Millions see New Year as the best time to nourish relationships, career goals and finances. The Autumn Budget in 2024 affected the finances of individuals. It is thus high time to reconsider your monetary matters. Identify the ongoing insurance coverage, update the will, and understand your pension.
According to Evelyn, Chief Financial Planning Director at leading UK wealth management firm Evelyn Partners, “Irrespective of evolving taxation and financial rules, the individuals needs and goals change. Thus, one must pause and take stock.”
The blog lists some important financial concerns you must consider this January 2025. Some are easy to enact and initiate, while others may be time-consuming. However, taking stock now saves you from future financial hassle.
How to update your finances in 2025 for a better financial future?
You may have sorted your taxes, but what about pensions? It requires equal consideration. Understand what returns you can expect on your current pension cover. Confirm whether you can carry the old employee pension forward if you switched your job recently.
Also, check the essential details like phone number, account number, and residential address. Identify whether you can get National Insurance credits if you don’t pay National Insurance contributions anymore. Here are other aspects to look for as you tread the financial path in 2025:
1. Explore possibilities to boost pension
Employer-based pension funds are the best way to safeguard your future by paying only a percentage and getting the rest from the employer. Generally, an employer contributes 3% to the pension. However, this may ideally range to even 7-14%. Thus, analyse how much your employer provides. Compare this with Individual pension funds. It is where you share full freedom and get 100% of what you contribute instead of a percentage. Yes, you can have both accounts at the same time.
Explore the possibilities of getting higher contributions from the employer side. Evelyn says, “Some employers offer pension contributions matching above the minimum. You may get an 8% contribution from the employer’s side.” It is just about negotiating and exploring options.
Explore the possibilities of using the bonus in the pension fund. It is better to be tax-efficient here. You can save on income tax and National Insurance by doing so.
2. Invest and update the Junior Savings account
If you have not thought about it yet, do it now. Investing in a JISA (Junior Individual Saving Account) could be the best thing. It may help secure a career and lifestyle for your children or niece. Generally, you can save £9000 annually on the JISA. The growth depends on the economy and the year you want to save. Typically, one must continue saving until 18-21 years. You can then legally transfer the account to the respective child or niece.
If you invest just £100/month in Junior ISA at a 5% growth rate, you may save £35000 by the time the child turns 18. It is just an example. You can increase the contributions according to your liabilities, income, monthly savings, and life goals.
3. Re-check pension will and inheritance rules
The government and the vice chancellor recently released some changes regarding the Inheritance Tax. According to that, “the unspent pension pots will directly go to the inheritance”. Hence, it will also be liable for Inheritance taxation. It is against the spouse exemption.
It is thus important to check who receives the pension after your demise. You must update the will here. It applies to any personal, employee-based or SIPPs. Be quick to file the workplace pension nomination. Consider the tax-efficient part before writing the will. From the tax perspective, nominating your spouse or a civil partner will be best.
Making changes to the pension will require consulting a lawyer or expert. You can also contact the previous solicitor, who may help with the changes. However, you must be prepared enough to finance the expertise. Taking the help of family members or friends for a sensitive matter would not be ideal. Instead, explore individual ways to fund the requirements.
You may check out no-guarantor loans from a direct lender nearby. It helps you finance sensitive matters without disclosing the details. No third person means you can act immediately without interference. You may get assistance of up to £10000 for your needs. Choose and use the amount wisely for your needs. Update the will today to benefit from tax liabilities in future.
4. Analyse the current financial strategy
Evaluate your basic financial strategy apart from investments like pension and JISA. Analysing the changes in your expenses, income, and liabilities paves the way for future investments. Thus, check how your costs have changed since last year. Did you encounter a hike last month?
How would you like to use that extra income? You could invest a higher part towards your short-term goals like- urgent repairs, buying a car, etc. Next, you can save little towards critical investments like emergency funds. It is essential to have one to tackle the challenging financial phase.
Analyse your current expenses and check where you can save more. It could be shutting down some subscriptions. Alternatively, analyse what you can do to boost your monthly income and savings. It could be adding additional income to your existing one. It may help you meet the requirements and invest some towards future critical expenses.
5. Track your debts and pay some
You might have accumulated serious debts, especially after the holidays. While most individuals planned to keep their spending low this Christmas, some denied succumbing to the bare minimum. That’s okay. However, you cannot stay blindfolded to the accumulated debt. Instead, attend to it and analyse the most important ones.
Clear them first to ensure a financially friendly start to the new year on a good note. You can begin with credit card debts, buy now, and pay late clearance, overdrafts, and personal loans. Identify the low-cost debts next. It could be utility bills, rent, groceries, etc. You can settle these after clearing the previous ones.
Paying debts is an essential part of financial growth. It optimises your credit history and score. It prepares you for the next big goals that come your way. Identify and arrange the goals to achieve in 2025 according to your debt clearance. Settling a heavy debt like a credit card may help you begin wisely.
6. Claim your tax relief
It is high time to pay off your taxes. Analyse your Self-Assessments before finally filing them before 31st January 2025. Check for the expenses that you can claim. Ensure that you hold all the receipts of the official expenditure.
Attaching this along with the claim grants authenticity to it. You may get it soon after filing it. Moreover, check the possibilities of getting a tax rebate on the current taxation amount. High taxpayers could be entitled to at least 20% relief.
However, if you pay £25000/year to a private pension every year, you may miss out on £12500. It could be due to unclaimed pension relief. The amount may be high for an additional taxpayer. Thus, immediately make a plea to HMRC to release your tax or pension tax relief. Highlight the contributions with proof to claim it rightly.
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Bottom line
These are some important financial aspects to check in the first month 2025. You may be excited to begin your next financial journey. However, taking note of the previous investments and liabilities is essential. It imparts clarity on saving and spending decisions. You can utilise the tax rebates and reliefs if you approach the authority timely. Thus, understand your financials better before tapping the new financial bucket list.
Description: The new financial year is already here. Identify important financial aspects to grow smoothly in 2025. Checking these would help achieve new goals better.
