Getting higher

The number of higher rate taxpayers in the UK has quadrupled in 30 years, reported the Daily Mail. Back in 1984 the 930,000 people who paid higher rate tax represented just 4% of all taxpayers.

In 2014, the 4.4 million higher rate taxpayers represent 16% of the total. This year’s higher rate tax threshold is £41,865 but if it had kept pace with inflation since 2010 it would be over £50,000.

If you are one of those (fortunate or unfortunate – depending on how you look at it) higher rate taxpayers, simple, effective tax planning is likely to be something that you may be interested in.

After all, saving tax at 40% will be more appealing than saving tax at 20%! A statement of the obvious if ever there was one.

There are big advantages to saving regularly in an ISA rather than waiting for the year-end before investing a lump sum, says the Daily Mail.

Pound cost averaging means a fixed monthly contribution buys more investments at low prices than high prices, which can add substantially to your returns. It’s easy to invest as little as £50 per month and with that minimum also applying to the funds you invest in, you can easily spread your contribution across several different funds. From July, the maximum monthly contribution to an ISA will be £1,250.

There is also the important factor for some investors that establishing a regular savings programme avoids the need to make a difficult “end of year” choice and removes the consequent anxiety over the timing of what could be seen as a significant investment.