8 min read

Five ways to spring clean your finances for the new tax year

On 6 April we rolled over into a brand new tax year, so it’s a great time to spring clean your finances. It’s worth taking a day to sit down with all your paperwork and take a good look at how you managed your money during the last 12 months, and what you could improve this year. Here are five tips to spruce up your finances and blow the cobwebs away this spring.

A man and women looking over their finances on a laptop and letters at a desk
  • Use of your ISA allowance
  • Turbocharge your savings
  • Check if you’re getting a pay rise
  • Pay less on your debt
  • Switch your utilities

Use your ISA allowance

In each new tax year, you get a new annual ISA allowance. For the year 2018/19 this is £20,000, which you can save or invest across the full range of ISA products. There are quite a few now available: Cash, Stocks and Shares, Help to Buy, Lifetime, and Innovative Finance, for example. If you pay into a Junior ISA for a child, you will find the annual contributions limit increases from £4,128 to £4,260 in the new tax year.

You’re allowed to split your total allowance across one of each of these ISA products (not including the Junior ISA) if you want, yet many of us are still putting most of our money into a boring old cash ISA, and sacrificing returns to do so.

Recent research from MoneyFacts highlights the paltry rates on offer – the average interest rate paid on cash ISAs this tax year was 0.97%. When considered with the rise in inflation, you’re effectively losing money, as your savings aren’t growing at the same rate.

So it’s worth thinking about investing through a stocks and shares ISA to get a better return, but bear in mind you may end up taking on more risk. Due to market fluctuations your investments may fall as well as rise. The Money Advice Service is full of helpful advice for those who are unsure.

Turbocharge your savings

If you do want to keep some of your savings in cash, such as in an emergency fund, make sure it’s earning the highest rate possible. Have a look at the best buy tables to identify some of the better savings accounts.

Usually you will get a better rate if you can lock your money away for a while in a fixed rate bond, or if you go for a savings accounts linked to a particular current account, so you may want to consider switching banks. Finding a savings account that suits your needs can make all the difference in the long term.

Check if you are getting a pay rise

The new tax year is when any changes to tax or pensions announced in the Budget usually come in to force. On 6 April 2018, a few changes are coming in which might affect the money in your pocket, so it’s worth checking and factoring this into your budget (you do have a budget, right?).

The personal allowance (the amount you can earn before you start paying tax) is going up from £11,500 to £11,850. The threshold for paying higher rate income tax will go up from £45,000 to £46,350. This will mean most basic rate taxpayers will pay about £70 less a year in tax, while higher rate taxpayers will save £340 a year.

The state pension is rising to £164.35 a week with auto enrollment contributions increasing as well. The lifetime allowance for pension savers is also going up from £1,000,000 to £1,030,000.

The national minimum wage is rising, from £7.50 an hour to £7.83 an hour. And, from 1 April, the cost of a TV licence will increase by £3.50 to £150.50 a year.

Pay less on your debt

If you have any debt on which you’re paying interest, for example, a credit card you don’t pay off in full each month, you will normally be better off using any savings you have to clear this debt. That’s because the interest rate you will pay on the debt will most likely dwarf even the best rate you can get on cash savings.

If you have debt but no savings and your credit rating is decent, try to shift your borrowing to a lower (or ideally interest free) credit card. Many cards now offer long 0% APR deals, giving you chance to pay down the debt more quickly and save yourself a fortune in interest. You can use ‘soft search’ eligibility checkers to see if you might be accepted for a new card before you apply, and this won’t leave a mark on your credit file.

Switch your utilities

Use comparison sites to shop around and see where you could be getting a better deal on utilities like gas, electricity, water and broadband. Switching may sound like a lot of hassle, but it’s much easier now than it once was, and the savings you could make should be worth the time you spend researching deals.

And while you’re at it, check your bank statements for old direct debits for things you no longer use and cancel them, just be sure to cancel the contracts as well to avoid being hit with fees for bounced payments.

 

Written by Hannah Smith – Financial Journalist

Note: Whilst we take care to ensure Talking Finance content is accurate at the time of publication, individual circumstances can differ so please don’t rely on it when making financial decisions. The opinions expressed within this blog are those of the author and not necessarily of OneFamily.