Everything you need to know about tax year end

We think women need to talk more openly about money. Embarrassing or confusing. Join the conversation. We'll be discussing a whole range of topics. Hello and welcome to this episode of the AJ Bell Money Matters Podcast. I'm Danny and if you're a regular listener, and why wouldn't you be, then this episode is going to feel a bit different. It is our tax year end special. It's going to be full of tips and tricks to make the most of your allowances.

really useful if you are already investing. And for our newbies, we're going to take you through what those allowances are, breaking down all the jargon and keeping things really simple. You might have noticed Laura isn't with us this week. She is taking a well earned break, but I've drafted in.

a couple of other members of our Money Matters team. If you read the articles on our website or you've listened to our other podcasts, you will know their names. Rachel Vay and Charlene Young. Welcome, ladies. So I'm gonna play interviewer for this episode, uh, and I'm gonna push you guys to do all the explaining, which is really nice because I feel like I'm having a bit of a break. Um So I'm gonna start with the absolute basics. And this one comes your way, Charlene, because

Some people will be wondering what on earth we're talking about, what is tax year end? And why does it happen on a seemingly random day in April, not at the start of either the new calendar year or even on the first of April? Well, tax year end, I guess if I was gonna describe it, I'd call it like a financial anniversary, financial birthday. So As you've mentioned, um, every year on the fifth of April, one tax year ends, and the next day, the sixth, another one begins.

And for our personal finances, um, it's really important because that's when various allowances or tax allowances, as you've mentioned, restart. And we'll kind of go into what they are a bit later, I expect. You'll be uh cuzumi on that Um so yeah, as you mentioned, the UK a bit of an outlier when it comes to the dates. So lots of countries have a tax year in that actually runs in line with the calendar year. So your first of January to the thirty first.

December. Most notably um I think the USA and also some of the countries using um the European Now, our tax year end in April has been that way for actually hundreds of years. It used to run with a different type of calendar um to that calendar year end and then it basically's just been transferred across and it just so happens that it falls on the sixth of April. Um, it is a bit weird, not gonna lie, but lots of systems and tax calculations and everything are built around it. So, you know.

Every few years there seems to be a debate on changing it. that would be massive and actually no one can really agree on that what date we should use. And do we really want to have sort of ICE season and the festive season at the same time? I know I probably get more excited about ICE. On the street. Yeah, it feels like quite a lot. And I think some of accountants our accountants probably would have a few things to say about.

Yes, I can imagine. I got caught out'cause I was writing an article for an Irish newspaper recently based in Dublin and I was talking about TaxUN. They were like, No, no, ours is the start of the year That actually makes sense. But then I figure when we have to deal with self-assessment deadline of the thirty-first of January, we don't want anything else in January, let's be honest. we've spoken about there clearly tax year end, it is a factor. So what if you're an employee?

Yeah. So as we mentioned, that new financial year, that anniversary brings with it new allowances. And when we talk about tax allowances, we actually cover quite a few different things. So kind of really importantly for us, you know, earning how much you can earn a year tax free, but also how much you can pay into accounts like ISIS, so individual savings accounts.

how much interest you can earn from your non ISA cash each year and actually the amount um you can get as dividends before income starts uh income tax starts to become due. So

Many of these allowances have actually also been frozen since twenty twenty one now, and they are going to continue to be frozen until at least twenty twenty eight. Um, some of those investment ones that I mentioned have actually even been slashed in the last few years. So whilst employees might not have seen um the tax rate rises on their incomes.

Frozen allowances are sometimes called a stealth tax because they lead to people paying more tax over time. So if you think as your salary or your wages are hopefully going up, if the amount you can earn before tax is still frozen, actually it ends up capturing more of your increased earnings over time and meaning that you're gonna end Um your income and your earnings for a tax year and that of your partner um also infect affects your uh entitlement to certain childcare support.

So things like child benefit and uh tax free childcare. Um and I know that you've been talking a lot about something which has become quite a trend on TikTok, which is this a hundred thousand cliff edge. which really impacts your ability to, you know, claim that. Tax free childcare. Yeah, absolutely. I mean, I never thought I'd become it's not me personally, I'm sound like a bit of a narcissist now, but um talking about tax would become trendy on TikTok. It's like one of my dreams, I think. But

Yeah, it you know, the the UK tax system is complicated. I won't go into all of it just now, but um there is this particular Cliff edge and distortion where someone with income that tips over£100,000 actually starts to be worse off. um for a while. So when you take into account things like a personal allowance that is lost, so that amount you can earn tax free each year, that starts to be lost if you if your income reaches that£100,000 level.

