How to prepare your finances for the UK Autumn Budget 2024

1. Balancing savings and investments

To build a solid financial foundation, it is important to strike a balance between saving for short-term needs and investing for long-term growth. 

• Savings accounts: Ideal for short-term financial goals, savings accounts offer a steady and reliable return. This may be less than the potential returns you can expect from investments, but they provide security and liquidity, making them suitable for emergency funds or upcoming expenses.
   
• Long-term investments: If you are aiming for growth over a longer time horizon, consider putting some of your money into investments. A general rule of thumb is to invest with a time horizon of at least five years to ride out short-term market fluctuations and for the potential to see meaningful growth.
   
• Investing for the next generation: You can start investing for your child’s financial future with accounts like a Junior ISA, which allows tax-free savings until they reach adulthood.

Remember, investments carry risk, and their value can fluctuate. You might not get back what you initially invested, so it is essential you understand your risks and the impact of capital losses on your goals before investing.

2. Making the most of current tax allowances

Taking advantage of available tax allowances can help you retain more of your earnings and maximise your investment returns.

• Use your ISA allowance: As a UK resident, you can invest up to £20,000 per tax year in an individual savings account (ISA), and any returns you earn are free from income tax and capital gains tax (CGT). Using your ISA allowance can be a highly efficient way to grow your wealth over time.
   
• Maximise pension contributions: Pensions come with a range of potential tax benefits, making them one of the most effective vehicles for saving for retirement. Depending on your circumstances, pension contributions may qualify for tax relief, and any growth within the pension fund is tax-free. Check your allowances to ensure you are making the most of this opportunity.
   
• Consider your couples’ allowances: If you are married or in a civil partnership, explore whether you can optimise your finances by taking advantage of any couple’s allowances available. For example, transferring assets between spouses may help reduce overall tax liabilities.

It is important to note that tax reliefs and allowances are subject to change based on legislation, and the availability of these benefits may vary according to your individual circumstances.

3. Protecting your wealth

As your wealth grows, protecting it from unforeseen risks becomes increasingly important. Insurance can provide a safety net, helping to secure your financial future against various risks.

• Mortgage protection:This typically pays off or covers a portion of the outstanding mortgage balance, ensuring that your loved ones can continue living in the home without the burden of mortgage payments.
   
• Life insurance: Adequate life coverage can protect your family from financial strain in the event of terminal illness or death, to replace lost income and cover outstanding liabilities.
   
• Income protection: This can be an enormous support allowing you to maintain your standard of living and cover essential expenses when faced with an unexpected setback.
   
• Critical illness cover: A serious health diagnosis can have a severe impact on your finances. You may need to take time off work for your treatment or have additional costs relating to your illness. Critical illness cover can ease financial stress, allowing you to focus on your recovery.

To find out more about how you can ensure the financial security for you and your family, download our Guide to personal protection.

4. Planning for passing on your wealth

Ensuring that your wealth is passed on effectively to future generations is a priority for many people. Proper planning can help ensure that your assets are distributed according to your wishes and minimise potential tax burdens.

• Writing or updating your will: A will is a critical document that outlines how your assets should be distributed upon your death. If you already have one, review it periodically to ensure it remains up to date with your current wishes and family circumstances.
   
• Inheritance tax planning: Proactive inheritance tax planning can help you pass on more of your wealth to your heirs by minimising tax liabilities. Consider making use of tax-efficient gifting strategies, such as annual gift allowances, or setting up trusts to manage how your assets are transferred.
   
• Life insurance: Having the appropriate level of life insurance can cover estate taxes and preserve the value of your estate. When properly structured it can be paid without waiting for the probate process to complete, giving your family quick access to the proceeds.

Professional guidance can be invaluable in navigating these complexities and making the most of the opportunities available to you.