Households need to watch every penny as chancellor Rachel Reeves stumbles from one calamity after another. The following 12 New Year resolutions may help.
1. Set a monthly budget. This may sound like a dull way to kick off the year but the savings make it rewarding, said Joe Lytwyn, personal finance expert at Vivamoney.
Add up all of your income sources then tot up your outgoings, including food, utilities, broadband, mobile, insurance and any debt repayments.
Identify ways to earn more or spend less. “This key is to stick at it,” Lytwyn said.
2. Get saving. Try setting a “specific and measurable savings goal” for 2025, said Christie Cook, head of retail at Hodge Bank. “Whether saving for a holiday, new home or a rainy day, drawing up targets can help.”
Setting up a regular monthly direct debit into a savings account makes saving effortless, she added.
3. Know the rule. An old financial advice rule of thumb called the 50/30/20 rule suggests allocating 50% of your income to essential needs, 30% to having fun, and 20% to savings and paying down debts. “This simple framework empowers consumers to strike a balance between spending and saving,” Christie said.
4. Shop around. Compare prices for broadband, energy, insurance and other household expenses and switch if it saves money, said Ryan McGrath, second charge sales director at Pepper Money. “Tools like Uswitch and MoneySavingExpert can help you find better deals. Haggle with providers.”
5. Cancel unused subs. Review your subscriptions to make sure you only pay for what you use. McGrath said. “Many streaming services, gyms, and memberships operate on an auto-renewal basis. Don’t just let them roll on.”
6. Target debts. Clear your Christmas debt hangover by paying down your most expensive first (while meeting minimum repayments on the rest). “If in serious trouble, free services like StepChange or Citizens Advice can provide guidance,” McGrath said.
7. Check pensions. More than three million pension pots are dormant or lost, holding £9,470 on average. Check you know where yours are, how much they’re worth and if they’re invested in the right place.
While you’re at it, work out who gets your pension when you die, said Emma Sterland at wealth managers Evelyn Partners. “Check you’ve filled in your workplace pension nomination form and update if circumstances change.”
Labour is set to impose inheritance tax on unspent pensions from 2027, Sterland warned. “Some leave their pensions to children but if this change happens leaving it to a spouse or civil partner may be more tax-efficient.”
8. Save for children. Small regular savings can build into substantial sums over the years, said Emma Sterland at wealth managers Evelyn Partners. “Paying into a Junior Isa could give a child or grandchild a real financial head start.”
If a parent or grandparent invested £100 a month in a Junior stocks and shares Isa at birth, the child would have £35,000 by age 18, assuming 5% growth a year.
You could even invest in a pension on behalf of a child and claim 20% tax relief. This lifts the maximum £2,880 annual pension contribution to £3,600.
9. Invest tax free. Tax wrappers like Isas and pensions are more important than ever these days, so max out yours if you can.
Investments held outside of the ISA wrapper now attract even more capital gains tax (CGT) and dividend tax, Sterland said. “The CGT annual exempt amount is just £3,000, but it may be worth taking some tax-free gains every year to mop this up.”
The personal savings allowance (PSA) lets 20% taxpayers take £1,000 of interest tax-free, or £500 for higher rate taxpayers.
If you’re in a couple and one partner has exceeded their PSA, consider switching savings into the name of the lower taxpayer.
10. Get gifting. Every year, HMRC takes more from inheritance tax. Time to fight back.
Gifting is a great way to cut your exposure, with everything tax-free if you live for another seven years.
Sterland said decide whether now is the right time to set that clock ticking. The 40% IHT charge falls on a sliding scale to just 8% in year seven. “Some might want to gift their pension tax-free lump sum, to beat Labour’s proposed pensions IHT raid.”
Consider using the “normal expenditure out of surplus income” IHT exemption too. This allows you to gift as much as you like from normal income, provided you have enough to cover your own living costs. Keep detailed records.
11. Update your will. Nobody wants to think about dying but writing your will could make like easier for loved ones if it happens.
It’s particularly important for unmarried couples and so-called blended families, where who gets what is complicated.
Also consider preparing a Lasting Power of Attorney, which allows someone to make key health and financial decisions on your behalf if you lose mental capacity because of illness, Alzheimer’s or dementia.
12. Check state benefits. Confirm you’re getting all of your state benefits, including Pension Credit, Attendance Allowance and Carer’s Allowance. This is even more important after Labour’s Winter Fuel Payment raid. Check entitlement at gov.uk/benefits-calculators, your local Citizens Advice or charities like Age UK.