Also, your entitlement to different types of childcare support, notably tax-free childcare, like you've mentioned. So once you add in the impact. There's a lot. uh support allowances and the lost tax free personal allowance. There's this horrible gap where somebody actually um would need to earn uh nearly sort of forty thousand pounds more after a hundred thousand pounds to actually take home the same amount once you add

So yeah, it's um it's something I've sort of done a bit of work on um in the press as well. And it's just it's just bizarre and you know, we're all here, you know, you think earning a hundred thousand pounds, oh that that sounds like

You know, I don't feel very sorry for people like that, but we've got that uh system where it's actually putting people off working more, uh putting people off investing in the UK. It kind of goes against everything we've seen the Chancellor try and reverse in uh recent months. Let's bring Rachel in here now. Um, Rachel, I know pensions obviously are going to be an internet sensation. They always are, yes, absolutely.

I think it's one of those subjects people are probably more interested in than we give them credit for. Um you always think pensions is quite a dull subject, but if I usually if I tell people I work in pensions then I've usually got a queue of people asking me very random questions. So yeah, big interest.

I know whenever we go to a money matters event and we say Rachel's here to talk pensions, I find that you are swamped by people coming to you afterwards and asking, yeah, very personal, often very Obtuse and unusual questions, but uh um is there anything about tax year end that's relevant when we're talking about pension?

But something that's very relevant to what uh Charlene's just been speaking about and the fact that you might be near a threshold where you start paying more tax. And Charlene's covered the hundred thousand pound threshold which is really m important and, you know, as a as she said, is gaining a lot of interest.

But it could be some people who are around just going from paying um basic rate tax to gain to paying higher rate tax and they're just very close to that threshold. Um well Pensions are absolutely brilliant when it comes to tax advantages and I know that both Charlene and I can ravit on for ages about how good they really are. But one of the magic tricks that they have is that you don't pay any income tax on your pension contribution.

So if you make a pension contribution, then what it can do is to reduce your taxable um income. And that way, if you are just slightly over one of these thresholds, there's um just slightly over p going into just over a hundred thousand or if you're slightly over the fifty thousand two hundred and seventy pounds which means you're going to pay higher rate.

If you pay a pension contribution, you can just bring your salary just under that threshold. And it just means that you you pay less tax in the long run. So it can be really, really helpful. Um and another way that if you sat there thinking, Well, I'm not really gonna get up to a hundred thousand, Rachel, but thanks for the thought. But if you really want to think about another way Is child benefit.

Um we know that if you earn between or the person in the household who earns the most is earning between sixty to eighty thousand pounds, then the child benefit slowly gets taken off them. So again, if you're close to those thresholds and you want to grab back a little bit more of your child benefit. um or you want to um not face a bigger n as big a tax charge on your child benefit, then what you can do is pay a pension contribution and bring your taxable income just slightly under

And again, you might get some of some or all of your child benefit back. So it pensions can really do some some proper magic around there. I love that. Talking about pensions being

Um, for people that haven't got a clue really, that they just get used to their hopefully their pension coming out of their wages every month, or maybe they've set up their own pension, but just remind everyone how much they can pay in Yeah, well this is actually a lot more complicated than it it should be in practice. It should I should be able to give you a figure and then that would be it. But it's actually gonna be it's actually quite complicated. So

I'm going to keep this quite simple. Most people will be under the allowances. And that's probably the first thing to say, well under their allowance. But sometimes you get an extra payment. Maybe you've got an inheritance or you um been made redundant or something like that. So knowing how much you can pay into your pension I think is always helpful, even though you most of the time you don't really need to know about

So there are probably two main things to know. The first one is that you can pay in your personal contributions as much as you can earn. Okay, so that's hard stop. You can only pay in as much as you earn. So if you earn twenty thousand you can only pay in twenty thousand pounds. The second thing is that all all the contributions going into your pension. So this includes ones that you've put in, or ones that your employer has put in, or maybe even ones that your partner has put in for.

All of those together, those can't be more than sixty thousand pounds. And this is called the annual allowance. Now There are some exceptions to this rule because that's the great thing about having rules, isn't it? There's always exceptions. And the first one is that you can put maybe more than sixty thousand pounds if you look back and think I haven't used up that sixty thousand pound allowance in previous taxes and the coup few taxes in the one-up.

So I'm gonna put in a little bit more, but remember you've still got this one overriding that says you can only put in as much as you personally earn. The other thing you might have is that that allowance, that£60,000 allowance, might be less than£60,000. And that's because you are a really high earner. You have to be earning quite a lot of money for that to count.

Or because you've already accessed your defined contribution pension. So a pension which is like a a SIP or a personal pension or a stakeholder plan, if you've already taken some money out of that. then it's likely that your annual allowance is going to be reduced and it will be reduced right back to ten thousand pounds. So it is really complicated, but it's probably just worth having this

First one as your personal contributions as much as you earn and your second one, the annual allowance, and just keep having those in the back of your mind. If you are in the position you can just put in a little bit extra into your pension.

