After an eventful 2022, everyone has a good reason to think about their financial planning in 2023.
Last year we saw three prime ministers, four chancellors, no formal Budget (even if the Autumn Statement looked remarkably like one), high inflation, rising interest rates and volatile investment markets. At the start of 2023, it therefore makes sense to review the effects of these events on your personal finances and what, if any, actions you should consider to set you in good stead for the new year.
As we begin 2023, ask yourself these questions:
- Does your life and health cover need to be increased? Double-digit inflation rapidly erodes the value of fixed sums. £10,000 of protection set up two years ago now has less than £9,000 of buying power.
- What top rate of tax will you pay in 2023/24? The continued freezing of personal allowances and many income tax thresholds, plus the cut in the additional rate threshold, could mean you drift into a higher tax band next tax year. It is worth knowing that early, so you can plan accordingly.
- What interest are you earning on your cash deposits? Interest rates started 2022 on the floor. The Bank of England has been busy increasing them ever since, but many banks and building societies have been much less zealous in raising the rates they pay to their depositors, particularly on accounts no longer open to new savers.
- How did the mix of your investments change over 2022? Although many investment indices fell in 2022, some of the relative changes were surprising. For example, many UK government bond funds suffered larger falls than their UK share fund counterparts. US funds were also often performing better than the Dow Jones Index suggested because the dollar was so strong against the pound. The net result is that your portfolio may need rebalancing.
- What allowances do you have remaining? Before the start of the new tax year on 6th April, consider whether you have used your various allowances including your ISA allowance, pensions allowance and Capital Gains Tax allowance. Particularly with changes to the latter (it will reduce to £6,000 in April, and again the year after), it is worth considering what planning needs to be done before, and after, the turn of a new tax year.
As ever, if you need help answering these questions – or what actions are required – make sure you seek professional advice. Please contact us using financialplanning@ebcam.co.uk.
The value of investments and the income they produce can fall as well as rise. You may get back less than you invested. Past performance is not a reliable indicator of future performance. Tax treatment varies according to individual circumstances and is subject to change.The Financial Conduct Authority does not regulate tax advice