Back to Stash

Live Better Blog: Happy New (tax) Year!

A new tax year is soon to arrive, beginning on April 6th and running until April 5th, 2022. This means that HMRC is currently busy working out how much tax you have to pay based on the income (and capital gains) you receive during these dates.

Although a lot of the paperwork is completed on your behalf by your employer (if you’re self-employed, you’ll do this yourself through your self-assessment), there’s still some things you should know about how it can affect your personal finances – particularly, your savings.

How does tax affect savings?

Individual Savings Accounts (ISAs) are a way to save that guarantees tax-free interest on your savings (some of them even offer tax relief in the form of a bonus on your savings). At the end of each tax year, various allowances on these savings pots will run out, such as the amount you can pay into a Lifetime ISA (LISA), which is capped at £4000 per year.

Although the tax year ends at midnight on the 5th April each year, it can take a few days to open a new ISA, and some providers require a few days to transfer the money over. So don’t leave it too late, as it’s good to be prepared before the deadline comes around.

If you have an ISA, or would like to open an ISA, here’s what you need to know.

The government gives you an annual allowance for how much you can save tax-free. The overall amount for ISAs is £20,000 per individual.

There are different types of ISAs available, so it’s important to choose the one that best aligns with your financial goals:

  1. Cash ISA: This is a low-risk ISA, and is best used for short-term savings goals.
  2. Stocks and Shares ISA: Can be higher risk and is typically used for longer-term goals.
  3. Lifetime ISA (LISA): Can be Cash or Stocks and Shares. Benefits from a 25% government bonus each year (up to £1k per year) but can only be used towards a deposit for a home or for later in life (60 onwards) without losing the bonus.

Making the most of your ISA allowance.

Your ISA allowance refreshes each tax year, so you don’t have long to utilise your available allowance in the current tax year and get any associated bonuses, such as the 25% government boost on a LISA.

You can, however, split your annual allowance however you like across the different ISA types each year, such as putting £1,000 in a LISA, £1,000 in a Cash ISA and £1,000 in a Stocks and Shares ISA.

Ultimately, how you use your allowance depends on your current financial position and what your financial goals are. For example, if you have any high interest debt, it’s best to pay this off first.

If you find yourself struggling with debts, MoneyPlus Advice is always on-hand to provide expert, stress-free financial advice.

Most people don’t use their full ISA allowance every year, but something is always better than nothing, and you should only put in what you can afford. Each year, you have the same opportunity to maximise your ISA allowance.


Although there’s no limit to how much you can put into a pension, personal pension contribution allowances are also set by the tax year.

Your pension will stay tax-free for as long as the money stays in your account, and once you’re over 55, you can take out up to 25% of your pension tax-free, with the balance being taxed as income.

To find out more about the different types of ISAs you could have, visit the Money Advice Service.