7 ways to spring clean your finances

After a challenging 2020, the new year has started with lockdowns once again in place. While the vaccine rollout offers hope for the year ahead, current restrictions mean you might have some spare time on your hands.

We all have jobs we’ve been meaning to do but have put off. If your housekeeping jobs relate to money matters, we’ve got just the thing for you!

Here’s your guide to seven things you can do now to give your finances a spring clean.

1. Get organised

If you know where all your important paperwork is, great! You can move onto the next step. If not, gather it up now.

Find your bank and pension statements, car, house, and pet insurance documents, and anything else you need to keep, such as original certificates and your will (more on that later).

Then, put the documents you find into an order that makes sense to you and find somewhere secure to keep them, ideally in a safe-deposit box.

2. Create an “ICE” document

Now create an “In Case of Emergency” document. This can be used if an accident or illness means someone else needs to look after your financial affairs.

List everything someone looking after your money might need to know – account numbers and key contacts – and where to find important documents such as your birth certificate or passport. You might also want to include contact details for Logic so your relatives know who looks after your money.

Finally, make sure your loved ones know the ICE document exists, and where they can find it!

3. Review your cashflow

This is a great time of the year to go through your bills to find out where you can make savings.

Have you checked for a better deal on your utilities recently? Is your car or home insurance up for renewal? Maybe you have subscriptions to streaming services or gym memberships that you no longer use?

Cancel the things you don’t need and then use the extra money elsewhere. Maybe you can afford to pay some bills in one go, thereby saving money when compared to making smaller monthly payments?

Finally, check your bank account. With the Bank of England base rate at a historic low, it’s been a tough decade for savers. You probably won’t be getting a great rate of interest with your current bank, but could you be getting a better deal elsewhere?

Now is a great time to check.

4. Check in with your pensions

You might have had multiple jobs throughout your career or taken out private pensions at various stages in your life. By the time you approach retirement, you may have several pensions. You might even have forgotten about, or lost scheme details, for some of them.

If you have lost track of your pensions, the Pension Tracing Service might help you find them.

Once you have, be sure to review the charges and returns on each to see whether you might benefit from consolidating some of your smaller pots.

Also, remember to check the beneficiary details held by each scheme. You can complete an Expression of Wishes form to confirm who you’d like your pension to go to in the event of your death, so ask the scheme to supply the form if your beneficiary needs updating.

5. Get tax-year end ready

The new tax year begins on 6 April and many HMRC allowances will reset from this date. Whereas some can be carried forward, others can’t. This means if you don’t use them, you lose them.

Here are a few key allowances to make full use of in the next few months, if you can afford to:

  • Annual Allowance

This is the amount you can pay into a pension each year and still receive tax relief. It’s currently £40,000 (or 100% of your annual earnings if lower). There are separate limits for high earners and your Logic adviser will have discussed these with you if they apply to you. Unused allowance can be carried forward for up to three years.

  • ISA Allowance

For the 2020/21 tax year, the ISA Allowance is £20,000. You can place this amount into any one ISA you hold or spread the £20,000 across multiple ISAs if you have them.

The ISA Allowance can’t be carried forward. Make full use of it before the end of the tax year or you will lose it.

  • Annual exemption

HMRC will allow you to make some gifts tax-free each year. This can help you to lower a potential Inheritance Tax liability while gifting a living inheritance to loved ones.

You can gift up to £3,000 tax-free and the exemption can be carried forward for one year. It applies per individual too, so couples can gift £6,000 between them; £12,000 if neither of you made use of the exemption last year.

Speak to us for help managing your allowances and exemptions.

  • Capital Gains Tax exemption

You can make a profit on the sale of an asset up to a certain limit before any tax is payable. For 2020-21 this Capital Gains Tax allowance is £12,300 and double that for assets that are owned jointly with another eligible person. If you don’t make full use of your allowance in a given tax year, you aren’t allowed to carry it forward to the next.

Various exemptions apply – for example, no capital gains tax is payable if you are selling your main home or a car – and the amount you pay depends on whether you’re a basic-rate or higher-rate taxpayer. There are also steps you can take to reduce your liability, like deducting capital losses from capital gains or selling shares over two or more tax years rather than in one go.

As you can imagine, the rules can be very complex and you should talk to us if you need help.

6. Check you are protected

Use the start of 2021 to check that you and your family are protected. There are several ways to do this:

  • Insurance policies

You might have life cover through your employer. But what if you change jobs, retire, or are made redundant? Be sure to replace any lost life insurance and consider critical illness cover and income protection too.

If you don’t know what cover you have, then speak to us. We can find any gaps and help you to fill them.

  • Lasting Power of Attorney

Appointing a Lasting Power of Attorney (LPA) means you’ll have peace of mind that your affairs will be looked after if you are no longer able.

Different types of LPA can cover health and welfare, and property and finances, and we can help you to put one in place.

  • A will

If you haven’t yet written a will, now is a great time to do it. If you have, is it up to date?

A will ensures your wishes are understood and that your estate is divided in a way that aligns with your wishes.

Big life events can shift your priorities so if you haven’t checked in with it for a while, do so now.

7. Book your annual review

A recent report from Royal London and the International Longevity Centre (ILC) looked at the impact of financial advice.

It concluded that over ten years, customers who took financial advice were on average £47,000 better off than those who didn’t.

Not only did forming an ongoing relationship with an adviser further improve financial outcomes, but it was better for a client’s emotional wellbeing too.

Those surveyed claimed that regular advice helped them feel more confident, more in control, and gave them peace of mind. That’s why we contact all clients who use our ongoing advice service to arrange an annual review at an appropriate point during the year, but we are always available in between times for any questions.

Get in touch

If you would like help completing your financial spring clean, please email us at info@logicfinancialservices.co.uk or check with your adviser.