A new year is always a good time to review your finances. It’s also possible that your circumstances have changed, and you may need to adjust your plans accordingly. To help you in this effort, we offer these five tips to put you in good stead for the year ahead.

Set a budget to achieve your goals

We’re experiencing the biggest price hikes in 41 years, driven largely by the rising cost of food and fossil fuels. And higher inflation means higher interest rates. Financial markets currently see Bank of England rates peaking at 4.75% by the middle of next year.

That means it’s probably time to take action to protect your finances. Whether your financial goals are to enjoy a happy retirement or buy a first home, sticking to a budget is the key to success.

By looking at your income, outgoings, savings, and other assets, you can crunch the numbers to create a long-term projection of your finances. Identifying trends (positive or negative) can help to give you the best chance of achieving your goals and have a huge impact on how in control of your finances you are.

Know the key dates that affect your money

With reductions in tax reliefs and allowances looming, now is a good time to check you’re taking maximum advantage of them in the coming months.

Changes announced in the Autumn Statement, will impact almost everyone’s personal finances:

• Income Tax: the chancellor reduced the threshold at which the top 45p rate becomes payable from £150,000 to £125,140 from April 2023. This will see an increase in tax of just over £1,200 tax per year if you earn over £150,000. The tapering of the tax-free Personal Allowance means those with earnings from £100,000-£125,140 are effectively taxed at 60%.
• Dividend Tax: the dividend allowance will be cut from £2,000 to £1,000 next April. From April 2024, it will then be reduced to £500.
• Capital Gains Tax (CGT): Currently, the CGT annual allowance is £12,300. From April 2023, the CGT allowance will halve to £6,000. From April 2024, the allowance will halve again.

Pension contributions and other tax-efficient investments (ISAs, Venture Capital Trusts, Enterprise Investment Schemes) will become even more important if saving tax is important to you.

Also watch out for fiscal drag; the way in which governments pull more and more taxpayers into higher tax brackets. One example is the High Income Child Benefit Charge income limit of £50,000. Around one in five families are now affected by the limit, compared to one in eight when the charge was first introduced in 2013. Even if you aren’t receiving this benefit, it is important you fill in a claim form to make sure you get National Insurance credits for your State Pension.

Protect your savings from inflation

High rates of inflation continue to drive up the cost of essentials like food and fuel but could also be eating away at your savings. Interest rates are heading up, but they are not yet close to the levels of inflation.

It makes sense to get ahead of the game by building up your rainy-day savings pot – a cash buffer for unexpected emergencies. We think around three to six months’ worth of essential expenses held as cash to cover emergencies is about right. And make sure that any cash savings you have, are getting the highest interest rate possible.

If, however, you want to protect longer-term savings from inflation, you may need to take some risks. If you have some money you don’t need to touch for at least five years, and are wondering how to beat inflation during that time, think about putting it into a stocks & shares ISA.

Create a will

If you haven’t already, creating a will is one vital element of your estate planning that will ensure you and your finances are taken care of if anything should happen. Many of us wait later in life, but especially for those with children we recommend doing this as soon as possible.

If you don’t make a will then your estate will be distributed according to the rules of intestacy. Remember that these rules do not recognise unmarried partners: if you’re not married or in a civil partnership, then your partner won’t receive anything from your estate (that isn’t jointly owned by them) unless this is specified in your will.

Make sure you also set up a Power of Attorney, so someone can make financial decisions if you or a loved one are unable to do so.

Do good with your pension

Billions of pounds of our pensions are invested in carbon-intensive sectors, such as fossil fuels and fast fashion, or unethical industries such as tobacco, arms, and gambling.

Our research indicates that moving a £100,000 pension pot with a traditional portfolio with oil and gas companies to a positive impact portfolio is the equivalent of taking six cars off the road a year.

Green pensions aren’t just good for the planet – they also allow us to take advantage of the enormous economic opportunities of a green industrial revolution.

Arrange a call with one of our experts

Financial planning is all about anticipating the consequences of different choices and situations. To discuss any of the topics covered in this article, please get in touch.