Give your finances a profitable clean-up
Don't let apathy rule in 2013. January is the perfect month to reorganise your finances in a way that will pay dividends for the rest of the year.
Switch bank accounts
Some of us are still banking with the same institutions our parents signed us up to as children - and millions more haven’t switched in the past decade or more. But doing so can be lucrative - and could provide a crucial safety net. Branch sales and bank mergers mean more money than you think could be tied up with the same over-arching institution. Savers have up to £85,000 guaranteed against a bank or building society going bust so if you have large cash deposits, make sure it isn’t tied up. Check who is owning the place you’re managing savings at moneyfacts.co.uk.
You can also earn big bucks changing current accounts. First Direct has highly reted customer services and is offering £125 to new customers to its current accounts until the end of the month. And new customers switching to one of Halifax’s current account deals will pocket £100.
Check your tax reliefs and status
Pay too much tax and you’re wasting money; too little and you’ll have to pay your dues later on. So ensure you’re paying the right amount by checking your tax code - see hmrc.gov.uk - or talk to an accountant. The most recent tax change was to child benefit. Anyone in a household where one or both parents individually earn less than £50,000 will still receive their full child benefit allowance, however those with one parent earning more will see their benefit either reduced (between £50,000 and £60,000) or entirely clawed back (for earners over £60,000) at the end of the tax year.
Those earning more than £60,000 will have to pay back the benefit via a self-assessment tax return next January - so may not think it worth the bother. To opt out, visit hmrc.gov.uk. New mothers, however, should still register for child benefit, even if then opting out - because doing otherwise can affect future provisions for state pension.
Use up ISA allowances now
Don’t wait until the April deadline if you’ve got spare savings: top up your tax-free ISA allowance now to ensure you get the maximum return on your cash.
Write a will
Dying intestate can leave an expensive and painful bill for family and friends left behind. Think about inheritance tax (IHT) too - it’s imposed on individuals whose estate — home, savings, investments and possessions — is worth more than £325,000, or married couples whose belongings exceed £650,000. And any gifts to beneficiaries above that are taxed at 40 per cent. Yet taxpayers can give away £3,000 a year as part of the annual gift allowance, and can give away unlimited money if doing so is both regular and coming out of ‘excess income’ - i.e., it’s not hitting your standard of living.
Small cash gifts up to £250 can also be made to any number of individuals each tax year, and parents can give up to £5,000 tax-free to a couple getting married. Grandparents can give £2,500 to the newlyweds tax-free. Larger transfers of capital or investments bequeathed before you die are known as “potentially exempt transfers”. If you live for seven years after giving them away, they avoid inheritance tax.