Take stock of your finances for the new tax year

5 min read

The new tax year can be a good time to check in and consider the financial goals you may have set at the beginning of the year.

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2024/25 Tax year

Life is unpredictable and it can be difficult to stick to your plan to the letter. Things might not have gone to plan, unanticipated expenses may have thrown you off track from the goals you set - and that’s okay.

That’s why the beginning of the new tax year is a good time to see where you may have veered off course. Then you can make adjustments that are more practical and perhaps revise the goals you set.

Here are some things you can do to get back on track:

Adjust your budget

Your expenses can be categorised into two groups: essential bills and lifestyle choices. Essential bills encompass unavoidable expenses such as rent or mortgage, utilities, food, insurance, and transportation. Lifestyle expenses usually cover discretionary spending on items like gym memberships, subscriptions, and entertainment.

While you typically can’t change essential bills, lifestyle expenses are a lot more in your hands. Look back and assess your income and spending patterns over the first three months of the year. See where you may have overspent and where you can cut back during the rest of the year.

Luckily, tracking your finances has become more convenient than ever. Banking applications streamline this process, automatically categorise your income and expenditures into customisable "pots". Some banking apps even allow you to set spending limits and receive notifications as you approach them. Whether you opt for a monthly overview or analyse past months, regularly checking your accounts can instil a sense of control.

Consider switching banks

Many banks offer cash bonuses ranging from £100 to £200 for switching your bank account. These are often available from time to time during the year. Transferring to a new bank that offers better terms can yield significant rewards. By using the Current Account Switch Service (CASS), switching accounts has never been simpler. A little extra cash is always welcome. You can use it to pay down debt, stash it away in a savings account, or make a purchase that you couldn’t afford before.

Explore service provider alternatives

Switching to different service providers can also lead to substantial savings. While energy bill savings may not be as significant as before, comparing fixed deals amidst rising price caps could prove beneficial. Additionally, renegotiating broadband contracts upon expiration or bundling services might result in cost reductions that can help your money go further.

Manage debt effectively

If debt repayments are hindering your budgeting efforts, see what you can do to manage your debt more effectively. The key factor in managing debt is calculating how much interest you’re paying and how you can reduce that.

One of the best ways to manage credit card debt is to transfer it to a 0% balance transfer card, which can give you up to 25 months interest free. If you pay off the balance by the end of the interest free period, you could save hundreds of pounds in interest.

If you have several debts, you could combine them into a single monthly repayment with a debt consolidation loan. Be aware that debt consolidation often means spreading the repayments over a longer period to bring monthly payments down. You may end up paying more in interest over the long term. But. it’s still a useful way to bring debt repayments down to an affordable level on a monthly basis.

Start saving or investing

The end of a tax year is also a good time to take stock of your savings. This is especially true if you haven’t used the annual ISA allowance for the 2023/24 tax year, which lets you save or invest a total of up to £20,000 across different types of ISAs tax free. With the steady increases in the Bank of England (BOE) base rate last year, interest rates on savings accounts have been more attractive for the past year. While many providers offering rates above inflation, they won’t stay high for much longer. Experts are predicting that BOE may start cutting the interest rate sometime this summer.

If you want to start a savings habit, you could explore instant or easy savings accounts and lock in some favourable interest rates right now. Or if you’re looking for great returns, an investment ISA is also a good option. Just remember that investing comes with inherent risk and you may get back less than you invested.

Monitor your finances

Managing your finances is a daily exercise. It takes regular monitoring, budgeting, and prudent spending habits empower you to take control of your finances effectively. Implementing these measures can have, both immediate and long-term, financial benefits.

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