So, we’ve finally left behind one of the most tumultuous tax years in history. 2020/21 was a year defined by Covid-19, with market fluctuations and lifestyle changes aplenty. As 2021/22 gets underway, we are all looking forward to a year that’s a little more familiar both socially and financially.
There are a number of things investors can do to get themselves positioned for success in 2021/22. As economies begin to reopen following successful vaccination programs in some key countries globally, it seems appropriate that investors get themselves ready to capitalise on any potential growth.
So, with 2020/21 behind us, here are our top tips for the coming tax year to help you get your long-term personal finances in order.
Take time to assess any existing investments
The start of the tax year in the UK coincides with the beginning of Spring. After a difficult winter for everyone, now feels like a more appropriate time than ever to analyse your personal finances and create a positive plan for the future. A big part of this regular planning is taking stock of any existing investments you might have.
So, take the opportunity to see where you’re making progress with your existing investments and where you might be able to make improvements. Perhaps you have a few different ISA portfolios and are looking to consolidate for ease and in pursuit of better performance. Maybe you’ve realised that the fees you are currently paying on your portfolio are too high and the service isn’t living up to the price tag. Now is the time to consider your options.
Also, if we take a step back from ISAs for a moment – now may also be a good time to review your long-term financial options. If you want to see how much you should be putting away for your pension, use the Moneyfarm Pension Calculator. By putting in some simple information, you can see how much you should be saving each month to reach your long-term goals, which is a big part of making and adjusting plans going forward.
Use your ISA allowance early
As of April 6, the annual allowances for UK investors were fully reset. This means that, regardless of how much you put into your ISA in the 2020/21 tax year, your £20,000 allowance has been fully reinstated for 2021/22.
You don’t necessarily need to throw in a lump sum at the earliest opportunity, however. That’s a viable way of investing, but many prefer to contribute little and often to their portfolios to smooth out the cost of assets over time. Using pound cost averaging effectively can be a great way to find consistent returns over time, so there’s no reason to delay investing.
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Ultimately, the sooner you put your money into your ISA, the sooner it can be exposed to the potential growth that comes with it. Any returns you make will, in turn, generate returns of their own – the idea is that, in theory, your money then begins to truly work for you, with compound interest growing the value of your savings effectively over time.
Focus on the important things
Just as the 2020/21 tax year comes to a close, so too does the UK’s strict lockdown. After months of stay at home orders and closed businesses, April 12 will see shops and hospitality venues able to reopen (with certain limitations) and movement around the country begin again.
This is why, this tax year, we urge everyone to dedicate as much time as possible to the things we’ve all been missing out on over the last 13 months or so – socialise, travel, reconnect with work. The relatively sudden progression from isolation to socialisation may come as a shock to the system after being restricted for so long.
One way to give yourself more free time is to entrust your long-term financial planning to a professional. Personal investing takes a lot of time to get right, even before you consider the experience and knowledge it requires. As we get moving again, knowing that an experienced, proven team are managing our money on your behalf will make life after Covid-19 as stress-free as it should be.
To get started and see what a Moneyfarm ISA could do for your long-term financial plans, open an account today.
Get ahead of the game
In short, the 2021/22 tax year is all about getting your finances in order as early as possible. While we’re waiting for lockdown to fully subside and for society to open back up, now is the time to take stock.
Time is an investor’s greatest asset, which can mean one of two things under current circumstances. Firstly, investors currently have plenty of time that they would ordinarily spend socialising to assess and fine-tune their investments. Secondly, the earlier you start investing, the greater the potential for greater returns over the medium and long-term.
So, this tax year, why not set yourself up as early as possible. Take the time while we’re still in lockdown to assess any existing investments, to consider using your renewed ISA allowance and to figure out how much you can put away each month – you’ll thank us in the summer.