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What are your New Year’s (Financial) Resolutions for 2024?

Some people start each year with clearly defined goals; they might want to improve their health and wellbeing, build better relationships with friends and family, or take a step up in their career.

Financial planning is often high on the list as well, but people can struggle to put good intentions into practice.

According to research by Fisher College of Business at The Ohio State University, just 9% of people achieve their New Year’s Resolutions. Of the 91% of people who fail, 23% quit just one week in, while 43% give up by the end of January.

There are various reasons given for this. Firstly, goals should be set because there is a need for change, not just because it’s traditional to do so. Secondly, New Year’s resolutions are often too vague – people don’t plan for obstacles or break their plans down into manageable chunks. Finally, the research suggests that people fail in their resolutions because there is no accountability.

We can help you make New Year’s financial resolutions and support you in reaching your goals, establishing a clear plan to ensure you remain on track. January is a particularly good time to review your financial plan, with many of the changes to taxation announced in November’s Autumn Statement (in addition to the abolition of the Pension Lifetime Allowance) set to come into force in just a few months’ time on 6 April 2024.

Some suggested resolutions for a successful 2024

Review your pension strategy

Pension allowances have become more generous in recent years, with the Annual Allowance rising from £40,000 to £60,000 in April 2023 and the Lifetime Allowance set to be abolished this April.

Increasing your pension payments in line with these new thresholds could be a rewarding long-term strategy, as well as helping to reduce your Income Tax liability now. In addition, pension carry forward rules allow you to bring forward any unused allowances from the previous three tax years. This can be particularly valuable if you are getting closer to retirement.

Take full advantage of your current Capital Gains Tax (CGT) allowance

The annual CGT exemption is set to fall to £3,000 in April 2024 from £6,000 in the current tax year (and from £12,300 in the 2022/23 tax year). Up until the end of the current tax year, each individual can utilise their £6,000 CGT allowance to realise capital gains from investments without paying additional tax. Spouses and civil partners can also transfer assets between themselves, allowing both individuals to benefit from this individual exemption.

Maximise your ISAs and JISAs

The above changes to CGT and the Dividend Allowance (which will fall to just £500 from April 2024) render the £20,000 annual Individual Savings Account (ISA) allowance even more valuable for investors. ISAs are free of income tax and capital gains tax, meaning all returns are yours to keep.

You may also wish to make use of the Junior ISA (JISA) allowance, which enables you to contribute £9,000 per year, per child you are saving for.

Review your mortgage

With the Bank of England base rate held at 5.25% for the third consecutive time in last December and inflation continuing to fall, there are signs that lenders are gaining in confidence and that the upward pressure on mortgage rates is starting to ease.

If you are coming up for remortgage this year, it is likely that your new deal will be subject to a higher rate, given that many people are currently on deals made at the height of the pandemic when Bank Rate plummeted to just 0.1%. However, with lenders now bringing rates down and with some lenders once again offering sub-5% deals, there may be advantageous deals to be had. Look out for our monthly Top Mortgage Buys, where we review the market rates and schemes available.

Considering an overpayment to your mortgage, to get a better rate, can potentially make a big difference to not only the interest you are paying, but monthly servicing costs as well, putting more money back in your pocket now.

Make use of tax-efficient investment schemes

With Chancellor Jeremy Hunt extending the sunset clause deadline on the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs) until 2035, these schemes will continue to offer generous tax reliefs for those investing in early-stage small businesses.

Due to the higher risk of investing in early-stage start-up businesses, these schemes offer 30% tax relief and are exempt from dividend tax and CGT. Investment in the EIS and VCTs should be viewed with caution and advice should be taken from an independent financial adviser due to the heightened risk involved. However, for those with an appetite for higher-risk, and a longer term time horizon, they can be an attractive way to minimise your tax liability.

Providing support, strategy and accountability

We’re always here to help ensure that your New Year’s resolutions become a reality. Should you wish to discuss any of the information outlined above, or would like to work with us to gain better control of your finances in 2024, please contact your usual Partners Wealth Management adviser, call us on 020 7444 4030, or email info@partnerswealthmanagement.co.uk for an initial conversation.

 

The contents of the article have been prepared solely for information purposes. The article contains information on financial products and services and such information is designed for and addressed solely to individuals seeking generic industry information. Past performance is no guide to future returns. The above content does not represent a personal recommendation. Tax rules are subject to change and taxation will vary depending on individual circumstances.

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