Make the Most of Your Extra Day

One day that could save you thousands.


We thought we should remind you that on February 29th, 2020 we have an extra day, and it’s on a Saturday! Just think how you could use those additional 24 hours, (suggestions welcome in the comments below). However, if you find yourself with time on your hands, why not use it to start getting a grip of your finances and even prepare yourself for the end of the tax year on April 5th. As the saying goes, ‘use it or lose it’.

Why should you take advantage of this? It gives you another 24 hours before the end of the tax year on April 5. If you’re saver paying UK tax, April 5 is probably the single most important date in the year, because, by making full use of all your allowances before that date you can potentially save yourself thousands of pounds.

For retirement planning, if you’re still working, the most important of these is the personal pension allowance of £40,000. You can pay this amount into your pension scheme in any given tax year and receive a generous bonus from the taxman in the shape of 20% tax relief. This means that HMRC will add £8,000 to your £32,000 contribution – and potentially double that, if you’re a higher rate tax payer.

Not only that, but if you haven’t used your allowances for up to the previous three years, this is your last chance to take advantage of them. If you haven’t paid in anything this year, or for the previous three years, you could pay in up to £160,000. This means that if you make a contribution of £128,000, the taxman will top it up with another £32,000.

Also, if you’ve already reached retirement and have no earned income, you can still contribute up to £4,000 gross a year to your pension and benefit from the tax relief.

Not only that, but if you haven’t used your allowances for up to the previous three years, this is your last chance to take advantage of them. If you haven’t paid in anything this year, or for the previous three years, you could pay in up to £160,000. This means that if you make a contribution of £128,000, the taxman will top it up with another £32,000.

Also, if you’ve already reached retirement and have no earned income, you can still contribute up to £4,000 gross a year to your pension and benefit from the tax relief.

You also have a personal annual ISA allowance of £20,000. Within the shelter of an ISA, any dividends, interest or capital growth are income tax and capital gains tax free. They can be an attractive savings vehicle, particularly if you’ve used all your personal pension allowance. You can contribute up to £20,000 to your ISA or ISAs in any tax year, but this allowance can’t be carried forward.

Of course, you also have your personal income tax allowance of £12,500. If you’re drawing down your pension, make sure you have made full use of this year’s allowance and – as with all allowances – don’t forget to ensure your spouse makes full use of their allowance too.

Finally, there’s a annual Capital Gains Tax Allowance of £12,000, which could be relevant for some people.

With low interest rates, savers are seeing historically low rates of return on their investments and this means that these bonuses from the taxman can be the equivalent of several years of returns earned purely by your investments. No saver can afford to neglect them.

The tax year ends on April 5, but don’t leave it until the last minute to take advantage of these personal tax allowances. At Reeves, we will be only too happy to advise you on how these allowances can best be used in your own personal circumstances, but do try to get in touch with us before March 20. Remember, you have an extra 24 hours this year – make the most of it.

Reeves Independent offers a free review of your pension situation. Click the button below to get started.


These articles are for information only. These articles are based on specific clients and their situation may be different from yours. No advice should be conferred from the articles. No action should be taken without independent professional financial advice as any actions on your pension may be irrevocable and have a big impact on your income in retirement.

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