Updated: 26/11/2024
BUDGETING | SAVINGS | ISAS | INHERITANCE TAX | GOVERNMENT UPDATES | CONTACT AKEPB
What is a budget? Use AKEPB’s template to get started
A budget provides a breakdown of your income and expenditure. It helps you keep track of your money while also planning for the future. Creating a budget is a key step in taking control of your finances.
Here are some tips:
• Identify your fixed or essential expenses (e.g. rent and bills), as well as your variable expenses (e.g. groceries and eating out).
• Convert your income and expenses into monthly amounts. Our template has a calculator which helps you do this.
• If you have money left over, you can allocate this towards your savings.
Click here to access the free budgeting template by AKEPB.
SAVINGS
Top Tips for Saving
Building good saving habits is a key part of achieving long-term financial security. Here are some tips to get you started…
• Start now and take advantage of compound interest. Compound interest is when your interest starts working for you and increasing your returns. The earlier you start saving, the stronger the effect of compounding on your money. Click here for a short video explanation.
• Consistency is key. Build the discipline to set aside savings on a regular basis. Try treating saving like any other fixed expense, such as rent or utilities, and see whether you can prioritise saving before you spend.
• Create a budget and reduce unnecessary expenses. To save effectively, you need to understand where your money goes and assess your needs and wants. Create a budget to track your income and expenses. Click here to get started with our budgeting template.
• Easy accessibility for emergencies. When building your savings, diversify the sort of savings accounts or investments you choose to be able to access your funds during an emergency. Scroll down for our post on different types of savings accounts.
Boost your savings with high interest
With interest rates at 5.25%, now is the time to shop around for a savings account with a competitive interest rate. There are three main types of savings accounts to consider:
• Easy-access accounts offer flexible deposits and withdrawals, giving you control over your money. These accounts are ideal for short-term savings goals or if you’re not sure about your future plans.
• Fixed-term accounts lock your funds away for a set period of time at a higher interest rate. However, early withdrawal may incur a penalty, so this account is only suitable for long-term savings goals.
• Cash ISAs are a tax-efficient way to save money, as interest earned is not subject to Personal Savings Allowance (PSA). PSA is currently £1,000 for basic-rate taxpayers and £500 for higher-rate taxpayers. Cash ISAs can be easy-access or fixed-term.
Before choosing a savings account, compare interest rates, minimum deposit requirements and penalties for early withdrawal. Always consider your individual needs and goals when making a decision.
What is an ISA?
An ISA is a special type of savings account that allows your money to grow tax-free. This means any interest you earn or capital gains you make (dividends or profits from selling investments held within the ISA) are not taxed by the government. Maximise your ISA allowance for this tax year before the 5 April 2024 deadline.
For more information on what ISAs are, the different types available, and how you can benefit from them click here for AKEPB’s guide.
Understanding Inheritance Tax (IHT)
Inheritance Tax (IHT) is a tax on the assets (such as money, property, jewellery, cars, antiques, paintings) you leave behind when you die. Here's a short guide for UK-domiciled individuals:
• Asset Thresholds: You only pay IHT on estates (accumulation of all your assets) valued above £325,000 per person. This is called the Nil Rate Band.
• Tax Rate: If your estate is worth more than £325,000, you pay 40% on the amount over that threshold.
• Residence Nil Rate Band: An additional allowance of £175,000 per person applies when passing on your main residence to direct descendants.
• Combined Allowances: For married couples or civil partners, the combined allowances can reach up to £1,000,000.
• Private Pensions: From April 2026, private pensions will be included in the total value of your estate. Further information will be available in 2025 following consultation.
• Business Asset Disposal Relief and Agricultural Property Relief: From April 2026, 100% relief on agricultural and business assets will be limited to the first £1 million. Relief above £1 million will be reduced to 50%.
• Alternative Investment Market (AIM) Shares: From April 2026, these are no longer IHT exempt, and a 20% tax will apply.
Preparation is essential to structure your estate efficiently for IHT. Seek professional advice if your assets are above the allowances mentioned, and consult with an independent, whole-of-market, chartered financial adviser who specialises in providing IHT advice. They can help you with wills, estate composition, power of attorney and trusts.
GOVERNMENT UPDATES
Autumn Budget - 30th October 2024
The Budget outlines the UK government's plans for spending and taxation for the year ahead. Most changes take place from April 2025. Here's what it means if you are…
• Employed: The National Minimum Wage for over-21s is increasing from £11.44 to £12.21 per hour, while the rate for 18 to 20-year-olds is increasing from £8.60 to £10 per hour.
• Employers: Employers' National Insurance is increasing from 13.8% to 15%, and the threshold at which businesses start paying National Insurance on a workers' earnings will be lowered from £9,100 to £5,000. However the Employment allowance (the allowance for off-setting Employers' NI bills) is increasing from £5,000 to £10,500.
• Business Owners: The business rates discount currently in place for the retail, leisure and hospitality industries will reduce from 75% to 40%, up to £110,000 per business.
• Investors: From 30th October 2024, basic rate capital gains tax increased from 10% to 18%, with the higher rate rising from 20% to 24%. The annual ISA allowance remains at £20,000.
• Property Owners: From 31st October 2024, the stamp duty surcharge on second homes has increased from 3% to 5%. Inheritance tax thresholds are frozen until 2030.
• Pension Holders: Pension pots under defined contribution schemes will now be included in inheritance tax calculations from 2027.
Contact AKEPB
For more information on personal finance, contact AKEPB at [email protected]
