My five-step personal finance battle plan for 2015
New year is a good time to make plans and forge resolutions to be adhered to (yes, adhered to, not broken) over the coming year – and 2015 is no exception.
Many of us promise to get fit in the New Year or to temper the intake of alcohol but others turn to money matters, and giving the household finances an overhaul can reap rich rewards.
While decorating the Christmas tree over the festive period, I came up with my own 2015 personal finance battle plan. Act on some – or all of it – and I promise that you will give yourself every chance of getting in better personal finance shape.
I'll be flabbergasted if at least one of my suggestions did not transform your finances, either immediately or in the long term. Some, of course, might not apply to you. For that, I apologise.
Part one: Tax
Get 2015 off to a solid start by ensuring you file your self-assessment tax return online in time. You have until the end of January to file (for the tax year ending 5 April 2014) although you may already have completed a paper return, in which case you can rest easy.
If you've received a notification since April 2014 from HM Revenue & Customs saying you need to submit a return, you must do so even if you think you don't need to. Not filing will result in an automatic late payment penalty of £100. So don't forget.
More than 10 million people need to complete a self-assessment tax return. As a general rule, if your tax is deducted by your employer, you usually don't need to submit a form (unless you get income from a second job or freelance work). Parents caught up in the changes to child benefit introduced in early 2013 – impacting on individual parents earning in excess of £50,000 a year – must complete a return.
Part two: Pensioner bonds
January heralds the launch of new pensioner bonds from NS&I, the government-backed savings organisation. Available to the over-65s, they will offer guaranteed returns over one year or three years. If you're eligible and can afford to tie up money up for a while, you'd be a fool to miss out. Grab them while stocks last.
Part three: Isas
Although household finances may be tight, do try to squirrel as much money away as possible in an individual savings account (Isa). These tax-friendly plans are a great way to build long- term wealth away from the grasp of the taxman without forcing you to wait until you are in your mid-50s (as a pension does) to access them.
George Osborne, Chancellor of the Exchequer, has boosted the amount that can be put aside in an Isa. In the current tax year, you can contribute £15,000 and from 6 April 2015 £15,240.
It's a use it or lose it allowance, so in 2015, my advice is simple: use it. Money can also be put aside for children in a Junior Isa – £4,000 in this tax year and £4,080 in the next. Remember, the earlier you start saving in life, the better.
Part four: Pensions
In April 2015, most people aged 55 and over will have far greater freedom over how they draw money from their private pensions - a personal pension or a company scheme.
There will no longer be a need to purchase an annuity. Indeed, there will be nothing – other than self-discipline and probably a hefty tax charge – to stop you withdrawing the lot. As part of this new pensions world, free guidance will be available from either Citizens Advice or The Pensions Advisory Service. Ensure you take advantage of it.
Part five: Home Loans
Finally, if you haven't done so already, try to keep a cap on your mortgage costs by locking into a three- or five-year fixed-rate home loan. Low interest rates won't be with us forever.
All that remains is to wish you a prosperous 2015. Let me know if my battle plan works for you.
Jeff Prestridge is the personal finance editor of the Mail on Sunday. Email him at email@example.com
Available from 1 November 2011, the Junior ISA will replace child trust funds (CFTs), which have been phased out. Junior ISAs will have a £3,000 limit and will be offered by high street banks, building societies and other providers that currently offer ISAs to adults. You can invest in either stocks and shares or cash. But, unlike CTFs, there will be no government contributions into each child’s savings pot. Money invested in Junior ISAs will be “locked in” until the child is 18, and the ISA will default to an adult one.
This is more usually a feature of car insurance but it can also crop up in contents, mobile phone and pet insurance policies. An excess is the amount of money you have to pay before the insurance company starts paying out. The excess makes up the first part of a claim, so if your excess is £100 and your claim is for £500, you would pay the first £100 and the insurer the remaining £400. Many online insures let you set your own excess, but the lower the excess, the more expensive the premium will be.
In exchange for any lump sum – usually your pension fund – an annuity is “bought” from an insurance company and provides an income for life. When you die, the income stops. Annuity rates fluctuate daily and depend on your sex (although from 21 December 2012 insurers will no longer be able to use gender as a factor when calculating annuities), age, health and a number of other factors, so you have to pick the right one and, once bought, its terms cannot be altered, so seek financial advice.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.