5 practical financial planning tips for a positive start to 2025

The new year is a great time to set new goals and build helpful habits, so here are five practical financial planning tips to help you start 2025 on a positive note.

The new year is a great time to set intentions and build helpful habits. Reviewing your finances could be a useful place to start.

A survey by YouGov (21 December 2023) found that “saving more money” was the second-most popular resolution for 2024, with 49% of UK adults planning to set themselves this goal.

Yet, knowing how to put your positive intentions into practice isn’t always easy.

So, here are five helpful tips for starting 2025 on the right financial foot.

1. Set yourself clear financial goals

Managing your finances effectively isn’t just about accumulating more wealth. You might have a set of specific financial outcomes you want to achieve, beyond just “getting richer”, such as retiring early or leaving a meaningful legacy for your loved ones.

Setting clear goals like these could help you to:

• Craft a realistic action plan for achieving your targets
• Stay motivated to keep your plan on track
• Monitor your progress and celebrate key milestones
• Create a sense of achievement.

What’s more, a study by the University of Stirling (21 April 2021) found that individuals who set themselves goals are more likely to be successful at saving money. Yet, according to FTAdviser (8 August 2024), 17% of UK adults have no long-term financial goals at all.

If you don’t have a clear idea of what you want to achieve financially in 2025, January is the ideal time to set yourself some meaningful short-, medium-, and long-term goals.

As your circumstances, needs, and aspirations are likely to change from time to time, it’s worth reviewing these periodically to ensure they remain relevant and motivating.

2. Top up your ISAs

Individual Savings Accounts (ISAs) offer a useful way to build your savings and investments while shielding them from tax. This is because you don’t pay Income Tax, Dividend Tax, or Capital Gains Tax on interest or investment returns from any money you hold in ISAs.

In contrast, you might have to pay tax on a portion of the interest generated from funds you hold outside an ISA wrapper. A report by IFA Magazine (18 September 2024) has revealed that almost 2.1 million people will pay tax on their cash savings interest in 2024/25.

So, if you haven’t yet used your full £20,000 ISA allowance for 2024/25, you might want to consider topping up your ISAs before the new tax year begins on 6 April 2025.

It’s important to note that any unused allowance cannot be carried over into the new tax year. If you don’t use it, you’ll lose it.

Remember that everyone is entitled to an annual ISA allowance. This means that a couple could save or invest up to £40,000 tax-efficiently between them in a single tax year. 

Additionally, if you have a Junior ISA for your child, you can contribute up to £9,000 for the 2024/25 tax year – this won’t affect your individual ISA allowance.

3. Obtain a State Pension forecast

The State Pension could provide a valuable source of income during your retirement.

Indeed, the government’s triple lock policy means that the State Pension will increase each April in line with whichever is the higher of:

• Inflation, according to the Consumer Prices Index
• Average earnings growth across the UK
•  2.5%.

As a result of this arrangement, according to gov.uk (21 November 2024) the full new State Pension will rise from £11,502.40 in the 2024/25 tax year to £11,976 from April 2025 – an increase of £473.60 a year.

Yet, you might not be aware that you’ll need to have 35 “qualifying years” worth of National Insurance contributions (NICs) or equivalent credits to claim the full new State Pension.

However, if you have any gaps in your National Insurance (NI) record – for example, due to taking a career break to care for children or relatives – you may be able to make voluntary NICs to enhance your entitlement.

There is an important deadline looming for topping up your NI record in this way. Until 5 April 2025, you may be able to fill gaps in your record as far back as April 2006, provided you reached State Pension Age after 2016.

After this date, the normal rules – which state that you can only fill gaps in your NI record from the last six years – will be reinstated.

You can visit the government website to check your State Pension entitlement. If you have any gaps in your NI record, it might be worth boosting your entitlement ahead of the April deadline. You can also check whether you’re eligible for any free credits that may boost your State Pension without the need for paying voluntary NICs.

4.  Write or update your estate plan

Passing away without an estate plan – also known as an “inheritance plan” – could mean that your wealth is not passed on according to your wishes and that your loved ones face unnecessary stress at a difficult time.

If you already have an estate plan, it’s important to review this periodically or if your circumstances change, to ensure that it reflects your current preferences. The new year is an ideal time to do this.

Your plan might include:

• A will – A legal document that sets out how you want your estate to be passed on.
• A letter of wishes – This usually accompanies a will and provides further detail regarding your wishes (however, it is not a legally binding document).
• A property and financial affairs Lasting Power of Attorney – This allows you to give a chosen person or people the legal authority to manage your affairs if you become unable to do so, or if you don’t wish to do so.
• One or multiple trusts – A legal arrangement where assets are managed by a trustee on behalf of your chosen beneficiary.
• Plans for your funeral – Such as where you’d like the event to take place and what music you’d like to be played.
• Guardianship arrangements – To ensure that your dependants are cared for by someone you trust after you’re gone.

As you can see, there’s a lot more to estate planning than just writing a will – although this is an extremely important step.

In addition to the above, planning how to pass on your estate as soon as possible could help you understand your Inheritance Tax (IHT) liabilities and ensure that your wealth is passed on as tax-efficiently as possible.

If you made an estate plan before the Autumn Budget, you may need to revisit your plan next year, in light of the IHT changes that were announced.

For example, if you were expecting to use your pension as a tax-efficient means of passing on your wealth, you may need to make alternative arrangements. Unused pension funds and death benefits will be brought into your estate for IHT purposes from 6 April 2027.

5. Speak to your financial planner

Reviewing your finances and planning for the future might be more complicated than you expect it to be.

There’s a lot to consider and the rules around important matters such as pension and tax planning can be complex.

That’s why speaking to a regulated financial planner can be so valuable. I can work with you to create a plan that aligns with your unique circumstances, wishes, and needs.

To chat with me about your financial goals for 2025 and beyond, email lottie@truefinanicaldesign.co.uk or call 07824 554288.

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, tax planning, trusts, Lasting Powers of Attorney, or will writing.

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.