The start of a new year is often a time for reflection, addressing lingering items from the previous year and planning ahead for the year to come.

The coronavirus pandemic has tested individuals’ financial resilience, and demonstrated the importance of taking stock of your finances, and ensuring not only that you are prepared for upcoming events such as the end of the tax year, but that longer-term financial goals are also well planned for.

To help you plan ahead for 2021, here are our top recommended financial planning and investment areas you should focus on:

Use your allowances

The proactive use of basic allowances can be powerful in helping to grow your wealth. A few of these allowances are noted below;

(i) Pensions

From the 2020/21 tax year, the highest of earners are now only able to make contributions of £4,000 p.a. However, many will be able to contribute much more under the standard allowance. Unused allowances may be carried forward for up to 3 years, so such individuals may therefore be able to carry forward their higher allowance of £10,000 from prior tax years.  With several changes having been made to pension allowances in recent years, it is worth reviewing your entitlement closely – further detail can be found in our ‘Pension contribution planning – why it pays to plan ahead for high earners’ article.

 (ii) ISAs (including Lifetime ISAs)

You can put aside up to £20,000 into an ISA during the 2020/21 tax year and pay no income or capital gains tax on your investments.  For those eligible, £4,000 of this allowance can be allocated to a Lifetime ISA and benefit from a £1,000 government bonus. Junior ISAs are also worthwhile opportunities, and we can help you recognise which ISAs will suit your circumstances, and the different annual limits associated with each.

(iii) Capital Gains Tax (CGT) exemptions

At present, any gains on investments held directly (i.e. not within an ISA, pension or other tax wrapper) are liable to CGT, with an annual exemption of £12,300 of realised gains each tax year before CGT applies.

It is worth noting that, in November, a report from the Office of Tax Simplification (OTS), the government body, laid out several potential changes to the regime for CGT with the headline change proposing to more closely align the rate of CGT with income tax rates.

Long-term Planning

We consider the following fundamental questions for effective long-term financial planning:

  • Do you know when you want to retire? And do you have a retirement plan in place?
  • Do you have any other funding priorities now and into retirement, such as helping out your children?
  • If you passed away or were unable to work, would your family / partner have sufficient funds for expenditure now and into retirement?
  • When was the last time you had your overall financial position reviewed by a financial adviser?

If you’re unsure of the answers to any of the questions above and would like to get clarity on your current and future financial position, we’re here to help.

It is important to take the time to consider and prioritise your future objectives rather than just focusing on the short term. We help support our clients by providing a comprehensive financial planning and investment management service. By considering their financial situation holistically, we help focus on their investment and associated tax considerations, cash flow planning and modelling, pension planning and inheritance tax and estate planning.

Consider Responsible Investing

Increasingly, investors are looking for a ‘holistic’ return, whereby strong financial returns are accompanied with making a positive impact in terms of Environmental, Social or Governance outcomes (ESG), without compromising financial returns. Towards the end of 2020, we launched our Responsible Investing portfolios and further information of this can be found in our Responsible Investing Brochure.

Speak to an expert

If you have any questions on the information above, or would like to discuss any areas of financial planning with an adviser, please get in touch.

About The Author

Tom Gerrard
Tom joined Saunderson House in 2008 after graduating from Durham University with a degree in Economics. He is a ...
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