Skip to main content
  • Register
  • Help
  • Contact us

Financial planning – 4 things to factor into your financial plans in 2021

Here are 4 things to look out for when planning your finances in 2021.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

After what most would agree has been a tough year, the roll out of a Covid-19 vaccine means 2021 is starting to look up. But we’re not out of the woods yet.

Even in normal times, it can be tough to see what’s on the horizon for the year. So, the best we can do is look at some of the things we’ve been given some warning of.

Here’s what to look out for in what’s likely to be another rollercoaster year.

1. Energy bills and council tax increases

The default tariff price cap is a cap on the price you pay for energy. It’s there to help make sure you pay a fairer price for your gas and electricity, and to protect against overcharging. It was introduced in January 2019, and is revised every six months. The current default tariff cap ends on 31 March.

The past three revisions have pushed it down to £1,042, but the cap’s expected to increase in the next change. That means you could be paying more than before on energy bills.

Ofgem will consult on the changes until 21 December and announce the new level in February. As ever, if you’re on a default tariff you can still bring down the price you pay by switching to a cheaper deal.

Council tax could also spring up some challenges. Over 7 million have missed a council tax payment already or expect to because of the pandemic.

In any year, council tax can rise up to 2% without triggering a referendum. However, next year Rishi Sunak has announced councils can add another 3% – so taxes could rise as much as 5%.

One of the first things you should do when planning your finances is work out your essential expenditure. Energy bills, council tax bills and other regular outgoings are an important part of this. So it’s important to factor in these changes and make cuts to any non-essential spending if you need to. This could really help you cope with any potential changes in the year ahead.

2. Potential tax rises

There might be light at the end of the tunnel in fighting the virus itself, but curing the economy could still be a way off.

It’s unlikely to come as a surprise to many that we’re all going to have to face the music at some point and pay higher taxes. But as some of these tax rises could come in as soon as April, time might creep up on you.

We could see some rises in capital gains tax and possibly changes in inheritance tax. There might also be pension tax relief cuts, but speculation about this ebbs and flows at the best of times. Rishi Sunak has also refused to rule out changes to income tax, VAT and national insurance.

April might not feel like it’s far away but it could be enough time to take advantage of the current allowances and benefits. Inheritance tax in particular provides a number of ways to pass on your wealth tax efficiently before you die.

Pension tax relief cuts would affect many of us but will potentially affect those approaching retirement even more. If you’ve previously factored in pension tax relief as part of your retirement planning, you might need to reassess when we know more and if changes are made. Remember tax rules change and benefits depend on your individual circumstances.

Read our saving tax guide for more details on how to take advantage of the current rules.

Read now

3. The state pension will rise

While it might sound it so far, it’s not all doom and gloom. There’s positive news for most people who are already in receipt of their state pension, and those who may be eligible to claim theirs in the coming months.

The state pension is set to rise by 2.5% from April 2021. Given inflation came in at 0.5% in September, this ‘real terms’ rise will likely be well received. In some cases, the state pension is vital to help cover essential expenditure, so this should be a nice boost for lots of people.

Remember though, to get the full new state pension you’ll need to have 35 years of qualifying national insurance contributions.

4. Government coronavirus schemes change

If you’re self-employed, anything you can plan for is a plus. The end of a government support scheme isn’t exactly something to look forward to but at least you can prepare for it.

With the Self-employment income support scheme deadline approaching, the government has said there will be another grant. But they haven’t decided what percentage of average profits should be paid out.

As this is likely to affect how much ends up in your pocket, you might need to adjust things like how much you’re paying into your pension or savings. Depending on how far you are from retirement or reaching another goal, it could be worth revisiting your investments to see if anything needs changing given the smaller contributions. Remember money in a pension is not usually accessible until at least age 55 (57 from 2028).

This article isn’t personal advice. If you’re not sure what’s best for your situation seek personal advice.

Financial advice from HL

Everyone’s goals, circumstances and time frames are different. So each of the changes in this article will affect everyone’s plans in a different way.

It can be tough to know where to start when it comes to planning, but an expert financial adviser can help you put your best foot forward.

We have advisers across the country who can go into more detail about saving and investing for your future. For your safety and the safety of our advisers, we’re currently offering advice over the phone or video call.

Our advisory helpdesk are the gateway to getting financial advice from HL. They don’t give personalised advice themselves, but they’ll help you make sure advice is right for you and you’re comfortable with the charges involved. If you’re happy to proceed, they’ll put you in touch with an adviser within two working days.

Book your call today to get started.

Book a call

What did you think of this article?

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

Editor's choice – our weekly email

Sign up to receive the week's top investment stories from Hargreaves Lansdown. Including:

  • Latest comment on economies and markets
  • Expert investment research
  • Financial planning tips
Sign up

Related articles

Category: Funds

UK investment trust review – is the UK undervalued?

After a strong start to 2021, we take a look at where in the UK’s done well, which sectors are coping best and how some popular investment trusts have performed.

David Holder

21 Apr 2021 6 min read

Category: Investing and saving

HL Multi-Manager funds income update – where do we stand now?

The environment for income investors is starting to look a little more normal, but what does it mean for our HL Multi-Manager funds?

Lee Gardhouse

21 Apr 2021 3 min read

Category: Shares

Pubs, pints and profits – promising future ahead?

We’ve added two of the nation's leading pub and restaurant shares to our share research coverage. Here's a closer look at both of them and what could be next.

William Ryder

21 Apr 2021 5 min read

Category: Investing and saving

A financial adviser’s guide to common cash myths

Bradley Clark, Financial Adviser, dissects three of the most common cash myths he hears from clients and looks at how to make your money work harder.

Bradley Clark

20 Apr 2021 5 min read