Savers are making last-minute arrangements ahead of the new tax year on Thursday.
The annual contributions limit for Isas will remain frozen in the 2023/24 tax year, from April 6, at £20,000.
Sarah Coles, head of personal finance at financial services provider Hargreaves Lansdown, said: “Every year we see a last-minute dash, as customers are keen to use this year’s Isa allowance before they lose it forever.
“This year it includes those who want to use their capital gains tax allowance too, before it more than halves overnight.”
Ms Coles said that Hargreaves Lansdown is also seeing an increase in pension contributions as a result of the dropping of the lifetime allowance – the limit on the total value of pension benefits someone can build in their lifetime without getting a tax charge – in the recent Budget.
We always see a steady stream of people, and as usual we expect some people to take advantage of their allowances right up to 11.59pm— Sarah Coles, Hargreaves Lansdown
She added: “It’s notable how many people are paying into the Jisas (Junior Isas) and Lisas (Lifetime Isas) of other people, as they’re keen to see their loved ones benefit from their allowances too.”
Ms Coles continued: “We always see a steady stream of people, and as usual we expect some people to take advantage of their allowances right up to 11.59pm.
“However, if you’re leaving things to the last minute, don’t forget that your transaction needs to be complete in time, so it’s worth giving yourself all the time you need.”
James McManus, chief investment officer at digital wealth manager Nutmeg, said: “From April 6 the amount of profit or ‘capital gain’ each person can make when selling valuable assets, like shares or a second home, will be more than halved to £6,000 from the existing level of £12,300.
“This allowance is called the ‘annual exempt amount’ and it will remain £6,000 for the 2023/24 tax year only, before being halved again to £3,000 in the 2024/25 tax year.”
He added: “Meanwhile, the £2,000 tax-free dividend allowance will be cut to £1,000 from April 2023 and shrink again to £500 in 2024/25.”
For savers looking at cash Isas, rates have improved significantly over the past year, amid rises in the Bank of England base rate.
The average easy access Isa rate has jumped from 0.38% on April 1 last year to 2.15% on April 1 2023, according to financial information website Moneyfacts.
Rachel Springall, a finance expert at Moneyfacts said: “The savings market overall is going through a buoyant period thanks to a mix of rate competition, base rate rises and the rush of launching enticing offers.
“However, there is no guarantee that the most lucrative offers will stay on the shelf for long as a new tax-year arrives.
“Savers will need to check their rate regularly to keep on top of the latest rate rises and remember that they can look for an alternative deal that allows them to transfer in their current Isa to keep their tax-free wrapper intact.”
Meanwhile, Madeleine Ingram, director at investment specialists Calculus, said: “The total amount you can save into a pension each year, without paying an additional tax charge, will go up to £60,000, from £40,000.”
The Government announced the scrapping of the pensions lifetime allowance, and the increase in the annual allowance from £40,000 to £60,000, following concerns that these ceilings may be acting as disincentives for people to remain in work.
Several tax and savings thresholds will, however, remain frozen.
“Fiscal drag” happens when thresholds and allowances do not increase in line with rises in wages and living costs, pushing people into paying more tax.
Among the threshold freezes, the standard income tax personal allowance – the amount of income someone does not have to pay tax on – will remain at £12,570.
Think-tank the Resolution Foundation has said that if this had risen in line with 10.1% inflation, the threshold would have increased to about £13,840.
The UK’s tax burden is expected to reach a post-war high of 37.7% of GDP in 2027-28, according to recently-published Office for Budget Responsibility (OBR) documents.
The new tax year comes in a month that has been dubbed “awful April”, due to households grappling with rising bills, including broadband, mobile, water and council tax.
To help households deal with the impact of rising living costs, many benefits and the state pension are being uprated by 10.1% this month, alongside a 9.7% rise in the national living wage.
Millions of households receiving means-tested benefits will also benefit from enhanced cost-of-living payments across 2023-24, as part of the support available to households on lower incomes.
More than eight million households across the UK will receive a £301 cash boost by mid-May 2023.
The payments are part of a package of wider government support announced to tackle the cost of living in 2023-24, including a further £300 cost-of-living payment for eligible families in autumn 2023, with a payment of £299 in spring 2024.
Neil Hugh, head of workplace proposition at Standard Life, part of Phoenix Group, said: “On April 10, most state benefits including universal credit and pension credit will rise by 10.1%.”
He said that, while this is a welcome boost, many state benefits go unclaimed each year.
Mr Hugh continued: “Many people don’t realise that if you get accepted for some benefits, it can mean you are entitled to others.
“If you’re struggling with the increased cost of living, it’s worth checking you’re claiming any and all payments you might be entitled to – it could make a difference.”
Mr Hugh said a good starting point to check benefit entitlements is to visit gov.uk.
He said: “Before using the benefit calculators you’ll need some key details to hand, including any savings, your single or joint income, your single or joint existing benefits, any income from a state or personal pension and any outgoings such as childcare, rent etc.
“Another option is MoneyHelper, a government-backed, free, impartial guidance service for money and pensions, which has a handy benefits page to help you find out what you’re entitled to, how to claim, when you qualify, and what to do if things go wrong.”
