News and Analysis | Written by Casey Goodwin, updated by Victoria Redsell, 29 November 2023

Your end-of-year financial review: our tips

As we approach the end of the year and the dust settles on Jeremy Hunt’s Autumn statement and the new energy price rise announcements, now is a good time for some financial planning.

It might be a busy period, but it’s worth taking the time to reflect on the past year, consider how the changes from the Autumn budget could affect you, and do some pre-planning so you know what to focus on in the new year.

Time for reflection

What financial lessons did you learn this year? What worked well, and what would you like to improve on?

Every year comes with changes. Have you got married, divorced, bought a house, retired or had a child go to university? Changes in your individual circumstances will affect your finances and should inform your planning for the year ahead.

When it comes to financial planning, we tend to focus on the negatives and fixing financial mistakes. But it’s good to enjoy our successes, too, even if they are small. Think about how things have improved in the past year – have you paid off any debts, started a monthly budget, or cut down on your outgoings? What goals did you achieve?

Next consider how you feel about your current financial situation. Are you concerned, unsure, or comfortable, in control? Is your money helping you to achieve your life goals? Reflecting on these points will help you to assess your financial situation and prepare for the year ahead.

Revisit your estate plans

The festive season is all about spending time with our loved ones, so it’s a good reminder to think about the people you want to take care of financially. If you have a will, it is worth revisiting it every 4 to 5 years to make sure it still reflects your wishes and is inline with any changes to legalisation.

Currently, inheritance tax is paid at 40% on the value of the estate over the nil-rate band – the level at which no tax is paid – set at £325,000 (and £650,000 for a couple). Inheritance tax thresholds are being frozen until April 2028, meaning that those inheriting a house, money or other valuable items worth more than £325,000 will have to pay the difference above that threshold at a tax rate of 40%. With assets rising in value over time, more people will find that they fall within this threshold. So, you might find that you are not able to leave your loved ones as much as you’d hoped when the time comes.

There are some exemptions, for spouses, civil partners and charity donations, and there are ways to reduce the eventual tax burden on your loved ones, such as the Residence Nil-Rate Band (RNRB). We would highly recommend speaking with a financial adviser to discuss this in more detail.

If you haven’t yet made a will, then make this a priority. It’s the only way to make sure your money and possessions go to the people and causes you care about. You can find more information about making a will here.

Your savings and investments

How are your savings and investments performing? Take the time to review your portfolio, and think about whether your reasons for investing, your circumstances, your attitude to risk or your objectives have changed. With current market conditions, you may wish to look at ways to minimise risk, such as diversification – take a look at our tips for retirement planning in a volatile market here.

The dividend tax-free allowance, which currently stands at £1,000 a year, will fall to £500 for the 2024-2025 tax year, with the tax rates on dividend income remaining the same at 8.75% for basic rate taxpayers, 33.75% for higher rate and 39.35% for additional rate taxpayers.

Then there’s capital gains tax. This is levied on profits from assets ranging from shares to second homes, buy-to-let properties and personal possessions. The threshold for paying capital gains tax has been halved from £12,300 to £6,000 for the 2023-2024 tax year. It will be cut again to £3,000 in the 2024-2025 tax year.

With these reductions in your allowances, combined with rising interest rates and tax payable over savings income of over £1,000 for basic and £500 for higher rate taxpayers, making sure your investments are ‘tax wrapped’ in either ISAs or pensions is more important than ever.

Have you utilised your £20,000 ISA allowance? 

With limited exceptions, the income and capital gains associated with the investments held in an ISA are tax-free under current legislation, and if your ISA is ‘flexible’ you can add and take funds from your ISA within the same tax year without affecting your £20,000 annual allowance.

Take this time to think about whether your savings and investments are aligned with your values. Where is your money, and what impact is it having on the world? At Path, we can help you to think about your priorities and any areas you want to avoid investing your money in – it might be fossil fuels, mining and extraction, animal testing, arms or tobacco. Know your personal values, which industries you want to support, and which you don’t agree with.  

Your retirement plans

Even if you’re not looking to retire for some time, retirement planning is important. The earlier you start, the more you can help to ease the pressure later on.

It’s good news that the State Pension triple lock has been reinstated, but you still shouldn’t rely on your state pension alone. There’s lots of different ways to plan for retirement – take a look at some of our advice here and if you feel ready to make a more detailed plan, we can help.

Could you increase pension contributions and save National Insurance and Income Tax with Salary Sacrifice? 

There are lots of ways to boost your retirement savings, such as salary sacrifice, bonus sacrifice and using carry-forward to make the most of unused pension allowance from previous years. With the ‘fiscal drag’ of personal allowances being fixed until April 2028, your adviser will be able to help you navigate through the options that are available to you to maximise tax efficiency and enhance your finances.

Taking stock

The end of the year is always a good time to check in on your finances and make sure you’re on track. Be honest with yourself, and if there’s something that you’re not happy with, make 2024 the year you do something about it.

If you need further advice, our financial advisers can help you to review your current financial situation, discuss your short-term and long-term financial goals and help you get on the right path to financial happiness. You can book your free consultation here.

Your end-of-year financial review: our tips

As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.

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