Will you be better off in 2015?
Thursday, February 12, 2015
It's never easy forecasting how the economy will play out over the next year at the best of times, let alone when there's a general election to factor in too. But now is a good time to look ahead and consider how it may affect your finances.
Although it's impossible to predict what will happen - and we're not going to try - some changes are already pencilled in, as follows.
1. Tax rates and allowances
Some of these have already been announced for the new tax year, which starts in April 2015, and include:
- An increase in the income tax personal allowance from £10,000 to £10,600. This will shave up to £120 off your tax bill if you're a basic rate taxpayer earning more than £10,600 a year.
- A £240 increase in the NISA annual allowance, which will take it to £15,240. This will allow you to increase your tax-free savings and investments by £20 a month to a new maximum of £1,270.
Please note: Tax rules may change and depend on individual circumstances.
There will be some changes here that can affect your finances. These are:
- The well-publicised relaxation of the rules around how you take your pension, which will come into effect in April 2015. Rather than having to buy an annuity, it'll be easier to dip into your pension pot once you reach age 55.
- If you work for a business with a workforce of between 30 and 249 employees and you haven't already joined the pension scheme, you should be 'auto-enrolled' into it in 2015. This can help you build up your retirement savings, with your employer, who is required by law to pay in a minimum contribution into it on your behalf.
3. Interest rates
2015 is also expected to be the year when interest rates start moving upwards again.
Although the Bank of England base rate has been held at 0.5% since March 2009, economists are predicting that we'll see it increase towards the end of 2015. On top of this, noises from within the Bank of England suggest that any rise is likely to be gradual, with the rate moving up to 1.7% in three years' time.
- What will this mean for you?
The Bank of England's base rate affects the interest rate set on your savings and your mortgage. If it rises, you may earn more on your savings but, if you have a variable rate mortgage, your repayments are likely to increase.
- On savings, a 0.25% increase in your interest rate will give you an extra £2.50 a year before tax on £1,000 of savings.
- On a £100,000 interest-only mortgage, the same increase will mean an extra £250 a year.
It's good to look ahead
Spending some time looking at how the next 12 months are likely to shape up financially can also help you with your plans. Perhaps you'll be able to increase your savings or those for your children, direct more to your pension or pay off more of your mortgage.
And don't forget to take your own financial changes into consideration too. Everything from pay rises, promotions and retirement, to getting married, paying off a loan or the kids leaving home can, have a significant impact on your finances. Being prepared will ensure you make the most of your money.
Planning your finances
If you'd like to find out more about how to plan your finances and save for your goals, read our blog on financial planning.
This blog is intended to provide information, not financial advice, to help you make an informed decision about savings and investments. We do not offer financial advice. You should contact a financial adviser if you want financial advice. You may have to pay a fee for this advice.
HM Treasury: Autumn Statement 2014
This is Money: How the Autumn Statement will affect your take-home pay
BBC News - Autumn Statement 2014
Gov.uk - Automatic enrolment starting dates
Bank of England Statistical Interactive Database - Official Bank Rate History
This is Money: When will interest rates rise?
This is Money: Interest rate rise/fall calculator