They don't like to make it easy, do they? I tell you. No. Laura and I on last week's pod spoke about um all the bill increases that are happening in what has been dubbed awful April. And um Laura of course was sharing that She called her daughter April and now sometimes regrets it because she has to use that phrase quite a lot. And um so we spoke about changes to the state pension, changes to benefits. So if you didn't catch that one, do listen back.

We also spoke about national insurance contributions, both on the last pod And we've spoken about it before as well. I'm just gonna mention that things are changing from the tax year end because after the fifth of April you'll only be able to plug holes in your contributions going back six years. So again, if you've been putting off taking action You've heard us speak about this before, and we've said, look, now is the time. You have until the fifth to fill in a callback request.

With DWP, but you just must make sure that you do take a photograph to prove that you have filled in that callback request. And of course, as with everything that we talk about on here, do remember everyone's situation is different. So just check. that it is the right decision for you to plug those gaps and you can still plug six years worth of gaps even after the sixth of April.

Let's move on from pensions to other investments because I think that 11.59 p.m. on the 5th of April is a really important date and time, Charlene. Very specific for investment. Yeah. So um we've sort of mentioned tax allowances and what you can pay and so it's probably worth um after hearing Rachel talk about pension allowances, talking about other So eleven fifty nine, those allowances, uh, that will be your last minute to use them before uh everything gets reset and reset for another year. So

ISIS, individual Savings accounts, those tax-free accounts that we we love and we talk about a lot actually. Um, we all have a quite generous allowance of twenty thousand pounds a year uh to use across all of those different of ICE. So most notably your investment, so your stocks and shares ISA, your cash flavour. That also includes the lifetime ISA for anyone who has got one of those.

So that twenty thousand pounds covers all of those accounts. Um there's also the junior version of ICER accounts um for under eighteens and they come with a a generous allowance as well of nine thousand And like I said, anything you don't use before midnight is lost. So unlike those pension allowances where you might be able to carry over something um that you haven't used, if you've, you know, come into a bit of money and want to stack

Um, ISO allowances a little bit more simple. You have that fixed amount, you use it or you lose it. Um, you know, as I mentioned yesterday. For people who are able to use them up, you'll get a brand new set. on the 6th of April. And I think if you can, uh using these allowances early in the tax year often means you're getting in there early with the benefits of things like compound returns, compound interests, if you're able.

We speak about compound interest a lot. It's one of Laura's favourite topics to talk about. Look, when we're thinking about money that people have made from their investments over the past year, maybe they did get in early. What can they be thinking about here to protect their investment growth from the taxman?

Yeah, so as I mentioned, I love ISIS. I love pensions too, obviously. It'sn't my job title. But um why do we love them so much? Because, you know, along with mm sometimes tax bonuses on what you pay it I know I'm not supposed to be using jargon terms, but I will forgive me. Um I will sometimes refer to them as rappers because I think that's quite a nice you know, Magic Isa rapper, it raps

Um but that's my pass and I've used it now. So anything else, Danny's gonna get very cross with me. So um back to investments, I digress. So if you're selling some investments that haven't been held in one of those kind of magic eye. You do need to keep an eye on something called capital gains tax. So for capital gains tax, that's looking at money you've made when you sell an investment, your profit.

they're just referred to as gains and investment lands. So everybody gets um a tax free allowance for gains as well that aren't in an ISR each year. Um that's three thousand pounds uh for this tax year and it will be three anything that you've made or any profits or gains above that three thousand Will be subject to capital gains tax. The exact rate depends on your income, actually. But the important thing again is you can't carry this allowance over into a new year.

So let's talk about the new tax year then. Um, because allowances are reset, people are coming in fresh.

Um let's start with investments and then I'll come and talk again a bit about pensions just to sort of catch up on where we are. Yeah. So if you've as I mentioned if you've got investments outside of these tax rates And you want to keep the actual investment, you like that company share, for example, you like the prospects, but you know, you're interested in kind of sheltering it from tax because you're hopefully going to make some money.

Um you can get them wrapped up within an Icer using something known as a bed. It's a weird name. It's uh it's a really weird name. I think it's goes back to some historic tax rule again. But it's called a better nice so you will see that around uh whoever you you provider. So what does it mean? It's where your provider you can tell them to sell an investment and then they can immediately buy it back.

And so at AJ Bell, for instance, that means one dealing charge for shares rather than one for selling the share and one for buying it. And you're actually out of the market for less time because you're not waiting for the sale to complete and then you're not moving the money yourself. Your provider will do that for you if you tell them that's what you want to do. um, things to watch out for, as well as capital gains tax. You know, if you are making profits when you sell that investment.

