The start of a new year is the perfect time to review your finances. Here are 12 financial planning tips for 2025 to help you maximise your savings, reduce tax liabilities, and secure your future.
1. Increase Your Pension Contributions
Pension savings offer tax-efficient growth, and increasing contributions can make a big difference in retirement. Many employers match additional contributions, which means free money towards your future.
If you receive a bonus, consider sacrificing it into your pension. This reduces income tax and National Insurance deductions, allowing you to keep more of your earnings for retirement.
2. Start Saving for a Child or Grandchild
A Junior ISA (JISA) is a great way to build wealth for a child. With a £9,000 annual allowance, even small contributions can grow into a significant sum by adulthood.
A child’s pension (SIPP) is another option. Contributions up to £2,880 receive 20% tax relief, meaning the government adds £720 for free!
3. Ensure Your Pension Goes to the Right Person
From April 2027, unspent pensions may be included in inheritance tax (IHT) calculations. Check your beneficiary nominations to ensure your pension passes to your loved ones in the most tax-efficient way.
4. Review Your Financial Strategy and Seek Advice Early
Many people only seek financial advice late in life, but early planning helps optimise investments, pension access, and tax efficiency. Regular financial check-ups ensure you stay on track.
5. Use Tax Allowances to Reduce Liabilities
With capital gains tax (CGT) allowances now just £3,000, careful tax planning is vital. Consider:
- Utilising your ISA allowance (£20,000 per person)
- Transferring assets between spouses for tax efficiency
- Selling assets strategically before tax year-end to benefit from CGT exemptions
6. Claim Higher-Rate Tax Relief on Pension Contributions
If you’re a higher-rate (40%) or additional-rate (45%) taxpayer, you may be entitled to extra pension tax relief. Many people miss out on thousands of pounds by failing to claim this back from HMRC.
7. Have Financial Conversations with Family
Communication is key, especially for the sandwich generation balancing care for ageing parents and supporting children. Discuss inheritance planning, education funds, and retirement strategies openly.
8. Make or Update Your Will and Set Up Lasting Powers of Attorney (LPA)
A valid will ensures your assets are distributed according to your wishes. If you already have a will, review it regularly to reflect changes in family circumstances or tax laws.
An LPA allows someone you trust to manage your affairs if you lose capacity—an essential step for future security.
9. Check Your Tax-Free Pension Lump Sum Allowance
Since April 2024, the lump sum allowance is £268,275. If you’ve withdrawn tax-free cash before, you may be entitled to more than expected. Seek financial advice to optimise your pension withdrawals.
10. Start the Seven-Year Clock on Gifting
Large financial gifts take seven years to become IHT-free. Consider making gifts early to reduce your estate’s tax burden. Regular gifting from surplus income is another tax-efficient option.
11. Review Workplace Death Benefits
Many death-in-service benefits (typically 3-4x salary) may soon be subject to IHT. Check your beneficiary nominations and explore employer schemes that might avoid this tax liability.
12. Consolidate Your Pension Pots
Over 3.3 million pension pots are lost or dormant in the UK. Tracking down and consolidating pensions can simplify management and reduce fees, ensuring your retirement savings work harder for you.
Final Thoughts
Planning your finances early in the year ensures you make the most of tax breaks, allowances, and investment opportunities. Whether it’s pension growth, inheritance planning, or tax efficiency, taking action today can secure a brighter financial future.
