Major life events|Money management
Is it time to spring clean your finances?
As the seasons change, many of us feel a sense of regeneration and a pull to make changes in our lives. Can you extend the urge for spring cleaning and freshening up your home into other aspects of life, such as your finances?
Signs of spring often spark an urge for change and reinvention as we start cleaning and decluttering our homes. In the UK, it’s also a perfect time to spring clean your finances as it coincides with the start of a new tax year and the Spring Budget, in which the UK chancellor sets out his taxation and spending plans for the coming year.
So, what should you be considering to freshen up your finances this spring? We outline the best places to start.
Set your goals
Do you have overarching financial goals and, if not, should you think about setting some? What do you want most from life – for yourself and your family? Maybe to help your children or grandchildren through education, or to buy their own homes. Or you have plans to travel or relocate. Perhaps you’d like to build philanthropy into your goals? If you’re unsure where to start, map out some short, medium, and long-term goals. Then you need to take stock of your savings, investments and pensions to make sure they reflect these goals.
Get your paperwork in order
First things first, are all your official documents – wills, lasting powers of attorney and certificates – together where they can be easily found when necessary? If you don’t have a will, or it’s not up to date with your current situation, this should be a top priority. Important digital assets may also need a review.
Use this as an opportunity to sit down and evaluate your incomings and outgoings. Are you paying for services or subscriptions you don’t use? Are there areas that you could cut back on? Could you free up more cash to put towards your financial goals?
Now is a good time to review your pension savings – are they in line with your plans for retirement? The most unexpected changes in the chancellor’s Spring Budget were pension reforms. The pension lifetime allowance, which currently stands at £1.073 million, will be abolished by April 2024 and the annual pension allowance – the most you can pay into a pension each tax year and receive tax relief – will increase from £40,000 to £60,000. Although these benefits will be tempered as the tax-free lump sum you can take will be capped at £268,275 (unless you have protections already in place).
Tax changes announced in last year’s autumn statement will come into effect this tax year. These include the freezing of the annual personal allowance at £12,570 and the higher rate tax threshold at £50,270. Plus the reduction of the additional rate 45% band from £150,000 to £125,140. This means you could be tipped into a higher or additional rate tax band if your earnings have increased, so it’s worth exploring options, such as increasing your pension contributions.
It’s also important to take advantage of any tax allowances you’re entitled to. Are you using your annual ISA allowance in full? Are you claiming tax relief against charitable donations and professional subscriptions? As always, you should seek independent tax advice based on your own situation before making any financial decisions.
Plan for life
The lifting of the lifetime allowance on pensions might have additional benefits when it comes to inheritance planning, but are you making the most of your wealth while you’re still around to enjoy it? Have you, for example, dreamt of living somewhere else – escaping the city or moving closer to family? Or gifting from your assets or surplus income to benefit your loved ones – when they need it most? Or supporting a favourite cause? Why not revisit these ideas and consider your work-life balance. Are you happy, or could you be doing more?
Examining many areas of your life – from finances to family matters – can feel daunting, but sitting down and talking about it will almost always pay dividends in the long run.
If you’d like to start a conversation, please get in touch. Our experienced team can work with you to create a personal wealth plan that can help you achieve your financial goals now and for the future.
Clients of Nedbank Private Wealth can get in touch with their private banker directly to understand how wealth planning can help them achieve their financial goals and objectives, or call +44 (0)1624 645000 to speak to our Client Services team.
Investment values can go down, as well as up, to the extent that you might get back less than you originally invested. The value of your investments may also be affected by exchange rates. The inclusion of any investment structures and wrappers is for information only and should not be taken as advice or a recommendation. You should seek the necessary advice, specific to your circumstances, before making any financial decision.
Senior Private Banker , Isle of Man
Allie manages a select portfolio of high-net-worth clients, working closely with their professional advisers, such as lawyers and accountants, to provide services tailored to their specific financial needs. These include wealth management, succession planning, pensions, lending and banking services. She also works closely with fund managers, trusts and corporate service providers, financial advisers and legal firms. In addition, she acts as an investment adviser to various pension schemes and trusts.
Allie is a Fellow of the Chartered Institute for Securities & Investment.
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