Um, you know, keep an eye on that. You might face some other costs like stamp duty on UK shares and there will still be a small difference between the buying and selling prices you get for that share, even if the actual kind of uh transaction if you like goes through pretty quickly. And one thing to remember is although you're not manually moving that cash from that account into your ISA, the value that is going into your ISA still counts towards

allowance. So whilst many people kind of think of it as a tax for end thing, we looked at what our customers are up to. Uh Danny, I know you are a big fan of this as well. Having a look. I like peeking behind the scenes, yeah.

Such nosy people. Most of our customers actually do this in the first few weeks of the new tax year. So we're really seeing people kind of get ahead and and make the most of those allowances when they renew. So that I thought that was pretty Now also with investments, if you're married or you're in a civil partner. Um, you also can transfer investments and cash as well um between yourselves. So and that doesn't trigger um capital gains tax for investment.

It doesn't trigger any kind of gifting or other tax rules. Um, but you do have to be married or in a civil partnership to make the most of that. And why is that a useful trick? Well You know, you might be earning a different level to your partner. Um, if you're earning more than them, if you transferred investments to them um and they came to sell them and make a profit, they might actually.

gains tax at a less uh a lower rate. Um again, you can share allowances. So your uh your savings allowance, your personal savings allowance, the amount of interest you can earn outside of an ISA before any income tax comes in um you each get one of those. So, you know, if you're comfortable transferring cash investments and sharing that with your with your other half, um, with your spicy or civil partner, I should say, uh that is some that's a way of really maximizing those.

on offer. And as we said, they've been frozen or slashed. So if we're on the lookout, we can't save as much tax as we want. So um some accounts also offer free cash or bonus. Um I think Rachel might touch on that when it comes to pensions and something called tax relief. But there's also accounts like the Lifetime ISA that give you a bonus on what

So that would give you uh one pounds for every four pounds you pay in. It does come with some pretty hefty strings attached though, some hefty penalties if you don't use it for its original purpose. And that is to either buy your first home in the UK or for retirement in later life. So once you reach age,

And of course you need to be um between age 18 and 39 to take one out in the first place. But again, if you're looking to make the most of that account to either get on the property ladder or have a nice tax-free part um extra at retirement, it's worth knowing about. And it's really important to stress because we've been talking about um, you know, some big numbers in some.

But when we're talking about these allowances, you don't need to use them all up in one go, although lots of people might choose to do so. Cause actually starting really small can be beautiful. Yeah, absolutely. And like you say, with all these kind of figures flying around, it can be a bit daunting. We're talking about twenty thousand here, nine The allowances are generous.

Um, but you know, less than ten percent of ICE holders um actually used their full ICE allowance in the most recent year that we get the data for.

Um, and actually almost I think it was nearly two thirds of people, just over sixty percent of people paid in less than five thousand pounds. So yes, the allowances are there, they are generous, but that doesn't mean, you know, don't beat yourself up if you're nowhere near being able to use Mae'n ymwneud â'n ymwneud â'n ymwneud â'n ymwneud â'n ymwneud â'n ymwneud â'n ymwneud.

But I, you know, I like to think it needn't be because you can really get started, you know, AJ Bell from as little as 25. So if you get in the habit, and we know lots of women are really good at this, you know, paying putting money aside, paying yourself first, we like to call it, when your salary arrives or however you get paid, I think you'll miss the cash less because you're not sort of waiting until the end and then putting that lock.

Um and as well as paying in kind of regular cash to your account, let's use them An example. Um, make sure you also set up automatic or what's called regular investing for the investments you actually want to buy. So there's kind of two sort of automatic uh things that you can do there, two You want to call it that. And why is that good too? Well, providers usually offer a discount on dealing charges when it comes to investments if you've set up that automated.

trade. And and also most of all for you, it takes out the guesswork of investing as it happens on or around the same day each month. It's just basically like a direct debit but into an investment. So You know, investment prices do go down and up. Um so you'll end up kind of smoothing out those ups and downs, those peaks and troughs when it comes to buying in. And, you know, there is a reason in investment boards we like to talk about time in the market rather than time.

So that's where that kind of regular investing really comes into its own. I love that old chestnut. Rachel, there are some hacks as well when we're talking about pensions and tax UN's a really good time if you've not done it already, basically to spring clean. Absolutely. I think it's a lot of what Charlene's just been explaining applies to pensions as well as it does to any other type of investment and or ISA or whatever. It's um getting into the habit, isn't it? It's just forming the habit.

of paying into something regulating. And I know that if I take it out of my thought process and if I set up a direct debit, then it's a lot easier. That way I don't miss my energy bills or my council bills or paying off my uh credit card or whatever it happens to be, it's just taking the stress out of it, isn't it? If you can just make it a regular payment that you don't look at.

