As the new year begins, you might already be thinking about resolutions you want to adopt and changes you want to make in the months ahead.

As well as the familiar goals of hitting the gym, cutting back on indulgences, or spending more quality time with loved ones, the start of the year is also the ideal time to organise your finances.

Taking steps now can help you feel more secure and confident heading into 2025, especially with plenty of time to prepare before the new tax year begins in April.

So, read on to discover five simple steps to get your finances in order for the year ahead.

1. Maximise your pension contributions

Pension contributions are one of the most efficient ways of investing in your future financial security, as they offer tax relief and the potential for considerable growth over long time horizons.

Most contributions automatically benefit from 20% relief and if you are a higher- or additional-rate taxpayer you can claim an extra 20% or 25% by completing a self-assessment tax return.

Each tax year, you have an Annual Allowance that limits the amount of pension contributions you can make without incurring a tax charge.

For most people, in the 2024/25 tax year, the Annual Allowance is £60,000 or 100% of your income, whichever is higher. However, it may be lower if you are a high earner or if you have flexibly accessed your pension. You can also carry forward any unused contributions for the previous three tax years.

So, if you haven’t maximised your Annual Allowance for the current tax year or didn’t in the previous three tax years and you have money left to invest, the new year is the perfect time to review your pension fund and make additional contributions.

Remember, a pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

2. Make full use of your gifting exemption and ISA allowance

Each tax year, you can save a set amount in ISAs, which provide tax-efficient growth on your savings. For the 2024/25 tax year, the ISA allowance is £20,000.

So, if you haven’t made full use of this allowance yet, the new year could be the ideal time to make the most of it before the limit resets in April.

You’re also able to gift a certain amount each year without your loved ones incurring Inheritance Tax if you were to pass away shortly after giving the gift. This is known as the “annual gifting exemption” and for the 2024/25 tax year is £3,000.

If you don’t utilise these allowances or exemptions before the end of the financial year, you could miss out on valuable tax benefits.

Starting early in the new year gives you the time to take full advantage of available reliefs, contributions, allowances, and exemptions, ensuring your finances are optimised before the tax year ends.

It’s important to note that the Financial Conduct Authority does not regulate tax planning or estate planning.

3. Review your budget

The start of each new year is a good opportunity to assess how changes in both your personal life and the broader economic climate have influenced or could influence your budget.

For instance, rising inflation could increase the cost of your weekly groceries, while fluctuating interest rates might impact your mortgage payments. Moreover, welcoming a new child or grandchild or starting a new job could significantly change your income and expenditure patterns.

The new year could be the perfect time to review these factors and adjust your budget accordingly, ensuring it aligns with both your financial goals and current spending needs.

A well-structured budget helps you track your spending, avoid unnecessary debt, and allocate funds for future investments or expenditures in the year ahead and beyond.

You can read more about how to create a budget in our previous article on the topic.

4. Complete a self-assessment tax return before the deadline

The deadline to submit a paper self-assessment return is 31 October, but you have until 31 January to file online, which is the final date to avoid penalties.

This gives you a full month from the start of the new year to sort out your tax affairs for the previous financial year.

It’s important to remember that completing a tax return isn’t just for the self-employed or business owners. Several circumstances may require you to file a self-assessment, including if you:

  • Are employed and earn more than £150,000
  • Have savings and investments outside of tax-efficient wrappers like ISAs
  • Have made a profit on the sale of assets liable for Capital Gains Tax (CGT)
  • Had to pay the High Income Child Benefit Charge
  • Received income from property rent
  • Earned tips or commission
  • Earned income from a foreign country.

You are responsible for filing your return on time, and HMRC does not consider claiming ignorance of the requirement as a valid excuse.

So, the new year could be a great opportunity to ensure your tax returns are in order and you’re ready to meet the deadline.

5. Revisit your goals

Your goals are the heart of your financial plan, providing the foundation and motivation for the strategies you implement.

Yet, as life progresses and circumstances change, your goals may evolve too. For instance, you might celebrate the birth of a grandchild, remarry, or unexpectedly lose a loved one.

Life is often unpredictable, and the new year offers the perfect opportunity to reassess your goals and ensure they reflect your current situation and ambitions.

Think about the milestones you aim to achieve in the year ahead, such as hitting a savings target, purchasing a new property, or paying off debt.

Once you’ve defined your immediate objectives, take time to revisit your long-term goals, whether it’s retiring by a certain age, reaching an investment target, or ensuring you can support your family in the future.

Re-evaluating both short- and long-term goals ensures your financial plan stays in line with your changing circumstances and sets you up for success in the years ahead. Even if your objectives remain the same, the new year is a great time to review your progress and make sure you’re still on track.

Get in touch

A financial planner can help ensure your finances are in immaculate order for the new year and beyond.

To speak to a financial planner, get in touch.

Email info@perennialwealth.co.uk or call 0117 959 6499.

Risk warnings

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Approved by Best Practice IFA Group 09/01/2025