Christmas is supposed to be about the time we spend with our loved ones. But if you feel the need to escape the mayhem of a family reunion for a couple of hours, the holidays could also be a good opportunity to shut yourself away and pay some attention to your finances. Here are five simple steps you can take to make yourself better off in 2018.
1. Switch your current account
It’s a lot easier to move to a new current account and get a better deal or service, but most of us still aren’t doing it. There are around 70 million active current accounts in the UK, but only 3.5 million people have changed accounts since all the major banks introduced the free seven-day switching service in 2013.
For a high-interest account, consider Nationwide’s FlexDirect, which pays 5% on the first £2,500 for 12 months. Or you could get a one-off £100 bonus if you switch to FirstDirect’s current account. For those who pay some large household bills by direct debit, Santander’s 123 account (1%-3% cashback on bills) and Natwest’s Reward account (2% cashback) can be profitable, despite their monthly fees.
2. Dump your energy provider
Switching energy provider is a ten-minute job if you have a recent bill to hand. Visit a few comparison websites, such as uSwitch and CompareTheMarket, tap in the usage details provided on your bills and check you aren’t overpaying for your energy. If you haven’t switched for 12 months, or are coming to the end of a fixed-price plan, switching could save you hundreds of pounds a year.
3. Check your pension is on track
The end of the year is an obvious time to check on how your retirement savings are progressing. First, do you know where all your money is? Use the government’s website (Gov.uk/find-pension-contact-details) to track down any lost pensions.
You should also consider whether your pension fund is doing too well. The Lifetime Allowance has been cut repeatedly in recent years, and now if your total pension savings exceed £1m (rising to £1.03m in April), you’ll be heavily taxed on the excess. If your fund is getting near to that limit, or has gone over it, speak to an independent financial adviser to find out what you can do to mitigate the tax charge.
4. Make the most of your tax allowances
We are heading into the final few months of the tax year, so now is the time to check you’re making the most of your tax allowances. Have you used your £20,000 Isa allowance for the year, maxed out your children’s £4,128 Junior Isa limit and, if applicable, used the marriage allowance to reduce your tax bill?
Also, don’t forget that the dividend allowance – how much you can receive in dividends before tax is due – will fall from £5,000 to £2,000 in April. If that is going to affect you, look at whether you can move your investments into an Isa to avoid dividend tax.
5. Move your savings for a better rate
Interest rates are at record lows, but it’s still worth shopping around for the best rate available. The average instant-access savings account pays just 0.09%, according to statistics from the Buildings Society Association, but it’s still possible to get an instant-access account that pays 14 times more than that.
The highest rate you can get on an instant-access account is currently 1.3% from RCI Bank. However, if you have under £3,000 to save, consider a high-interest current account instead, such as those from Nationwide (5%), Tesco (3%) and TSB (3%). You can earn 2% interest on a one-year fixed-rate account with BLME, or lock up your money for even longer and get 2.21% from Charter Savings Bank’s three-year bond.
Pocket money… don’t fall into a tax trap with Christmas cash
• If you are planning to give cash as a gift this Christmas, you need to be aware of the rules, says Anna Mikhailova in The Sunday Times. If your gift is worth less than £250, then neither you nor the recipient have to worry about tax, but for larger amounts inheritance tax has to be considered. Everyone has an annual exemption of £3,000 – the amount they can give away each tax year without it being considered part of the value of their estate when they die. But you can’t use the annual exemption and the £250 small gifts allowance when giving to the same person.
If you give more than that – and it isn’t to a relative marking a special occasion such as a wedding – then it may still be exempt from your estate when it is valued for inheritance tax, so long as you live for seven years after the gift is given.
• The Scottish government has announced changes to income tax that will see “higher earners pay more than elsewhere in the UK”, says the BBC. Last week the Scottish finance secretary Derek Mackay revealed a new tax band of 21p for people earning more than £24,000, while higher-rate income tax will increase to 41%, and the top rate will go up to 46%.
The country will move to a five-band income tax system, with people earning between £11,850 and £13,850 paying 19% income tax and those earning between that and £24,000 paying 20%. “Normally [Mackay] exudes gravitas…but he could not help playing to the gallery with a declaratory grin when he insisted that, for most
people, Scotland would now be the lowest taxed part of the UK,” says the BBC’s Brian Taylor.
• Patients who don’t want to queue for their GP can now pay for an appointment or a video consultation, says Ali Hussain in The Sunday Times. On average it takes two weeks to see an NHS doctor, according to a survey by GPs’ newsletter Pulse – up from ten days in 2015. Now, services such as DocTap are filling the gap, seeing people at drop-in clinics for a fee starting at £29, while another service, Doctaly, is looking to raise money to develop an Uber-style appointment app. The NHS has also developed an app that lets people talk to a doctor via video link.