A new year can mean a fresh start for your finances. Follow our simple to-do list to get your tax and pension plans in order and prepare for the end of the tax year.
We’re here to help if getting on top of money matters is one of your resolutions for the new year.
Work through this simple to-do list and you can head into 2022 with a bit more confidence in your finances – whether that’s having clearer goals or having your tax plans in order before the new tax year in April.
1. Find out how much you have right now
You can’t work out where you’re heading if you don’t know where you’re starting from. January is the time to take the plunge and check those balances. How much do you have in any current or savings bank accounts or ISAs (individual savings accounts)?
When you’re considering your longer term plans, you need to know how much you have in any pension plans. A recent Standard Life survey found that more than 40% of customers said they reviewed the value of their pension only once a year, or less.
And if you’re rounding up what you’ve got don’t forget any pensions you might have with previous employers or that you’ve set up yourself. If you think you might have lost some pensions along the way, read our article on how to track down ‘lost’ pensions.
When you have the information feed it into our pension calculator to get an idea of how much could be available to fund life after work.
2. Name that goal
What are you saving for? Put a name to it and you’re more likely to save for it. Write it down, mark it on the kitchen chalkboard, or – better still – set up an online savings pot in the name of your goal to spur you on. Making it tangible can help make it feel more achievable.
Don’t just stop at one though, think of both your immediate and future goals. Our article Pension plan or savings? Getting the right mix explains how savings, pension plans and other investments can all offer a different mix of flexibility, accessibility, potential for growth and tax benefits to help you hit different saving goals.
Or for more on how to set a savings goal, visit the MoneyHelper website.
3. Set yourself a spending allowance and budget
Rather than save what’s left at the end of the month, try putting some savings aside as soon as you’re paid. This will help to ensure the amount you wanted to set aside is actually the sum you save. It puts your savings goals higher up the priorities for your money than things like socialising.
Online banks and apps that let you create different savings pots so that you don’t mix up your savings with everyday spending have grown in popularity, and you can often round up bank transactions to the nearest pound and automatically add the extra into savings. If saving towards your retirement is a priority you could consider moving some of the money saved into your pension plan either by increasing your regular payment or as a one-off payment.
And if you want any help in setting a budget to track how much is coming in and where each pound is being spent, this budget planner tool from MoneyHelper is a great starting point.
4. Get your tax return in now
The deadline for filing self-assessment tax returns is coming up at the end of January. So if you’re in one of the categories of people who need to send a tax return – such as self-employed or earning a taxable income over £100,000 – now’s the time to act.
The deadline for submitting your return online is midnight on 31 January. MoneyHelper has a guide on who needs to submit a tax return and how to register, if you’re unsure.
5. Get ready for the end of the tax year
It’s the start of a new calendar year but you still have a few months to do what you need to ahead of the new tax year, which starts in April.
Start your preparation by reading our round-up of the tax and pension changes announced in 2021 that could affect you in the new tax year, which has already been read by more than 60,000 people.
It outlines what’s happening to the State Pension, the Personal Allowance (how much you can earn before paying income tax), pension tax relief and the growth and inflation forecast for the year.
6. Make the most of any pension tax allowances for the year
Pension plans are a tax efficient way to save for your future and with the end of the tax year approaching it’s a good time to make the most of the tax benefits they offer.
Thanks to pension tax relief it normally costs £80 for a basic rate taxpayer to save £100 into their pension plan, so saving more into your plan can actually cost you less.
Pension Annual Allowance is the total that you, your employer and any third-party can pay in across all your pension plans in a tax year. Any more than this and you may get a tax charge. Right now, the standard Annual Allowance is £40,000. If you’re nearing your Annual Allowance, you may be able to make the most of unused allowances from previous tax years to maximise your pension payments. To find out more about how this works read our Annual Allowance guide.
The Lifetime Allowance is the total amount you can take from all your pension pots without paying an extra tax charge and for the 2022/23 tax year it will remain at £1,073,100. You can find out if this might affect you, what the charges are and what to do if your pension pot is close to or beyond the allowance in our Lifetime Allowance guide.
7. Think about a pension top-up
If your budget allows, why not think about increasing your monthly pension contribution or making a one-off payment? You can read more about this in our article 5 pension tips that could help give your savings a boost.
Or, simply log in to your account to review your pension payment levels, check your investments and more.
The information here is based on our understanding in January 2022 and shouldn’t be taken as financial advice.
A pension is an investment and its value can go down as well as up and may be worth less than was paid in.