gradually over the course of the year, than if you fill it fully just before tax year end.

And if you’re at all unsure about what you should be doing, get support from a financial adviser.