Nobody can deny we are in tough times but without whistling a happy tune for the sake of it, I’m a big believer in staying positive and looking for small, smart ways to make the most of our finances - on the plus side, there are already signs that this year may not be as difficult as 2022.
One thing that can really help is understanding what’s around the corner. We can all make better decisions if we’re aware of any big changes coming down the track, whether it’s tax tweaks or rising bills.
To help, I've created a season by season guide on what you might want to think about as you steer your finances through 2023.
January is tax month because the deadline for self-assessment tax filing is January 31. HMRC reported in the New Year that 5.7 million people Link opens in a new window had yet to file, but it pays to be on time and dodge a £100 fine.
Even if you’re employed and pay through PAYE, there’s a list of reasons Link opens in a new window why you still might have to fill in a self-assessment form. The big three are earning more than £1,000 from a side hustle, earning more than £2,500 from rent, tips or commission, and you or your partner earning more than £50,000 whilst claiming child benefit.
Talking about kids, you may well qualify for an extra 15 hours a week free childcare (on top of the automatically free 15 hours). To get this in time for the the summer term, you’ll have to apply for the extra hours' free childcare Link opens in a new window through the Gov.uk website, and apply to your local council by March 31.
Did you know that you could reclaim income tax even if you’re not self-employed? Depending on your type of work, you could claim expenses for using your smartphone, buying essential equipment including a laptop or printer, travelling long distance on work business, going on a training course, or subscribing to an essential publication. Have to wear a uniform? There’s an allowance of up to £832 a year for laundry and replacement.
For those of us who have a mortgage, or who want one, one thing we can’t avoid thinking about this winter is interest rates. Will they keep going up, and how fast? The all-important Bank of England base rate rocketed from 0.25% to 3.5% last year, and further increases are expected in 2023.
The next news will be when the Bank’s rate-setting committee meets on February 2, then comes the Budget on March 15, when the Chancellor will review the state of the economy. Then on March 23 the Bank’s committee meets again. All eyes will be on inflation – if it’s falling at last, there’s less of a panic to raise interest rates.
If you're a first time buyer then the good news is house prices are coming down – but predictions aren’t quite there yet as every regional, local, or micro property market has its own prices.
My own two-year fixed deal at 1.31% ends in June and I’ll probably have to pay over 5% if I want another. But you should typically be able to nail down a new deal Link opens in a new window well ahead of the old one expiring, and with so much uncertainty it could pay to get ahead. Remember you have a choice between a shorter or longer term fix and a variable mortgage, with each having their pros and cons. If in doubt, speak to your existing lender/bank to see which incentives or competitive rates they might be able to offer you. Or, reach out to a different provider or speak to a mortgage broker, who can help you find the best deals and weigh up your options.
When April comes in our energy bills are going up by 20%.
How come? Well, the maximum cost per unit of gas and electricity, under the government’s Energy Price Guarantee, will be 20% higher than for the six months to March 31. Just like house prices, the only numbers we hear about are averages. So, the average home will pay £3000 a year, not £2500.
Up until last spring, that figure was £1250, which was scary enough. But in late summer, there were even scarier forecasts that the cap would rise to £4000 or more this year.
What’s more, as yet, there are no plans to develop a successor to the £400 Energy Bills Support Scheme which sees households benefit from a £66/67 discount on their energy bills until the end of March.
Fortunately, gas prices have fallen sharply since. Experts now believe the bill ceiling of £3000 (average property) which is due to last for 12 months will not have to be raised in the meantime, and that average bills could float back down to £2500 again.
So, whilst energy bills will continue to feel painful, it looks like they’re not going to get any worse – in fact, they could well improve.
If your account is in credit, even after the winter, remember you will need some credit during summer and autumn to cover next winter’s bills. Citizens Advice says if the amount you’re owed now is more than the amount you pay as a monthly direct debit, you might want to claim back the difference.
The good news for anyone on a lower income who received Cost of Living payments (not via their council tax) last year is that they’re due another round this year Link opens in a new window. The first £300 will be paid out in the spring with two further instalments over the next 12 months.
Water bills also change in April, but some could actually go down, thanks to Ofwat cracking the whip with water companies that have been failing to meet targets. You can’t change your supplier, but if you are not on a meter, use the calculator Link opens in a new window from Ofwat to see if you would be better off metered.
Council taxes are likely to go up a little and their won't be a repeat of the £150 rebate we all got last year, so make sure to factor this in.
April is the time when inflation-linked rises hit contracts for TV and broadband, as they were written into your contract when you signed up. If you are at the end of a contract, now is a really good time to phone your supplier, tell them you’re thinking of leaving, and try to beat down the renewal price. Not satisfied with your supplier? Shop around. If you have the Virgin Money Mobile Banking app Link opens in a new window, head to the ‘Discover’ section of your app and check out Youtility, a handy price comparison site where you could save over £250 a year by switching providers on your TV, mobile and broadband deals.
The new tax year on April 6 will cheer everyone on any kind of benefits. Pension credit, universal credit and other benefits are all going up by last September’s inflation rate – a meaty 10.1%, even though the rate itself may have fallen back to single figures by the spring.
