5 scary financial mistakes you could be making and how to avoid them

Posted on

It’s that time of the year when the nights are getting darker and spooky films start to appear on the TV. While the sight of ghosts, vampires, and more could frighten you, tackling your finances can be just as scary, especially if you’re making one of these five mistakes.

1. Failing to claim all the pension tax relief you’re entitled to

Tax relief is one of the reasons why saving into a pension makes financial sense for many. It means the government adds some of the tax you’ve paid into your pension pot to provide a welcome boost. But are you getting everything you’re entitled to?

Tax relief is usually paid at your nominal Income Tax rate. While your pension provider will usually claim tax relief for you, this isn’t always the case. If you’re a higher- or additional-rate taxpayer, you’ll also need to complete a self-assessment tax form to receive your full entitlement. It can seem like an extra chore, but it’s well worth it.

Take some time to review what’s going into your pension. Most workers should have three sums going into their pension each month: their own contribution, their employer’s contribution, and tax relief.

2. Paying tax on your savings when you’ve not used your ISA subscription

The Personal Savings Allowance means most workers don’t have to pay tax on the interest they earn on savings. However, if you have significant sums saved in cash or are an additional- or higher-rate taxpayer, you may pay tax on interest.

The Personal Savings Allowance means basic-rate taxpayers can earn up to £1,000 in interest each tax year before tax is due. This falls to £500 if you’re a higher-rate taxpayer, and additional-rate taxpayers don’t benefit from the allowance at all. If you exceed the allowance, you may need to pay additional Income Tax.

In some cases, paying tax is unavoidable but if you’re not making full use of your ISA annual subscription, you could be paying more than you need to.

For the 2021/22 tax year, you can add up to £20,000 to an ISA. You don’t pay tax on interest earned if you’re money is an ISA, helping it to go further.

3. Missing out on allowances that could reduce your tax bill

Are you making full use of allowances that could cut your tax bill? The rules around allowances can be complex and may depend on your situation so it can be difficult to understand which ones apply to you.

The Marriage Allowance is one example of this. It allows spouses and civil partners to transfer some of their unused Personal Allowance, the amount of income you can earn tax-free, to their partner. For the 2021/22 tax year, the Personal Allowance is £12,570 and you can transfer up to £1,260 to a partner. It can reduce your tax bill by up to £252.

Despite this, it’s thought that many couples are missing out on the tax break. If it’s something you’ve overlooked, the good news is that it can be backdated by up to four years.

If you’d like to discuss what allowances you can make use of to reduce your tax bill, please contact us.

4. Avoiding investment risk by holding your money in cash

As well as ensuring you’re not paying unnecessary tax on interest earned on cash savings, it’s important to ask if cash is the right choice for you.

Holding your money in a savings account, rather than investing, can seem like the “safe” option. In reality, your money is likely to be losing value in real terms. The interest rate you earn on savings is likely to be lower than the rate of inflation. This means your spending power will decrease over time.

While all investments carry some risk, and the value can rise as well as fall, it can help you grow your wealth over the long term. If you’re saving for a goal that is more than five years away, it’s worth considering if investing could be the right option for you.

5. Putting off estate and Inheritance Tax planning

How carefully have you considered what you’d like to happen to your assets when you pass away? It’s something that many people put off. Just half of adults in the UK have written a will, according to Will Aid.

Without an estate plan in place, it can be difficult to understand what you’ll pass on to loved ones and these wishes may not be carried out without a will. An estate plan can also give you confidence. It can, for example, help you understand how you’d pay for care if you need support in the future.

If your estate could be liable for Inheritance Tax (IHT), taking a proactive approach is also important. There are often things you can do to reduce an IHT bill, but you must take these steps before you pass away. If you’re worried about IHT, please contact us.

Even a small financial mistake or missed opportunity could have a significant impact on your finances in the long run. Effective financial planning that considers the long term can help you get the most out of your money. Please contact us to talk to one of our team.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.

The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation, which are subject to change in the future.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

The Financial Conduct Authority does not regulate will writing.

 

We aim to keep our clients up to date on interesting and relevant financial news.

You can sign-up to receive our monthly newsletter by email, even if you’re not yet a client. Sign-up using the form below.

Client testimonials

I have always found Black Swan to be caring and understanding of my quirky lifestyle. I always feel they try to get me the best returns while respecting my current needs.

Sally Muir

A client since 2011

We would be very happy to recommend the support and service we receive.

