UK financial year: 9 essential money tasks to do before 2025 - from budgeting to tax and savings

• Wrap up the year financially prepared for a smooth start in 2025
• Ensure your finances are organised with this comprehensive year-end checklist
• Small actions now can save you on taxes, boost savings and improve financial stability
• Assess your current financial plan to stay on track with changing economic conditions.
• And plan ahead for upcoming financial adjustments to maximise benefits in the new year

With 2024 quickly wrapping up, now is the perfect time to tackle important financial tasks and set yourself up for a smoother 2025.

Whether it's tax planning, budgeting or investments, taking the time to review your financial situation before year-end can make a huge difference.

Here’s a comprehensive checklist to ensure your finances are in tip-top shape before the new year arrives - taking these financial steps now will help you end the year on a strong note and head into 2025 feeling more organised and financially stable.

Review your budget and adjust for inflation

With inflation impacting many household expenses, it's essential to review and update your budget, by taking a close look at your income, outgoings and any planned expenses for the upcoming year.

Consider changes in your household costs - such as energy, groceries, and transport- that may have increased significantly in 2024. If you’ve relied on a fixed budget throughout the year, you may find certain areas are now under- or over-budgeted.

Update your budget to reflect realistic costs, so you’re prepared for 2025. Tools like YNAB (You Need A Budget) can help you track your spending and plan effectively.

(Photo: Pexels) | Pexels

Maximise your ISA allowance

The tax-free ISA allowance for the 2024/2025 tax year remains at £20,000, covering cash ISAs, stocks and shares ISAs, and Lifetime ISAs. If you haven't made full use of this allowance, consider contributing to your ISA accounts before April.

Since interest rates have been fluctuating, now may be a good time to compare cash ISA rates. Alternatively, stocks and shares ISAs provide the potential for long-term growth, though with increased risk.

If you're saving for a first home or retirement and under 40, consider a Lifetime ISA. This offers a 25% government bonus on contributions up to £4,000 per year, but it comes with specific conditions for withdrawal.

Conduct an end-of-Year tax review

Making sure you’re tax-efficient can potentially save you hundreds, if not thousands, of pounds. Here are some ways to make the most of your tax situation:

• Self-Assessment Tax Return: If you’re self-employed or have additional income streams, be aware that the deadline to submit your online self-assessment for 2023/2024 is 31 January 2025. Gathering all your documentation now will give you a head start.
• Charitable Contributions: If you’ve made charitable donations this year, remember to claim Gift Aid. For higher-rate taxpayers, you can claim additional tax relief on donations.
• Capital Gains Tax (CGT): If you've sold assets such as shares or a second property, consider whether you can offset gains with losses to reduce your CGT liability.

Check your pension contributions and tax relief

Maximising pension contributions before the end of the tax year is a wise move, especially with tax relief benefits.

The annual pension contribution limit for tax relief remains at £60,000 or your annual income, whichever is lower, in the 2024/2025 tax year.

Contributing to a pension not only builds your retirement savings but can also reduce your taxable income, especially valuable for those in higher tax brackets.

For those who aren’t paying enough attention to their workplace pension, now is the time to review your pension scheme and contribution levels. Some employers may even match additional contributions.

Use any remaining allowances and reliefs

Several allowances and reliefs reset in April, so now is a good time to take advantage of them. For example:

• Personal Savings Allowance: Basic-rate taxpayers can earn up to £1,000 in interest tax-free (£500 for higher-rate taxpayers). If you’re nearing this threshold, you may want to consider shifting savings into an ISA.
• Marriage Allowance: If you're married and one partner earns below the personal allowance (£12,570), consider applying for the Marriage Allowance. This allows the lower-earning partner to transfer £1,260 of their personal allowance to the higher earner, saving up to £252 in tax.

Reassess your investments

If you hold investments, now is the time to review their performance and rebalance your portfolio if needed. The economic landscape is constantly changing, and reviewing your asset allocation ensures you’re on track to meet your long-term goals.

Consider diversifying if you’ve noticed underperformance or over-reliance on certain sectors. Rebalancing annually can help reduce risk and potentially improve returns.

Be mindful of CGT implications when selling assets, and consider utilising your annual CGT allowance (£6,000 for 2024/2025).

Plan for the upcoming tax changes in 2025

Looking ahead, the government has announced upcoming changes to National Insurance contributions and potential tweaks to income tax thresholds. Planning now for these changes could help you better manage your finances in 2025.

For instance, if higher taxes are expected, you might consider strategies like salary sacrifice or increasing pension contributions to reduce your taxable income.

Evaluate insurance policies

The end of the year is also a good time to review your insurance policies, from home to health and life insurance.

Ensure you’re adequately covered, particularly if you’ve had any significant life changes like a new child, a home renovation, or additional valuables. Price comparison tools can be helpful to find the best deal.

Plan for Christmas expenses to avoid debt

With the festive season in full swing, it’s easy to overspend. Start by setting a holiday budget for gifts, meals, and travel. Avoid unnecessary credit card debt by planning your purchases in advance.

Many people use credit for Christmas shopping, but paying off this debt in the new year with high interest is not ideal.

Ready to set yourself up for a financially strong 2025? Don’t wait until the new year to get your finances in order! Take action now, and let us know in the comments what steps you’re tackling or share any tips you’ve found helpful.