Welcome to 2025! It's that time when you might want to take stock of your finances and find out what you can do to improve your financial health in the months ahead. Here are 10 simple steps to get your finances in better shape and help enhance your overall wealth.
Remember that we don’t offer advice, so if you’re unsure where to invest or how to manage your money, you should seek professional financial advice.
1. Plan goals and how to achieve them
Knowing what your goals are is an important part of investing as they can help you stay focused and on track. These goals will also help with the level of risk you select.
We believe that the best way to achieve your long-term investment goals is to have a diversified portfolio. To help you we’ve created our Funds List – which is one way to help you narrow down the huge range of options available. We have included 3 different ranges of funds in our lists: Active funds, Tracker funds and our own Barclays Multi-Manager Funds to help you find what you’re looking for. If you haven’t already, why not take a look at our selection?
If you find selecting your investments too time consuming or feel you need a bit of renewed inspiration, you could take a look at our Ready-made Investments. You don’t need to be an expert, you just need to choose one of the five funds that you feel matches most closely your attitude to risk.
2. Use tax allowances
There are plenty of tax breaks to make use of each year – remember the tax year runs from 6 April to 5 April, so it’s worth checking what annual allowances you can potentially benefit from between now and April.
One of the most popular is the Individual Savings Account (ISA) allowance, which is £20,000. You may pay your ISA allowance into one or more of cash, stocks and shares or Innovative Finance ISAs, which invest in peer-to-peer lending, or if eligible, you can put up to £4,000 into a Lifetime ISA. You won’t pay income tax, dividend tax or Capital Gains Tax (CGT) on any investments you hold in an ISA.
You might not pay tax on interest and dividends anyway, as investors have a tax-free dividend allowance outside an ISA of £500 a year. However, if your dividend income is above this amount, investing in an ISA could give you the benefit of additional tax-free payments.
There’s also the Personal Savings Allowance (PSA), which enables basic-rate taxpayers to earn up to £1,000 interest a year tax-free, or £500 for higher-rate taxpayers. Additional rate taxpayers aren’t entitled to this allowance, so ISAs may remain worthwhile for those who don’t qualify, or who have a large amount of savings and have used up the PSA.
You also have a CGT allowance which is £3,000 for the 2024-25 tax year which applies when you come to sell some or all of your investments. If you invest outside an ISA, any profits made above the annual CGT allowance are subject to tax at 18% or 24% depending on your tax band.
Remember that tax rules can change in the future and their effects depend on your particular circumstances, which can also alter over time.
3. Consider Bed & ISA
Bed & ISA is a service where you can ask us to sell investments that you hold outside an ISA and then buy those same investments back within your ISA to ensure you are making the most of your ISA allowance.
This is useful when you have some unused ISA allowance and shares or investments held in an investment account with no tax benefits.
By actioning a Bed & ISA you can bring those investments into a tax-efficient wrapper, avoid losing out from market movements and potentially save on your tax bills. All we need is one quick online instruction from you and we’ll do the rest.
4. Review your investments
Check how your investments are performing to see if your goals are on track. It’s straightforward to find once you log into your Smart Investor account or launch the app as you can view a breakdown of how you’re invested and how each individual investment has fared.
If you have one or more investments that have consistently underperformed, you might want to sell. But before you do it’s important to understand why it might not be meeting your expectations. If it is a fund, you may want to read the latest report from the fund manager or for another investment maybe you want to look at whether recent market trends have impacted performance?
You may also want to rebalance your investments if since last reviewing, your balance has been tipped in favour of one sector or region and you want to have a more even spread. This can happen when the value of one sector soars and then you have more eggs in a basket than perhaps you set out to have.
5. Top up your pension
You could increase your potential wealth in retirement by paying more into your pension.
Provided that you take into account the pension allowances, and don’t contribute more than 100% of your income, you receive tax relief at the basic rate of 20% on contributions made to workplace and personal pensions, so for every £80 you pay in, the HM Revenue & Customs tops this up to £100.
The higher the rate of income tax you pay, the greater the tax relief on pension contributions. If you’re a higher rate or additional taxpayer, for example, you are able to claim additional relief on top of the basic rate through your self-assessment tax return.
However, remember that tax rules may be altered in the future, and their effect depends on your personal situation, which can also change. Bear in mind too that you can’t ordinarily draw benefits from a pension arrangement until you are aged at least 55 (rising to 57 by 2028), so this could be a long-term investment.
