6th January 2016
When you look at your wage slip it may not feel like it but the government wants you to be richer in 2016.
The Treasury has set out 10 top tips for sorting out your finances whatever your financial situation or resolution.
1. Buying a house? Then use the Help to Buy ISA
If you’re a first-time buyer saving for a deposit then you’re eligible for a Help to Buy ISA bonus.
You can put away £200 a month, and £1,200 in the first month of opening, in this special ISA and the government will top it up by 25%, up to a maximum of £3,000. This year, if you put away £3,400 in your Help to Buy ISA the bonus will total £850 in December.
2. Switch bank account
People are loyal to their banks despite the poor returns they are likely to be getting on their savings. The Treasury said switching bank accounts could save on average £70 a year and thanks to rules introduced in 2013 and the switch can take place in seven days.
Direct debits and standing orders are transferred automatically and the switch guarantee ensures you are protected against any financial loss should anything go wrong when your switch.
Over 2.25 million switches have taken place since 2013.
3. Manage your pensions
Since 6 April 2015 those aged 55 and over can access their defined contribution (DC) pension savings in any way they want as the requirement to buy an annuity has been removed.
You can now take money from your pension pot and put it into drawdown, where 25% is tax-free, or take the whole lot as a cash lump sum, again the first 25% is tax-free.
This has given retirees far more flexibility when it comes to their pensions and retirement. However, to make the most out of your money it is a good idea to contact Pension Wise, which has been set up by the government, and provides 30 minutes of free impartial advice to those wishing to access their savings.
4. Help to Buy scheme
It’s not just the deposit that the government is helping first-time buyers with. It has extended its Help to Buy equity loan scheme to allow more people to benefit.
Under the scheme, which is only open to first-time buyers, you must be able to put down a 5% deposit and the government will lend you up to 20% of the rest of the value of the property and you take a mortgage for the remaining 75% of the value.
Due to the rising prices in the capital, those buying in London will soon be able to benefit from a 40% loan.
Alternatively, if you have a household income of less than £80,000 outside London and £90,000 inside London, the Help to Buy shared ownership scheme will allow you to purchase a share of between 25% and 75% of a home. The rent on the rest of the property will not be more than 3% of the amount left.
5. Married couples allowance
If you’re married you could save up to £212 this year by applying for the marriage allowance. This allowance lets you transfer £1,060 of your personal allowance to your husband, wife or civil partner.
This means they could pay up to £212 less tax over the year.
6. Compare current accounts
You know you can switch accounts easily but how do you know whether you’re getting the best deal on your current account? You can use online tools to find out.
The Midata tool on GoCompare allows you to compare current accounts based on how you actually use your bank account.
The service was set up in April 2015 to help get easy access to your data so that you can make a decision about which bank to use. You can use the service if you bank with HSBC, Lloyds, RBS, Barclays, Nationwide, Santander and Tesco Bank.
7. Flexible ISA
There has been much talk of pension flexibility but ISAs have also become more flexible.
ISAs are being reformed so that instead of being able to put up to £15,240 in the savings wrapper in total, you can now take money out and put it back in within the same year, without losing the ISA tax benefits – as long as the repayment is made within the same year as the withdrawal.
8. Clearer mortgage fees
Consumer champions Which? and the Council of Mortgage Lenders have worked to simplify mortgage fees so that the fees you’re charge when you take out a mortgage are clearer.
Lenders have agreed to use the same names for fees so that you only have to get your head round the different types of fees rather than try and work out how to compare differently named charges.
All fees will also have the same fee descriptions listed in the same orders so when you take out a mortgage you’ll be able to decide which is the best deal for you.
9. Personal savings allowance
From April 2016 a new personal savings allowance will take 95% of taxpayers out of savings tax completely.
A tax-free allowance of £1,000, or £500 for higher rate taxpayers, will be introduced for the interest earned on your savings.
If you are a basic rate taxpayer – meaning you have a total income of up to £43,000 in 2016/17 – you will be eligible for a £1,000 tax-free savings allowance. If you are a higher rate taxpayer – meaning you have a total income of £43,001 and £150,000 in 2016/17 – you will be eligible for a £500 tax-free savings allowance.
10. More income in your pocket
From April 2016 the personal allowance – a part of your income you pay no tax on – will increase from £10,600 to £11,000.
This mean the typical taxpayer will be £80 better off in 2016/17 than they were in the preceeding tax year.