The National Living Wage will jump to a record £10.42 an hour, and the Household Support Fund, a council-administered backstop for those who really struggle, has been extended for another year.
Some eight million pensioners will also be getting the full inflation-linked rise, making the new state pension worth up to £10,600 or £204 a week, and the old state pension up to £8,100 or £156 a week.
Unclaimed benefits amount to up to £15bn a year. If you think you, or someone you know, might be missing out on a benefit you or they are entitled to, check out the Virgin Money x Turn2Us benefits calculator Link opens in a new window.
The heating’s off and we’ve tamed our bills as far as we can, so it’s a good time to get your head up and look a bit longer term. How are your savings? Ideally you should always have around three months’ worth of outgoings in an easy-access savings fund.
Maybe that’s been difficult lately. But squirreling away whatever you can manage each month will actually make your life easier in the long run. In time, you’ll build up a healthy fund that will be a lifesaver if you suddenly require some dosh for an emergency.
Using an Individual Savings Account Link opens in a new window means you don’t have to worry about paying tax – and that has suddenly begun to matter.
From April 2023 you start to pay tax once you earn £1,000 in interest or in dividends unless you have a cash ISA or a stocks and shares ISA. The slashed dividend allowance (£2,000 until April 2023 but £500 after April 2024) makes an ISA a must for long-term investors.
It’s the same story when you make any capital gains. The tax-paying threshold more than halved from £12,300 to £6,000 in this 2023-2024 tax year and halved again to £3,000 in April 2024.
Sadly, even the best cash ISAs are well behind inflation just at the moment, though they are about to catch up as inflation eases. Stocks and shares ISAs meanwhile ideally need a five-year horizon, and if you can make regular contributions (rather than lump sums), it can smooth out the bumps in the stock market ride.
If you’re trying to work out what your money can earn, focus on the ‘real’ rate which is the headline return minus the current or future inflation rate. For example, if your savings rate is 4% and inflation is 7%, sadly your real rate is -3%. But that should start to unwind this year – and making your money work is always better than leaving it idle.
Perhaps you’ve looked around for new ways to free up some cash and eyeballed on your payslip that big chunk of money in the box labelled ‘pension’. One worker in five stopped or reduced their pension contribution last year as the pressures built.
This could turn out to be a false economy in the long run. Remember every £60 paid into your pension creates a £15 pension bonus from the government, and if your contribution is matched by your firm that’s £150 of pension every month for the price of £60. Over 25 years at even a 3% growth rate that would build a fund of almost £67,000 (before charges and inflation) from your personal contributions of only £18,000.
So, try to make cutbacks elsewhere rather than targeting your pension – your future self will thank you for it.
Starting now, four million people will find themselves pulled by inflation into paying the higher rate of tax over the next five years. That’s because the magic earnings number which triggers the 40% tax rate is in the deep freeze until 2028 at £50,270, yet our earnings are going up each year.
This might mean you don't have as much spare cash for savings. But if you have any at all, it could save you income tax. For every £1000 you earn above £50,270, you can pay £1000 into a personal pension and land a £250 bonus in the pension, courtesy of the government, but also another £250 tax rebate in cash. It means you are actually only paying the basic rate of tax on your higher earnings, as well as stashing away some money for your pension. Bear in mind that you will have to apply for this on a self-assessment form at the end of the tax year.
What will happen to inflation? Will we still be seeing huge spikes in basic and not so basic food items, fares, and shopping essentials?
By the end of 2022 our food bill was likely to be 16% higher than a year earlier, but at least the Institute of Grocery Distribution (IGD) has predicted food inflation will peak at 17 to 19 per cent in early 2023 Link opens in a new window then begin to slow down over the next 12 months.
The Bank of England expects overall inflation to fall sharply by the summer and the Office for Budget Responsibility, the independent body that monitors the UK economy, believes it will be as low as 3.75 per cent by the autumn. But remember, this doesn’t mean prices will fall – they’ll just go up more slowly.
The monthly drumbeat of news from the Office of National Statistics will be louder than usual in October. That’s when it reveals the September rate of inflation, which determines how much pensions and other benefits will go up in April 2024. The August announcement will also be watched closely as it will determine how much rail fares will go up in January 2024.
For pensioners there is another £500 – the winter fuel payment plus a £300 bonus - to look forward to during the winter, while the second £300 Cost of Living payment Link opens in a new window for everyone on benefits will appear sometime in the autumn.
For the rest of us, as the heating goes back on and as we start seeing Christmas round the corner, here’s hoping for a slightly better Autumn than the last one!
You can find out your own household's inflation rate using a calculator provided by the Office for National Statistics (ONS) Link opens in a new window. It will show you which items of your budget are doing the most damage, and could prompt you to dial down in some areas. For instance pasta and milk inflation is through the roof compared with rice and orange juice. You can also use an app like the Virgin Money Mobile Banking app Link opens in a new window to keep tabs on all your spending and see where it is going.
So, there you have it. My season by season guide on how to navigate through the key money dates of 2023.
Remember, the Spring budget is due in March 2023 so some of these points could change. Keep an eye out for my Brighter Money article coming out shortly after the budget is announced where I’ll be detailing what the budget means for your personal finances along with some tips.
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