As we step into 2025, it’s the perfect time to take a step back and review your financial plans for the year ahead. Whether you’re looking to boost your retirement savings, plan for your family’s future, or make the most of your tax allowances, here are some top tips to kickstart your financial year on the right foot. With the new tax rules and planning opportunities in play, these simple steps could help you build a more secure financial future in 2025 and beyond.
- Supercharge Your Pension Contributions
We’ve all heard that retirement can be expensive, but the UK’s tax system actually rewards pension saving—big time. If your employer offers a pension match scheme (for example, they match contributions beyond the minimum 5%), you should consider taking advantage of it. This means you could be saving more without it impacting on your pay check too much.
And if you receive a bonus at work, consider “bonus sacrifice,” where you divert your bonus directly into your pension. Not only can this reduce your taxable income (so you pay less tax), but you’ll also maximize those employer contributions. If you’re earning around ÂŁ100,000 or more, this is a smart way to avoid losing your pension allowance and potentially facing a hefty tax bill.
- Give the Gift of Future Wealth: Junior ISAs and Pensions
The holiday season might be over, but it’s not too late to think about lasting gifts that set younger family members up for financial success. By opening a Junior ISA (JISA) for a child, you can start a savings plan that grows over time thanks to compound interest. A small monthly contribution (just £100) could grow into over £35,000 by the time they reach 18. If you’re feeling particularly generous, you could even consider contributing the full £750 a month, which could result in a pot worth over £263,000.
Alternatively, you could open a pension for a child. Yes, you read that right! Starting a pension for a non-earner like a child allows you to contribute up to £2,880 a year, and the government tops it up with £720. That’s a pretty solid start to retirement for someone just starting life.
- Get Your Pensions in Order
Many of us forget about old pension pots from previous jobs, but now’s the time to bring them all together. Research shows that over £31 billion is currently locked away in unclaimed pension pots, and a big chunk of that is from people who’ve switched jobs and lost track. If you’re unsure about how many pensions you have or where they are, reach out to previous employers or use the Government’s pension tracing service.
Consolidating pots can also make life easier—just make sure to get advice if you have a significant amount saved.
- Max Out Tax-Relief Opportunities
Let’s talk tax relief! Whether it’s through your pension or ISAs, using your tax-free allowances effectively is more important than ever. For example, you can contribute up to £60,000 a year into your pension and benefit from tax relief on your contributions. If you’ve not used up your allowance in the previous year, you can carry it forward providing you use up this year’s first. With higher tax rates looming, making full use of these allowances can shield your savings from hefty tax bills.
Another area to be aware of is your capital gains tax allowance. With rates rising, it’s essential to consider whether you’re making full use of your £3,000 annual exemption. For couples, ensuring both partners use their allowances can save you a lot of money in the long run.
- Review Your Will and Consider Power of Attorney
If you haven’t updated your will in a while, now’s the time to do it. Life changes—children are born, assets are accumulated, and relationships evolve. A well-drafted will ensures that your wishes are respected and that your loved ones don’t have to deal with unnecessary stress. If you’ve never set up a Lasting Power of Attorney (LPA), consider doing that too. This gives someone you trust the legal right to make decisions for you if you’re no longer able to do so.
In particular, if you’re in a blended family or an unmarried long-term relationship, having a will in place is crucial. Intestacy rules (the default law for when someone dies without a will) can create complications and confusion, especially if property ownership isn’t clear.
- Don’t Miss Out on Pension Tax Relief
If you’re a higher or additional rate taxpayer, you could be leaving money on the table by not claiming your full pension tax relief. Most of us get the basic 20% tax relief automatically, but if you’re in the 40% or 45% tax bracket, you can claim back an additional 20% or 25%. Don’t forget to include this in your tax return—it could make a big difference to your savings.
If you don’t complete a tax return, just tell HMRC about your pension contributions and they’ll calculate the extra tax relief and refund it to you.
- Start the ‘Seven-Year Clock’ for Gifting
The beginning of the year is a great time to think about your long-term gifting strategy. If you’re planning to make larger gifts, especially to family members, the “seven-year clock” is an important consideration. Gifts made seven or more years before your death are exempt from inheritance tax (IHT), so starting this process sooner rather than later can help reduce future IHT bills. You can even start using regular gifts from surplus income, which may also be exempt from IHT.
With upcoming changes to IHT rules by 2027, now is the time to get expert advice on how to structure these gifts, especially when it comes to pensions and business assets.
- Talk About Finances—Now and Later
Many people find it uncomfortable to talk about finances, but good communication is key, especially for couples and families who may have multiple generations to consider. The “sandwich generation,” or those caring for both aging parents and children, has a lot to gain from early and open conversations about financial goals, plans, and responsibilities. If one partner is typically in charge of the finances, it’s crucial that both parties are on the same page about key decisions. This will make transitions easier if unexpected changes (such as illness or a partner’s death) occur.
For couples, ensuring that both are equally informed about household finances will ease any future financial stress, particularly if one partner passes away or faces health issues.
2025 is a year full of potential financial opportunities, and a little planning now can set you up for a smoother, more secure future. Whether it’s boosting your pension, reviewing your estate planning, or making sure your tax allowances are in check, these steps will help ensure you’re in a better financial position when the year comes to a close.
Here’s to a prosperous 2025!
Clive Thompson