But on the other hand, having a look at things is really, really um good for us. So it may be that you want to use this spring clean feeling of a new brand April to have a look at how much you're paying into your workplace pension. um and to just look at the start of the tax year. Now, often what happens with workplace pensions is that they are on a you pay in on a on a scale.

So you might start off at the basic amount, but your c your company might say and your employer might have terms where it says, Well, I'll if you pay in is say we increase your contribution from five percent to seven percent, I'll also increase the contribution I'm paying in for you as well. So a little bit of money, extra money from you, might mean that you get double the amount going into your pension. So it's definitely worth investigating and at least knowing what terms are on the table.

So I think you just have to go out there, go have a look at your intranet, your company intranet, or go and speak to your um HR department or your people department or go and speak to your employer and find out what deal is on the table. And if it's not obvious, Be big and brave and go and ask them directly and find out exactly what's happening. Because once you know that, then you're in the position to decide if you can afford to increase it and to find out how much more money that means.

will go into your pension if they also increase their contribution. Now, if they're not going to match it, if they're not going to increase it that your employer, then you may think, well, I'll still put in a little bit more money for myself. And you might want to do this around the time that you get a paying Because if the money has been taken off your um salary before you really it really hit your bank account.

then if you could do it at the same time you get a pay increase, you may not notice the pain as much. You may not lose out on that, feel like you're losing out on money. And it automatically just goes somewhere to start saving for your later years. So to do it around about the same time as as a pay increase is a is a really good thing to think about. So if you do decide to set up a pension, have a look and uh read up, see how much the charges are.

see where you can invest and go and see what feels right for you. A lot of those um pensions are some of them offer some really good deals. But sometimes it just boils down to what you feel comfortable with in the communication and how you think how everything is set out. So go have a look, have a think about what you want to do. If you're not in a workplace pension, then one other thing you might want to do is just double check with your employer.

Now most of us are automatically enrolled into a pension when we start working. And if you earn over ten thousand pounds and you are over the age of twenty two and y you live in the UK, then you should really be automatically enrolled into appendix. And then you can choose whether you want to stay in the pension or you can opt out if you want to. So if you've opted opted out previously, then you have to be opted back in again every three years.

But if you've done that say a year ago, say you opted out a year ago, you may want to get in touch with your employer and ask if you can go back into the pension scheme. And they may be happy for that to happen. Alternatively, if you say you don't earn ten thousand pounds with that employer, you might still want to get in touch with that employer. And it may be that if you ask to be put into the pension scheme.

they will have to pay a pension contribution for you. It depends upon how much you earn and some terms and conditions, but generally it's definitely worth a conversation. So again, go and speak to your employer and find out what the deal is because your employer contribution to your pension. If you don't use it. It doesn't go anywhere else. It doesn't go back onto your salary. It just disappears into the ether.

So it's lost money. So it's really worth trying to make sure that you get as much bang as you can for that buck and you get it put in your pension and it's working for you.

So that covers your workplace pension and maybe setting up a new pension for you. Something else you might want to do is to see what's happened to all those old pension schemes that you once had. Because if you've moved employer, then that pension scheme that you previously set up with your employer through your workplace might just be sat there.

Maybe carrying on investing and everything like that, but there's no mone new money going in. Now it's easier sometimes to manage all your pensions if they happen to be in all the same place. So it might be worth having a look to see if you can combine all these pension schemes together. You might get um lower charges if you do that.

Or it might be you get better investment options, or it might be that you just prefer the company you're with at the moment, the pension provider you're with at the moment, and you might think, well, actually I just prefer that. that communication and that setup and the service I get. So that might be all really good reasons why you want to just combine all your pensions in one place. So you just need to really go out and find that. And that's a lot of the time just rooting through our

Well, I use the word paperwork, but I'm feeling very old when I say that, Danny. I used to say go rooting around shoe boxes and find out all your information, but I don't think that happens nowadays. But it's scrolling through emails, isn't it? It's scrolling through all that back administration to find all those details and to get in touch with your um previous

pension providers and then just transfer them maybe over to your new pension provider. Um and just a little bit of a a personal anecdote. I've just done this. I've just set up a new pension um just before tax year end. and just transferred an old pension scheme I had into it. And it was so simple, so easy, um, really straightforward, happened really quickly.

the pension provider kept me up to date with what was happening. So it I was sort of dreading it a little bit and I shouldn't have,'cause it was really simple and really straightforward. So Absolutely. Go and have a look and see if you can find these old pension schemes. There may be, just one last little thing on that. It's always worth watching when you transfer a pension scheme to somewhere else. There may be good reasons for not doing it.

you might have certain guarantees there, um, which means that you can get a a better deal on um buying something called an annuity. Now an annuity is just a secure income that lasts you for your lifetime. But the way that you do it is you hand over a a pot of money and then the provider, the annuity provider says, I will pay you this amount of money per year. But it could be that you might get a special deal on that price. with some pension plans. So just watch out for that.

