How to give your money a “mid-season medical” before tax year end

How to give your money a “mid-season medical” before tax year end

As we rapidly progress towards the business end of the season, you might be preparing for a run in at either end of the table.

No matter what league you’re playing in or who you’re plying your trade for, you’ve likely been pushing yourself on the training ground and in the gym to make sure you’re in top condition for this pivotal part of the year.

But while you’ve been working on your fitness, have you ever given your money the same thought? With the new tax year round the corner in April, this is almost like a brand-new season for your wealth.

The new tax year will start at midnight on 6 April. So, ahead of this key date, it might be an ideal time to give your money a “mid-season” medical and check that your finances are healthy and where they need to be to keep you on track for your financial goals.

Read on to discover where to assess your financial fitness ahead of the new tax year.

Check your savings are in shape

A sensible place to start when assessing your money is with your savings.

In many ways, your savings are the equivalent of cardio work for your money, giving you a solid basis to build the rest of your financial plan on.

Elements you may want to consider when checking that your savings are well suited for you could include:

  • How much of your wages you save each month
  • The interest rate you’re receiving on your cash
  • Whether you have a sufficient emergency fund.

The last of these can be particularly important. You never know when you might need money to live on in a pinch, whether that’s unexpected repairs to your car, or even finding yourself out of contract in summer and needing money to tie you over while you search for a club.

In events like these, you might well need a reserve fund of cash to draw from. So, consider keeping three to six months’ worth of your expenses in an easy access savings account, just in case you ever do need it.

Make your investments work as hard as possible

Once you’re satisfied that you have a stable basis in cash, the next area you might want to consider is making sure your investment portfolio is working as hard as it can for you.

Designing an investment portfolio is a lot like structuring your fitness regime. Just as you need to find the workouts that fit with your targets and your body, it’s important to focus on suitable investments that fit with your goals and tolerance for risk.

Additionally, in the same way that you vary your workouts to target different muscles and goals, you also need to ensure your investments are suitably diversified across industries, sectors, and geographical regions. This can help manage risk and prevent your entire portfolio from relying on a single type of investment.

You may also want to consider how your investments will be taxed, and what you might be able to do to mitigate this. Find out more in the next section.

Mitigate tax to keep your money fighting fit

Your tax bill is likely to be different in the 2023/24 tax year, with a range of changes that could see you have to pay more tax, both on your income and on your investments.

Major changes that will come into effect from 6 April 2023 include the:

  • Lowering of the additional-rate Income Tax band. The threshold at which you start paying additional-rate Income Tax will be reduced from £150,000 to £125,140, meaning any of your taxable income between these two figures will now be subject to the 45% top rate of Income Tax.
  • Reduction of the Capital Gains Tax (CGT) exempt amount. From 6 April, the amount you can generate in capital gains, such as on non-ISA investments, will fall from £12,300 to £6,000. This will also be further reduced to £3,000 in April 2024.
  • Reduction of the Dividend Allowance. The Dividend Allowance, which allows you to earn dividends before Dividend Tax is due, will fall from £2,000 to £1,000 on 6 April. From April 2024, it will be further reduced to £500.

In combination, these tax changes could see you liable to pay more tax from April 2023. As a result, it might be useful to assess whether your money is as tax-efficient as it can be.

There are various methods you could use to do this. For example, you could consider saving and investing through ISAs, shielding your money from any further Income Tax or CGT.

You can save and invest up to the ISA Allowance (£20,000 in 2022/23 and 2023/24) each tax year. This resets on the first day of each new tax year, so you’ll lose any remaining allowance from this year if you don’t use it before 6 April.

Similarly, you may want to make use of any of your remaining £12,300 CGT exempt amount in the current tax year by liquidating non-ISA investments up to this limit, especially as this exemption will fall to £6,000 in the new tax year.

Tax is often complicated and you need to make sure that anything you do remains within the current rules. It may be sensible to speak to an expert before you make any decisions.

Make sure your debt isn’t holding your financial fitness back

Debt is almost the financial equivalent of pushing yourself too hard in training – while it might feel like you’ll achieve your goals sooner, it can actually lead to injuries, affecting your entire training plan.

Certain types of debt can be useful tools for achieving your financial goals, such as mortgages and credit card borrowing. However, it can also drag you down if you don’t manage it prudently.

MoneySavingExpert provides a useful example of why this is the case. Their figures show that if you borrowed just £3,000 aged 21 and only made the minimum repayment on it each month, you’d be almost 50 before you cleared it.

In practical terms, that would be borrowing money right at the start of your playing career and then still paying it off well into your second career, and maybe even retirement.

This could have a knock-on effect on the rest of your finances. So, take this opportunity to assess your borrowing and make sure that it’s still suitable for your needs.

Get in touch

If you’d like to work with an expert to put your money through its paces ahead of the new tax year, we can help at ProSport.

Email or call 01204 602909 to find out more.

Please note

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only. All contents are based on our understanding of HMRC legislation, which is subject to change.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

The Financial Conduct Authority does not regulate tax planning.