Maximise Your Tax Reliefs in the New Tax Year: A Guide to Smarter Savings

As a new tax year begins, it’s the perfect time to review your financial plans and ensure you’re taking full advantage of available tax reliefs. At Merranti Accounting, we help individuals and business owners make the most of their savings and investments. Here’s a practical breakdown of the key tools to consider.

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1. Pensions: One of the Most Efficient Tax Tools

Pensions remain one of the most tax-advantaged ways to save for the future. Both personal and employer contributions qualify for tax relief, with salary sacrifice schemes offering additional National Insurance savings.

• Tax-Free Growth: Investments in your pension grow tax-free.
• Withdrawals: From age 55 (rising to 58 in April 2028), you can start withdrawing. 25% of your pension pot can be taken tax-free (up to £268,275), while the remainder is taxed as income.
• Annual Allowance: You can contribute up to the lower of your earnings or £60,000 per year.
• Tapered Allowance: For high earners with adjusted income over £260,000, the annual allowance may reduce to as low as £10,000.
• Higher Rate Tax Relief: If you’re a 40% or 45% taxpayer, don’t forget to claim your additional relief via your self-assessment tax return.

Tip: Make use of carry-forward rules to use any unused allowance from the previous three tax years.

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2. ISAs: Tax-Free Flexibility

Individual Savings Accounts (ISAs) offer tax-free savings and investment growth — and they’re easy to access.

• Annual Allowance: £20,000 per person.
• No Tax on Withdrawals: There’s no tax on income or capital gains.
• Flexible ISAs: Some accounts let you withdraw and replace money within the same tax year without affecting your allowance.
• Types: Cash ISAs, Stocks & Shares ISAs, and Innovative Finance ISAs (for peer-to-peer lending).

ISAs are ideal for both short-term savings and long-term investing, especially for higher-rate taxpayers who may lose some of their personal savings allowance.

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3. Lifetime ISAs: A Boost for First-Time Buyers & Retirement Savers

The Lifetime ISA (LISA) offers a 25% government bonus on contributions — making it a great option for those saving for a first home or retirement.

• Eligibility: Must be opened before age 40.
• Contribution Cap: £4,000 per year (which counts toward your £20,000 ISA limit).
• Bonus: Up to £1,000 annually from the government.
• Withdrawals: Allowed after age 60 or for buying your first home (up to £450,000). Other withdrawals incur a 25% penalty.

For basic-rate taxpayers and self-employed individuals, a LISA can offer pension-like benefits — with the added flexibility of accessing funds for a first home.

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4. Premium Bonds: Safe, Simple, and Tax-Free

Premium Bonds, issued by National Savings & Investments (NS&I), allow you to save up to £50,000 per person. Instead of earning interest, your bonds are entered into monthly prize draws — with tax-free prizes ranging from £25 to £1 million.

• Risk-Free: You can withdraw your money at any time with no loss.
• Tax-Free Prizes: All winnings are completely free of tax.
• Great for: Emergency funds, conservative savers, and those looking for a fun alternative to cash ISAs.

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Summary: Which Savings Option Is Right for You?

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Need Help With Your Financial Planning?

At Merranti, we work with clients to:

• Structure pension contributions tax-efficiently
• Plan savings strategies based on income and goals
• Maximise ISA and LISA allowances
• Review employer and salary sacrifice options

Let us help you build a tax-smart financial plan for the year ahead.