Some have exit penalties as well, so just be careful. And if it's in a defined benefit scheme, which is um another jargony phrase, I'm really sorry about that one. It means it's a pension scheme that's related, how much you get out. depends on how long you've worked there and what your salary has been. So again, if it's one of those types of pension, then it may be difficult to move and it may not be the best solution for you to move either. So just be careful around those ones.

You see, we let you off jargon if you explain it in simple terms. And I think often with finance that's the key, isn't it? Because y you can't escape the jargon in finance. But if someone can explain it to you Simply, Rachel, that light bulb goes off.

Absolutely. And you come across these terms all the time, don't you? And it's just so nice to have a simple explanation for things. And I have to say, Charlene, that for me the fact that we don't have a shoebox anymore with all the paperwork, I think it actually makes it a little bit harder because it used to be that all right, it might be down the bottom of the pile, but everything was in one shoebox.

Now, if you've got a couple of email addresses, it can get lost. It can and uh I always go back to friends when I think of this and Monica's messy cupboard. I mean a bit of a niche. But um yeah, no definitely I have a bit I have a bit of both. I've got definitely some old paperwork. Um but there is one thing actually, if you do Remember to download your statements. I I keep them on sort of a secure storage or hackers. There you go.

Um, but yeah, actually, you know, if you move providers, for instance, like a credit card provider, and I needed to go back and check something, um, once I'd completely left and closed that account down, I had to contact the bank to

order my statement as paper. So yeah, I mean a bit of nostalgia. It's it's sort of like keep keep track of things but maybe try and make sure you download them. But I like having the stuff we get in that secure place and then I can refer back That's a h that's a whole different uh not for today.

The virtual shoebox. Um while we're talking paperwork. Let's also talk about paper money because Cash is the elephant in the room. I don't know if all of you listening have seen our gender is a gap report. If you haven't, do take a look, because keeping your savings and investments in cash Can impact your financial health in the long term, Charlene. And you know, we're hearing a lot about interest rates and inflation.

Yeah, yeah, back in the news for sure. And, you know, cash in the news too. So I think when we're thinking about ISIS, and that, you know, obviously is the topic of that fantastic report. I wanna start with some good news because there's around a million more women with a cash is the men. However, if you flip that over, nearly five hundred thousand more men have the investment version, so what's called a stocks and shares ISA than women. So

The good news there is obviously, as I've mentioned before, once we sit down and think about it, we've we've planned out, we like to plan things, we like to know everything what's going on before we make a decision, like an informed decision. Women are clearly really good at that and budgeting and saving But that cash versus investment split

that really matters because men actually end up having on average£3,000 more in their ISA, I believe, than women. And when you, you know, extrapolate that out, um, that leads to the overall gender ISO gap. Of six point six billion pounds.

Um, that is a that is a really scary number. And, you know, why do we talk about investing? Why do we care about I work for an investment provider, of course I'm going to talk about the virtues of investing, but that's because over the long run the stock market will outperform cash. So like

for this one, but cash feels safer, but it gets eaten into by inflation. Now I Not that long ago would have had inflation as a bit of a jargon term, if I'm honest, but it's something we've all become uncomfortably familiar with over the cost of living crisis. Inflation is the rate at which prices increase. You know, we saw record inflation not that long ago. Yes, it might have started to slow down, but that is building on that already heightened kind of

Like so um it's smaller increases but on a larger base. And you know Getting started with investing can be daunting. Rachel's mentioned pension schemes and being auto enrolled automatically put into a pension scheme. And actually if you don't choose an investment, that investment is also automatically chosen for you. So I think the first thing is most people are invested. Some people might not just realise.

Yeah, and that's fine. Um, but you know, if you're looking at an ISA, perhaps you've got some money in a cash account or a cash ISA and you're thinking, Oh, I really should get involved with investing, but I really don't know where Start at all. And lots of different providers have sort of ready-made solutions. They might have funds that.

I I think of funds is just like a little shopping basket of different investments. You can get lots and lots of different types, but you can also get ones that spread investments across um different areas, different um types of investments. shares in different countries, for example. Um so have a look what's out there. You know, lots of lots of people have sort of made these solutions to help people kind of get on that first step of the ladder.

you know, we don't always want to just go and put all of our money into the thing we think is gonna make the most money the most quickly. That's not realistic and it's not a long term strategy, but there is help out there and I think something w we're all really kind of passionate about is that kind of education to help people get that confidence to take that first step. And once you've done it, you can get started, as we've talked about, automated regular investing.