Valerie Locks

A client since 2010

I have always been completely useless regarding finance - thankfully our financial adviser is not! I've retired with far more than I ever expected and investments continue to grow safely. So - thank you!

Bernadette Jane Warner

A client since 2000

Very happy with the professional service I have received and feel a lot happier now with my finances put in order.

Martin Field

A client since 2011

Julie Cooper was recommended to me by a work colleague. She has been very helpful, professional and has explained everything well. I would definitely recommend her services to anyone else who are interested in a financial review.

Steven Rooke

A client since 2018

…Service has been first class.

Hugh Fells

A client since 2012

My face to face meetings with Rob Young and Jessica Lyons have always been very open and understandable. My questions have been answered clearly and I have left feeling that my financial matters are in good hands.

Sandra Jack

A client since 2000

[A] safe pair of hands in a complex financial world.

Gary Middlehurst

A client since 2003

A reliable company with good communication skills and good knowledge of the financial markets.

Alan Evetts

A client since 2014

Maureen Pembridge is a long-time trusted advisor to our family. The market might fluctuate but her attention to detail is consistent.

Linda Burnard

A client since 2000

I am pleased to recommend Julie as a trustworthy financial advisor. She explains financial jargon in plain language, and always listens carefully to my particular financial needs and has helped me make the best of my savings.

Carolann Samuels

A client since 2010

I have always been satisfied with the way that Black Swan has handled my account. And I have always found the staff very helpful whenever I need to call the office.

Robert Anthony Matthews

A client since 2012

An excellent personal service from a person I know and trust.

Michael Dalton

A client since 2010

I am getting a very good services from Black Swan, they have got my investments sorted out which was in a bit of a mess.

Roy Jakens

A client since 2012

A good, efficient team providing clear ideas to shape a winning strategy.

Adrian Michael Levenstein

A client since 2011

Black Swan is a company to be trusted, with friendly staff and professional advisors.

David Brian Jennings

A client since 2017

I have been with Black Swan for many years. I have never wished to change anything. They give a good straight forward service.

Martin Barrett Brooks

A client since 2010

Andy Peters has been invaluable in firstly combining several pension pots and then giving excellent investment advice. It has given us a great deal of comfort to know that our financial affairs are in such good hands.

James Guillum Scott

A client since 2014

I find my financial advisor easy to talk to and feel that she understands my lifestyle. She is always available for help when I need her and explains in words that I can understand.

Margaret Ena Glasgow

A client since 2000

Andy is a first rate Director, excellent communicator and leader.

Ross Perry

A client since

Black Swan Financial Planning and Andrew in particular, are very clever at working out how risk averse we are, and coming up with solutions that we feel comfortable with. We are happy in the knowledge that we can continue to enjoy a comfortable retirement. Andrew Peters is a very, very friendly person who is great to chat to and easy to deal with. He explains things very clearly in layman’s terms, and if we still don’t understand, he explains it until we do!

Alan & Jane Dyer

Clients since 2012

We have always found Rob [Young] to be very approachable and knowledgeable. We have every confidence in the advice given and feel comfortable with the decisions we’ve made. There are certain opportunities that we wouldn’t have known about if Rob hadn’t brought them to light, which makes the advice good value for money as far as we’re concerned.

Peter & Pauline O’Halloran

Clients since 2013

Rob [Young] is extremely knowledgeable. I knew nothing about the different types of trusts which will not only secure my income in retirement, but also leave a legacy for my children. I’m glad that I sought his advice when I did.

Sarah Wilson

A client since 2015

I am extremely happy with the service afforded to me by the company and my adviser Julie Cooper.

Geoff Coxell

A client since 2010

My wife and myself have been dealing with Black Swan for a number of years. We have met with different representatives from the company over the years and have found all very helpful in their own way. We met with James [Anderson] a few years ago and found him very helpful and knowledgeable. He keeps in contact with us on a regular basis. We find the Company information very helpful and we feel very secure with our finances.

Andrew Kirchen

A client since 2015

I have always found my adviser to be easy to contact, very professional in his approach, yet friendly and understanding. I have a sense of an experienced company behind him, really on the ball financially and with good standards.

B McBean

A client since 2011

Partner with the most reliable and experienced team of advisers

Enter your details & we'll be in touch to discuss your needs.
Alternatively, contact us directly and speak to a member of the team.





    Subscribe to our newsletter