Seven tips for beating the tax year deadline

Published by on 02 April 2013.
Last updated on 02 April 2013

April calender

It is human nature to leave important decisions to the last minute and with the 5 April tax year deadline just days away, it is decision time for investors contemplating a contribution to an ISA, pension or investment into other schemes with annual allowances such as venture capital trusts.

Yet each year a handful of investors fail to beat the deadline, losing out on valuable tax-efficient allowances because of errors on their application, banking complications or postal delays.

This year, 'eleventh-hour' investors face the additional challenge of a long easter bank holiday weekend on the eve of the deadline and an unusually cold weather spell, which is playing havoc with the postal system.

1. ISAs and pensions

Act fast to make your contribution, but don't hurry to select your investments.

A rushed decision on which asset class, market or fund to invest in could back fire and it always makes sense to take these decisions having first reviewed your existing investments and strategy.

If you feel you need more time but don't want to lose your allowance, then open your stocks and shares ISA or contribute to a self-invested personal pension with an initial holding in cash.

Having secured your allowance, you can then invest it later when you are comfortable with your investment choices.

Investing in a series of lump sums will also help reduce the risk of getting your market timing wrong.

Find the best Cash ISA or savings account for you

2. Invest online

Avoid the postal service and invest online if possible. The postal service can be unreliable and this is particularly the case when parts of the country are covered in snow.

The last few days of the tax year mean big business for courier firms and in the past some advisers have even chartered helicopters to ensure client applications reached plan managers on time.

These days, things are less dramatic as the simplest and lowest cost way to invest in an ISA or pension at the eleventh hour  is to do so online.

3. Special delivery service

If you do use the post, use the special delivery service or a courier. Some investments, such as VCT applications, are not available for online applications and can only be submitted by paper based forms.

To maximise your chances of making a successful application, it makes sense to either use a courier or the Royal Mail's special delivery service. The latter commits to next day delivery with online tracking.

Do not use free reply-paid envelopes during the final days of the tax year as these typically take longer than normal mail.

4. VCTs

If you are investing in a VCT then check remaining capacity before you send your application.

VCTs and other limited capacity investments can fill up rapidly in the final days of the tax year, so it always makes sense to check how close a VCT is to achieving its fund raising target before submitting your application in case it is returned and in the meantime you miss out on other opportunities, or the deadline altogether.

5. Cleared funds

Make sure you have cleared funds in your account as you cannot invest with a credit card.

When investing online, it is vital that you have cleared funds in your bank account as you must purchase an ISA with a debit card and cannot use a credit card.

For investors hoping to beat the deadline, this may mean moving funds a couple of days ahead – so act now. Bank fraud departments can sometimes block unusually large transactions, so it may make sense to inform your bank ahead of making your application.

6. UK bank account

Payment must be from a UK bank account in the name of the applicant (or joint account).

A friend, relative or company cannot open an ISA on your behalf, so it is important that the payment is made with a debit card in the name of the applicant (or parent/guardian in the case of a Junior ISA) as this will form part of the identification checking process required under anti-money laundering regulations.

If you are making a paper-based application and intend to use a building society cheque, then ask your building society to include your name on the cheque or your application may be rejected.

7. National Insurance number

Make sure you know your national insurance number. An NI number is required to open an ISA. If you don't know your number, this can usually be found on your pay-slip.

There is an old saying that in life 'nothing is certain but death and taxes' and in the current environment high taxes are set to remain for a long time. It therefore really does make sense to utilise important tax-efficient allowances if you possibly can.

ISAs and pensions are 'use them' or 'lose them' allowances, so investors need to act without further delay to beat the deadline.

Jason Hollands is managing director of communications and business development at Bestinvest

This feature was written for our sister website Money Observer

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