Once you've taken that first step, you're away. If you know you're in it for the long term and you've got those kind of tips set up, um, you know, let's all hope that more people can enjoy the long-term benefits or prospects.

Now before we um leave you, let's talk very briefly about um some benefits that people might be entitled to that maybe they've missed out on. Um we have already spoken a little bit about child benefit and free childcare, but in some cases there have been some changes. People that maybe thought that they couldn't claim child benefit or would have to pay it back might actually be able to get it. So it's worth having a really quick look for that.

Yeah, a quick kind of sixty second rundown, I will try my best. So child benefit, um, normally for children up to age sixteen or it can be up to twenty if they're in approved full. or training. Now for a family of two children, that could bring you in an extra over£2,000 a year. So the way it works is you get slightly higher amount, just over£25 a week for a first child, just under£20 for the next No, as Rachel mentioned.

There are some thresholds here over which you start to have to repay that child benefit. So once your total income tips over 60,000 pounds, it starts to get clawed back at a rate of 1% for every£200 over that. Now that is a change on what it was up until the end of last tax year. Um those thresholds have gone up. So once you get to eighty thousand pounds now it is lost completely now.

Normally the way it happens is you might receive the child benefit, but actually you end up having to pay it back in a tax charge. Now you might think that's just a total pain and like I have to claim it and then pay it back. I just won't bother at all. But it really is a good idea to even just register for child benefit if you know you're going to be way over that£80,000. You can actually just opt not to receive the money in the first place.

Um, and so why would you do that? Why bother claiming something and then not the actual money? Well, it unlocks national insurance credits, something we talked about earlier. Um and if you know, if anyone's taking off time off work to care for your children

Um it will you know, you'll get a credit for that year even if you weren't earning enough to perhaps get the credit in the traditional way. Um it also means your child will automatically get a national insurance number when they turn 16 as well. I'm not sure if you get one of those physical cards though, anymore. You don't get the physical card, no. I I have had the brown envelopes through the door and you get the letter which is

in my cupboard, so I still have my virtual shoe box. It's an actual proper shoe box, yeah. You still get the letter. And it was an exciting moment when it came through the door. Um but no, you don't get the card anymore, I'm afraid. Oh but you still got the number, so you won't

you know, that was just something we took for granted and it just happened that that won't happen unless you are sort of registered for this child benefit, even if you don't claim the money. So, you know, more people will be able to claim it, even just a little bit, or get it back, as Rachel mentioned with the contributions, but it's really worth just checking. You can go online now, the kind of childcare area of the government website gov.gov

Um, is a little easier to navigate than I feel it was in the past. So have a look there and then Just another kind of childcare support part, tax recap, childcare. We mentioned it earlier. Um so it's worth two thousand pounds per child under twelve. per year. Um, once a child's at school, it can still be used for things like uh Ofsted registered clubs, like after school clubs, activities, holiday clubs, and actually even nannies if they are registered uh registered with Ofsted. Um

But there is that income threshold. And here it's not a clawback. If your income is over a hundred thousand pounds for a year, it's just lost completely. Um, so that's kind of what we were alluding to with what you might lose if your income. And um finally just one um one extra of kind of childcare support help, three hours. So in England and Wales, everyone gets fifteen hours per week in term time for three and four year olds.

So that what's that? About thirty eight weeks of the year, I If you're under that hundred thousand pound income threshold, so both of you both parents need to be under that, there's actually extra hours available in England, Wales, um, for for children from a nine month. olden up, so the term after they reached the kind of relevant age.

I don't have time to cover all the rules now, um, because there are some big changes coming up to that. It's kind of being extended even further. But I think we've got some plans to do kind of more on this as that English scheme expands. Sadly, um, it's not available in Northern Ireland. Um, in Scotland, everybody gets thirty hours for those children who are three and four years old, but there's no plans to kind of extend that age downwards. So

a bit of a complication with the different devolved governments there. But definitely something we've done in the past on podcasts. I know that and I think there might be an article but we definitely will be doing more. I'd like well, I'm committing myself to doing more on that.

One thing we're definitely gonna do more about is talking about um saving for kids and also about kids and their relationship with money and how they feel about it and how to talk to your children about it. So hopefully you'll find that in our next episode. Rachel, we've spoken um a little bit about a junior ICE. I just wanted to really wrap up by talking about a pension for a child because I've seen some incredible fingers, figures, particularly when we speak about women of

you know, having to start saving at the age of three when you're still playing with your Barbie in order to have the same pension uh retirement uh as a man would have. But actually you can start a pension for your child. Yes, you can. Um, and again, I think this builds into everything we've been talking about today. This builds into spring cleaning your finances and

how how you save and what you say for yourself and your family. And it clicks into good habits as well, doesn't it? Starting with a little bit and little and often and just creating that. savings habit where you're an investing habit where you're doing this every single month. So you can start a pension for your child and it's called a junior sip usually and what you can do is pay up to£2,880 every tax year into it.

