WARREN SHUTE: 'Key savings rule has helped me put away money every month'

As I reflect on the early days of my career, I’m filled with gratitude for a simple yet powerful piece of advice I received at just 21 years old, as I was starting out as a financial adviser.

My manager encouraged me to “pay myself first”, to set aside a portion of my salary each month before anything else. This counsel, given 30 years ago, has guided me ever since, leading me to set aside a part of my earnings every month. So each April, at the start of the tax year, I revisit how much I will save for the following 12 months.

It’s crucial that you maximise your earnings and take advantage of tax breaks to kick off the new tax year on a positive note.

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How much we can earn without paying income tax has remained the same in 2025/26 tax year at £12,570. Earn over £12,570 and we pay 20% income tax on the next £37,700 we receive (that figure has also remained the same this year), and after that it is 40% on income up to £125,140. Above that, income is taxed at 45%. The rates are different in .

In addition to income tax we also pay national insurance (tax) on our earnings. There is no national insurance payable on the first £12,570 we make. Then we pay 8% National Insurance up to £50,270 (which remains the same), and then 2% on income above that.

If we sell an investment asset such as a share or a buy-to-let property and we make a gain, we pay capital gains tax on any profit over our capital gains tax allowance, which has significantly reduced over recent years to £3,000.

The rate of tax payable on capital gains increased to 18% or 24%, depending on our income and the size of the gain. Our tax-free ISA allowance remains at £20,000. You can also invest – for your children up to age 18 – £9,000 into a Junior ISA.

For those aged 18 to 40 you can invest £4,000 into a Lifetime ISA and receive a 25% bonus on the contribution of up to £1,000 (your LISA funds must be used to help purchase your first home up to a limit of £450,000, or towards your retirement from age 60).

Many people leave investing into their ISAs until the last minute, but that could mean leaving thousands of pounds on the table. Investing the full £20,000 into an ISA at the end of the tax year for 20 years at a 9%pa growth rate would produce a fund of £1,023,202; if you invested at the start of the tax year instead, you’d have £1,115,291 – a whopping £92,089 more, just for getting yourself organised!

You continue to be able to put up to 100% of your earned income and taxable benefits into a pension, up to a limit of £60,000 annually, however this could be reduced if you earn over £200,000. If your income is below £3,600, you can still pay £2,880 into a pension and receive 25% tax relief (£720) to help save for your retirement. You can even set up a pension for a newborn baby.

Saving into your pension can also benefit from paying in early: saving £2,880pa into a pension at the start of the tax year from age 21 to 66 at 9%pa produces a fund of £2,063,470, whereas leaving it to the end of the tax year produces a fund of £1,893,091. That’s £170,379 just for saving early!

• For investment and financial planning ideas search for The Finance Geeks Podcast or go to LexingtonWealth.co.uk