The festive season often brings reflection and resolutions. As the New Year begins, it’s an ideal time to assess your financial situation and address any lingering concerns. Whether it’s pensions, family finances, wills, or inheritance planning, now is the moment to create a solid financial plan for the year ahead.
Emma Sterland, Chief Financial Planning Director at Evelyn Partners, a UK wealth management firm, advises, “While recent changes from October’s Budget may affect some plans, financial needs and circumstances continually evolve. Taking the time to review and adjust your plans is essential.”
Based on her experience, here are twelve actionable financial planning tips for 2025. Some are simple steps you can take quickly, while others may require ongoing effort. All are practical ways to improve your financial health and security.
1. Increase Your Pension Contributions
Pensions receive significant tax advantages in the UK. You can save on taxes and receive employer contributions by contributing more to your pension.
For example, some employers offer matching contributions if you contribute above the minimum requirement. Additionally, consider using bonuses or lump sums like an inheritance to boost your pension. Remember to stay within the annual allowance limits to maximize tax relief.
2. Start Saving for a Child’s Future
Regular savings can grow into substantial amounts over time. Junior Individual Savings Accounts (JISAs) allow tax-free savings of up to £9,000 annually for children. Investing even modest amounts monthly can provide a young relative with a financial head start.
You can also consider starting a pension for a child, which benefits from tax relief and offers long-term growth potential.
3. Ensure Your Pension Goes to the Right Person
From April 2027, unspent pension funds may be included in inheritance tax (IHT) calculations unless a spousal exemption applies. Review and update your pension beneficiary forms to ensure they reflect your current wishes and consider the potential tax implications.
4. Review Your Financial Strategy Regularly
Many people seek financial advice too late, missing opportunities to plan effectively. Building a trusted relationship with a financial adviser early can help you prepare for unexpected life changes and ensure your finances align with your goals.
5. Use Tax Allowances Efficiently
Take full advantage of ISAs and pensions to shelter investments from taxes. Couples can also optimize their tax efficiency by transferring assets to the lower-earning partner or using both partners’ allowances.
6. Claim Higher or Additional Rate Tax Relief
Higher and additional rate taxpayers may miss out on significant tax relief on pension contributions if they don’t claim it. Check your self-assessment tax return or contact HMRC to ensure you’re receiving the full benefit.
7. Have Open Financial Discussions
Good communication is key to effective financial planning, especially for couples or families. Talking about finances with loved ones can help avoid misunderstandings and plan for shared goals.
8. Update Your Will and Arrange Power of Attorney
A will ensures your assets are distributed according to your wishes. Regularly review and update it to reflect changes in your life or tax rules. Setting up a lasting power of attorney (LPA) can also provide peace of mind should you lose the ability to manage your affairs.
9. Check Your Pension Lump Sum Allowance
The new lump sum allowance offers opportunities to withdraw tax-free cash from pensions. Consult an adviser to understand how much you can access and avoid actions that might reduce your allowance.
10. Plan for Inheritance Tax (IHT)
Consider gifting to reduce future IHT liabilities. Starting a “seven-year clock” for larger gifts or using surplus income for regular gifts can help transfer wealth tax efficiently.
11. Review Workplace Death Benefits
Workplace life assurance benefits might be subject to IHT under new rules. Check your nominated beneficiaries and consider switching to schemes that avoid IHT if applicable.
12. Consolidate Your Pensions
Tracking multiple pension pots can be challenging. Consider consolidating them to simplify management and potentially improve investment performance. Seek advice to ensure this is done effectively and aligns with your retirement goals.
Conclusion
Taking control of your finances now can make a significant difference in your future security and peace of mind. These twelve tips are a starting point for a comprehensive review of your financial plans in 2025. Whether you handle it yourself or seek professional advice, each step can help you achieve greater financial well-being.