And then the government will add in some tax relief and they'll add in twenty percent of that, which is five hundred and twenty pounds. So it brings it up to a big contribution of three thousand six hundred every year. Now, the the downside to that is the good side is the the tax relief, and the downside is that your child won't be able to access it.

until they are much, much older. Now at the moment the age for accessing a pension is fifty five, but that's going up to fifty seven in a couple of years' time. So I imagine that by the time um my children will be up to accessing their pension, it might be a a little bit later still. But those are the rules at the moment that you you can't access the pension until they are older.

So if they would like to access the money earlier than that, then again we're thinking about something like a junior ISA. And we were talking about um being able to contribute up to nine thousand pounds every tax year into it.

And then what happens with a junior ISA, very briefly, is that you get up to the age of eighteen and then at the age of eighteen, um, the the child has a a decision to make. They can carry on with the pen uh with the ISA or they can decide to take the money out, but it falls to them to be responsible for it and to to manage it. Um and usually our experience at A J Bell is that

I think the majority of children get to age eighteen and just keep on with the ISA. They keep on saving. They might take some money out, but they keep on saving. So that's really, really positive. And it's again going back to that Starting early, making sure that um boys and girls are investing for their future and and trying to involve children in all of those sort of decisions.

And just one l other way of saving um for your child, if I can just slip this one in as well, Danny, is something called a child trust fund. Now that Would might have been set up for your child if you have a child born between two thousand and two and two thousand and eleven. Um, I have two kids and one of my eldest one qualified for a child trust fund.

Now what happens is this happened automatically and if you got to choose a provider at the time, but if you didn't, then it was automatically set up for you. Now, you might have lost track of this child trust fund. I have to be very honest here and admit that I did lose track of the child child trust fund my um my eldest child had. But I managed to track it down again through going through all paperwork and tracked it down.

And at that point you can then decide what you want to to do with this child trust fund. It may be that your child is now getting to the age of 18 and therefore they can take the money from it. But if they're not up to the age of eighteen, then you may want to think about if you carry on with a child trust fund or whether you set up a junior ICER for your child. You can't have the both of those options.

You can only have a child trust fund or a junior ICER, but you can transfer the child trust fund into a junior ISA and that is allowed to allowed to happen. It's got all the management of these child funds and investment accounts is by something called the register contact. And the register contact is just a um a formal way of saying a parent or um a carer.

But you've just got to make sure that the right person uh is is dealing with this. And it's sometimes for the child trust fund it would have been the mother who was set up as the registered contact. But it could have been the father as well. You've just got to make sure it's the same register contact for the child trust fund as it is for the junior IC. Now if you completely lost track of where this child trust fund is

Don't worry, there is help at hand. And if you Google Child Trust Fund and the government, then you can easily get onto a website that'll be able to track down this child trust fund for you. And in speaking again personally, it's really definitely worth doing. Get find out where it is and make sure you've got all your savings for your children in the right place. And again, you can contribute up to nine thousand pounds every tax year for them.

We're gonna do a special episode about saving for kids, about junior ICEs, about children's relationships with money and of course about our relationship with money because we are the ones that speak to our children about money and hopefully we can start them on some good habits. So hopefully you can join us next time. Do take a look at our website.

at AJBell Moneymatters dot co dot UK. I've put together a series of articles on there at how our financial lives change over the years with tips for every generation. But ladies, thank you both so much for your time. Thank you, Danny. Feeling pleasure. Thank you. And Laura's going to be back with us next time. So don't forget to sign up to our newsletter via the website.

uh AJ Bell Moneymatters dot co dot UK so you don't miss anything. And if you love art of the affordable kind, then Money Matters is going to be at the Affordable Art Fair on Hempstead Heath between the seventh And 11th of May. So do come along, have a chat. We would love to see you. Until next time, though, thanks so much for listening. If you have any questions about investing pensions or any suggestions of topics you'd like for us to cover, do get in. Thanks so much for listening.

Before you go, please remember this podcast is for educational purposes. And the views expressed don't necessarily reflect those of AJ Bell. The podcast isn't telling you if a certain investment is suitable. Don't forget that the value of investments can And you can lose money as well as make it. It's also important to remember that how you're taxed will depend on your individual circuit. The way an investment process is a very important thing.

it behaves in the future. If you want help, go see a qualified financial advanced