The end of the tax year is upon us! It’s a bit of a big deal in the finance world and so naturally there is quite a lot of chatter about it on social media. We get it, but to those who don’t live and breathe financial lingo, it might be a bit confusing. Here's the key definitions you'll need to know...
End of the tax year
The financial year differs from the calendar year in that it runs from April to April, rather than January to December. It’s the period of time in which all taxable activity, such as earning or investing is counted. This year, the end of the tax year falls on the 5th April 2023.
Trivia: The date of the end of the tax year has been the same in the UK since 1800, following a few centuries worth of events such as switching from the Julian to Gregorian calendar, and an unexpected leap year.
ISA
ISA stands for Individual Savings Account. It works in the same way as a standard savings account does, except you don’t pay any UK income or capital gains tax on it. There are several different types of ISA available, so you can make sure you’re choosing the right one for you. These include:
Stocks & Shares ISA
Cash ISA
Lifetime ISA (LISA)
Junior ISA (JISA)
ISA Allowance
The government sets an annual limit on the amount of money you are able to deposit into ISA accounts during the tax year. The ISA allowance is £20,000. You can choose how you utilise your allowance, whether that be topping up one ISA, or splitting it across different kinds. However you use your ISAs, the total amount across these accounts cannot exceed the annual allowance.
‘Use it or lose it’
This is nothing more than a scare tactic, used by a few investment providers as the end of the tax year approaches. They do this to make you feel the heat and deposit as much cash as possible into your ISA. Keep in mind that you should only make full use of your allowance if it’s the right thing for your circumstances. For most of us, there’s no need to rush to max out our ISAs, you’ll still start the new tax year on the 6th April with the same allowance of £20,000!
Capital at risk
You may have noticed that we include this term on some of our social media posts. Capital is another word for money. Although it sounds harsh, we don’t use it to scare you or to ‘cover our backs’ in any way. It’s just a fact with investing – there is more risk involved in than if you were to leave your money in a savings account. That might seem daunting, but we have a full team of advisers on hand ready to help you make the right investing decision – even if the right decision is to not invest!
