7 “big picture” financial tasks to complete at the beginning of the tax year

As the cost of living crisis continues to make budgeting somewhat challenging for families, it might be difficult to focus on the “big picture” aspects of your finances. 

These might include your:

  • Private pension(s)
  • State Pension 
  • Investment portfolio
  • Protection, like life insurance
  • Estate planning, like your will or Lasting Power of Attorney (LPA).

Now that the new tax year has begun, this could be the perfect time to complete some important, but often forgotten, financial tasks. 

Here are just seven to get you started.

1. Review your will

Your will is one of the most crucial documents to your name. Designed to ensure the fair distribution of your estate after your death according to your personal wishes, it is imperative that your will is up to date.

If your circumstances have changed recently, such as getting divorced or welcoming a new child or grandchild, now is the time to revisit your will and make the appropriate changes. 

You may gain immense peace of mind knowing that if you were to pass away unexpectedly, your precise inheritance wishes are laid out clearly in writing.

2. Register a Lasting Power of Attorney

An LPA is a document that allows another person to make choices on your behalf in certain circumstances.

There are two types of LPA: financial, and health and wellbeing.

A health and wellbeing LPA allows you to name an “attorney”, such as a trusted friend or family member, who can make health decisions on your behalf if you lose mental capacity.

A financial LPA means that your nominated attorney can manage your money on your behalf, including withdrawing money from your bank accounts and buying or selling properties. This could be helpful if you: 

  • Become unable to make your own decisions due to an illness or injury
  • Decide to pass financial responsibility to a younger family member once you reach old age.

The most important thing to remember here is that if you lose mental capacity, it’s too late to register an LPA. So, registering your LPA as soon as possible may mean that you’re covered in case something goes wrong.

3. Request a pension statement from each provider

A personal pension pot(s), including any workplace pensions and self-invested personal pensions (SIPPs), are invested assets that often form a crucial part of a person’s retirement income.

While you may not need to know how your pensions are doing every single day of the year, it could be very helpful to request a pension statement from each provider at the start of the tax year and look at your pot’s performance. 

Reviewing your pension performance at the start of the tax year may: 

  • Help you figure out if you’re on track to retire comfortably 
  • Enable you to consolidate any small or underperforming funds if this move is right for your circumstances
  • Increase your contributions where you can. 

Importantly, your pension Annual Allowance resets at the start of the tax year. This stands at £60,000 or your total earnings, whichever is lower, for most earners. If you are a high earner, your Annual Allowance may be tapered down. 

By looking at your pension performance at the beginning of the tax year, you can make the most of your Annual Allowance by making contributions throughout the year, perhaps boosting your pension’s value as you head towards retirement.

4. Revisit your financial protection

When unexpected life events occur, it can be extremely disorienting. So, knowing that you have financial protection in place, like life insurance or critical illness cover, may offer you immense peace of mind.

As a result, it may help to conduct an annual review of your protection. You may need to change your address or the amount of cover you need if your circumstances have changed, for example.

Doing so could mean that if the unexpected happens, such as a cancer diagnosis or stroke, your family’s wealth may be protected, avoiding a costly depletion of your hard-earned funds over time.  

5. Check your State Pension eligibility online

The State Pension is likely to form the bedrock of your retirement income. 

The amount you receive depends on how many “qualifying years” are on your National Insurance (NI) record. A qualifying year means that you have paid enough in National Insurance contributions (NICs), or earned NI credits for that year through receiving benefits, for example.

As the tax year begins, checking your NI record and finding out how many qualifying years you have may be a constructive move. In doing so, you could:

  • Pay voluntary NICs for missed years if you wish (usually, you can back-pay NICs for the previous six tax years)
  • Prepare your retirement budget according to the amount of State Pension you’re set to receive.

This move is especially crucial if you are set to reach State Pension Age in the next 10 years or so – it means that you have plenty of time to maximise your State Pension eligibility where possible.

6. Plan your ISA contributions for the year

An Individual Savings Account (ISA) is a tax-efficient account that allows you to grow your wealth without interest or investment returns being eligible for Capital Gains Tax (CGT) or Income Tax. 

Much like your tax allowances, the overall ISA contribution limit of £20,000 (with varying limits depending on the type of ISA you have) resets on 6 April. When a new tax year begins, it may help to take a look at your ISAs and plan how much you’d like to contribute in the coming 12 months. 

It may sound obvious, but if you contribute as much as you can into your Stocks and Shares ISA at the very beginning of the tax year, your returns over the long term could increase as a result. Putting the maximum amount in when the new tax year begins means your money has more time to grow tax-efficiently.

Or, you could opt to pay into your ISA on a monthly basis – either way, knowing how much you’d like to allocate for this purpose may be a constructive way to start the new financial year.

7. Contact your financial planner for a review

Your financial planner’s role is to manage the big picture aspects of your finances, while you get on with the important business of day-to-day life. 

So, if you are feeling proactive about covering the above tasks, but are apprehensive about keeping track of your overall financial plan in this year and beyond, contacting your financial planner may be a natural next step. 

A full review of your finances with a professional by your side may help you maintain peace of mind while pursuing the life goals that are important to you. 

Email me at a.douglass@grosvenorconsultancy.co.uk or call my office on 01793 766 123. 

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate estate planning or, will writing, or Lasting Powers of Attorney.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance. 

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. 

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

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