Five ways to improve your finances in 2016

From ensuring you limit taxes on savings to reviewing your debt, top tips to improve your financial position.

(Image credit: 2008 AFP)

It’s the new year and we’re all full of determination to improve our lives in 2016. You may not stick to that diet, run that marathon or learn mandarin this year, but a lunch hour or two tackling your finances could mean you end the year a much richer person.

Here’s five ways to improve your financial health.

1. Stop paying tax on your savings

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From April you will also be able to earn up to £1,000 from savings tax-free – or £500 if you are a higher-rate taxpayer earning up to £150,000 – even if your money is in a standard savings account. “Use this new perk and the £15,240 Isa allowance and you can escape tax on all or most of your savings,” says Anne Ashworth in The Times.

2. Switch current account

Moving your current account is really very easy. Choose a new account, fill out the forms and you’ll be up and running with a new account and all your direct debits will have been moved over within seven days.

Move to Halifax and, as long as you pay in £750 a month, you’ll get a £5 reward every month plus a £100 switching bonus. Alternatively, TSB and Nationwide offer five per cent interest on balances up to £2,000 and £2,500 respectively. Finally, NatWest and Santander offer cashback on your bill payments, but both accounts carry a fee.

3. Make a dent in your mortgage

With interest rates still at rock bottom many homeowners are enjoying incredibly low rates on their mortgages. This means monthly repayments are far lower than they have been in recent years. But, rather than spending your cash on other things, consider using this opportunity to pay off more of your mortgage debt by making over-payments.

4. Sort out your debt

If you built up some debt in 2015, review it. Could you pay less interest on it? Credit card companies are currently locked in a war to get your custom meaning there are some really good deals out there.

For people who have built up credit card debt consider moving it onto MBNA’s Platinum card. It offers zero per cent interest for 39 months – that’s over three years. But, it comes with a hefty balance transfer fee of 2.98 per cent. If you can clear your debts in less than three years consider a shorter zero per cent period with a lower fee, such as the Halifax’s credit card which is zero per cent for 23 months with no balance transfer fee.

If your debt isn’t on credit cards shop around to see if you can consolidate it on a low-rate personal loan.

5. Start a pension

If you haven’t started saving for your retirement, make 2016 the year you do. “It’s never to early to start saving for your retirement,” says Scott Gallacher, a financial advisor at Rowley Turton, in The Independent. “You want to enjoy your retirement drinking chardonnay in the south of France, not eating baked beans on toast in Cleethorpes.

Anyone who already has a pension should take a look at how it is doing. Do you need to increase your contributions or make changes to your investments?

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