After the gift giving, sales shopping and other excesses of the festive season, many of us aspire to start the New Year with tighter belts. According to research by Masthaven, 78 per cent of Brits intend to save over the next 12 months, with 34 per cent of them planning to squirrel away more than they did in 2016.
Good intentions are noble. But like any New Year’s resolution, the most fruitful financial goals are those which can be realistically achieved. And working out what you can plausibly save involves sound planning and preparation, especially with new pension rules coming into effect after the end of the current tax year and inflation expected to rise markedly over the coming years.
Creating a list of holidays, weddings or other major purchases and reviewing your options now could save you money in the long term. And seeking advice around retirement planning is always worthwhile.
Here are some tips from financial planning experts on how to make your money go further in 2017.
Make the most of your personal allowances, says Gary Smith, associate director of financial planning at Tilney.
My resolution would be that savers seek to maximise, where possible, all available allowances to improve the tax efficiency of their portfolio and make it work as hard as possible for them.
This would include utilising the current tax year Isa allowance of £15,240, along with the increased allowance of £20,000 – made available from 6 April 2017 – which would allow a married couple to save £70,480 between them in a tax-free environment.
Read more: What can investors expect from 2017?
Those who are invested in non-Isa investments should seek to utilise any unused capital gains tax allowances before the end of the current tax year. For any savings that aren’t held in Isas, basic rate taxpayers should be aware that the first £1,000 of interest earned will be tax-free, with only £500 tax-free interest for higher rate taxpayers.
For longer-term savings, individuals should consider making pension contributions to take advantage of tax relief while they still can, as concerns remain that the chancellor could make changes to these reliefs during future Budget statements.
Confront your own mortality, says Rachael Griffin, financial planning expert at Old Mutual Wealth.
There were several high profile deaths in 2016, which remind us, among other things, that it is important to plan for what happens to our wealth after we die.
A will is a good place to start, but people should also consider using trusts. The distribution of wealth upon death has become more complicated in recent years and trusts have several advantages that make them a good mechanism to have in your tool kit. In particular, trusts have tax benefits and offer the opportunity to gain greater security over the distribution of wealth on death.
Expect the unexpected, says Karen Barrett, chief executive at Unbiased.
If 2016 taught us one thing, it was to expect the unexpected, however unlikely it might seem. That’s why my top resolution this New Year would be to plan and prepare for what you hope will not happen.
I’m talking about protection – life insurance, critical illness cover and income protection especially. Most of us have at least one of those, but in a majority of cases you can get a far more suitable policy by seeking expert advice. The savings can be significant and the benefits incalculable, if something goes amiss.
Hoping for the best isn’t a strategy, but preparing for the worst most definitely is.
Consolidate your debts, says Clare Francis, savings and investing expert at Barclays.
Your finances may be stretched after the Christmas period, so it is worth looking at the interest rate you’re being charged on credit card or store card debt to make sure you’re not overpaying in interest.
The balance transfer market is very competitive, with long interest-free periods and good rates on personal loans to be enjoyed. Now is as good a time as any, and the longer you leave it, the longer you may be paying interest at a higher interest rate.
Beware of the pensions annual allowance taper, says Jon Greer, pensions technical manager at Old Mutual Wealth.
It’s particularly important to prepare for the end of the current tax year and ensure you are making the most of tax-free benefits.
Planning ahead is vital this year as the pension annual allowance has become more complicated thanks to taper rules. Normally, you would receive tax relief on annual contributions of up to £40,000. However, for people on high incomes, the government has introduced a sliding scale that reduces the £40,000 annual allowance to a minimum of £10,000.
The rules are quite complicated and require two different calculations of income to see if you are affected – a threshold income of more than £110,000 and an adjusted income of more than £150,000.
If you do exceed your annual allowance then you should consider using “carry forward”, which enables you to use leftover annual allowances from the previous three tax years to increase your allowance for this year.