6 ideas to make the most of your finances in 2021

1. Use those tax allowances if you can

There are a number of generous tax allowances available. These are a cornerstone of financial planning because the less you pay in tax, the more money you have for you and your future. Most tax allowances don’t carry over from one tax year to the next so you tend to lose them if you don’t use them. And they’re not set in stone – the Government can change them. In fact, it’s widely expected that changes are on the way to help pay for the cost of Covid-19, which is why many people feel there is an urgency to use them if possible.

• ISAs – savings in ISAs are free from Income Tax and Capital Gains Tax. The annual ISA allowance is £20,000 for adults and £9,000 for kids.

• Pensions – you get tax relief on pension contributions up to your annual allowance. Anything invested is topped up by 20% automatically. Higher-rate and additional-rate taxpayers can claim back another 20% and 25% respectively through their tax returns.

2. Get your existing investments working harder

This is a sensible one for everybody but also something positive you can do if you don’t have any money to invest at the moment. Holding good quality investments over mediocre choices or dog funds can have a huge impact on the amount of money you have in the future. Our chart below illustrates the point.

Our guide, How to choose and manage your own investments, has lots of information to help you and we also have some useful lessons if you’re a beginner or need to brush up. And for an easy option, you can choose a Ready-made Portfolio.

3. Keep an eye on costs

The fees you pay when you invest can vary widely: do keep an eye on these, but remember also that – like most things in life – cheapest isn’t always best. The key is good value.  

4. Consider transferring*

If you’re not happy with your existing investment provider, it is possible to transfer your pensions, ISAs or other investments elsewhere. These days, with digital transfers, it’s usually less hassle than you actually think but, with pensions, it's important to check with your existing provider because some pensions come with benefits that you’ll lose if you move them.

5. Set up monthly savings

Just like it’s easier to pay bills if you set up a Direct Debit, automating your savings is a really simple way to get into the savings habit. At Bestinvest you can set up monthly savings into your ISA, SIPP or investment account.

6. Speak to someone who can help you

If you're keen to have an expert look over your financial plans, why don't you book yourself in for a free 45-minute coaching session? All our Coaches are qualified financial planners, here to help you find the fastest path to your investment goals. It's easy to book yourself in using the digital calendar.

Book a free coaching session

The value of an investment may go down as well as up, and you may get back less than you originally invested.

Prevailing tax rates and reliefs depend on your individual circumstances and are subject to change.

This article does not constitute personal advice.  If you are in doubt as to the suitability of an investment please contact one of our advisers.

 

*Before you consider transferring a pension, it is important to ask yourself: Will I lose any valuable benefits or features from my existing pension plan? Will I incur any penalties on my existing pension if I transfer? Is it an occupational final salary pension scheme? (In which case it is very unlikely to be advisable to transfer). Have I considered the charges on my current plan? (A new arrangement may be more expensive – especially if you have a stakeholder pension).