It’s March – the January blues have paled; the nights are drawing out and Spring is in the air!
What better way of entering the season of growth and bloom than making positive changes to your finances?
Here are some ideas to Spring clean your finances:
Are you spending more than you need to, or can afford?
- Write a budget of all your outgoings against your income. There are now several mobile apps available for cash accounts that help you manage your spending.
- If you think your bills are too high, check if there are lower cost alternatives. When was the last time you re-mortgaged, changed your energy supplier or reviewed your car or home insurance? Comparison sites can make this easier than you might think.
Use your allowances
Spring coincides with the tax year end on 5th April, so this is your last chance to use your tax year allowances.
- You can invest up to £20,000 in ISAs; investment, cash or both, and generate tax-free growth and income.
- Pension contributions are particularly tax-efficient for higher and additional rate taxpayers, who can claim additional income tax relief from HMRC.
- You have a capital gains tax exemption of £12,000, so could part-sell assets that are heavy with unrealised taxable gains.
- If you are retired and your income is below the tax-free personal allowance of £12,500, you could use the remainder of your allowance by making a pension withdrawal.
- You can make small gifts that are immediately exempt from inheritance tax.
Simplify your affairs
Do you have cash accounts, investments and pensions with multiple providers? You can declutter by having less correspondence through your door or email inbox.
- Close old bank accounts that you aren’t using, making sure there are no penalties for doing so. There are accounts paying interest of over 1% on instant access. The fewer accounts the better; although take heed that you would only be compensated up to £85,000 if the bank fails.
- If you have investments with multiple providers, consider consolidating them. You might be able to reduce charges and give yourself more investment choice. You can transfer from one ISA to another without losing the tax-efficient ISA status.
- If you have money purchase pensions from previous employments, you may want to transfer them into your current employer’s pension or a private pension.
Before transferring investments and pensions, we recommend that you take financial advice, to make sure it is the right thing for you to do. In fact, that leads into our final suggestion….
Consult a financial adviser
You can carry out some of these ideas yourself but there’s no substitute for good quality independent financial advice. If you are thinking about looking for a financial adviser, my colleague Katrina’s blog highlights some questions to ask, and can be found here.
Neil Lindsay FPFS