Building good money habits in 2025
Looking to improve your finances in 2025? Discover simple, actionable money habits, like growing your savings, setting financial goals, and maximising tax allowances to build financial stability.
This article is not advice. If you would like to receive advice on your savings and investments, consider speaking to a Financial Adviser.
According to a YouGov poll, ‘saving more and spending less’ is the single most common New Year’s resolution Britons are making for 2025.
Good money habits aren’t about drastic overhauls. They’re about small, consistent changes that fit seamlessly into your daily life. Here are some practical ways to build better financial habits for a prosperous year ahead
1. Set clear financial goals
Every financial plan starts with a purpose. Whether you’re preparing for a significant milestone, planning for future generations, or building a philanthropic legacy, setting clear financial goals ensures that your resources are working with purpose.
Ask yourself:
- How do your savings fit into your wider financial strategy? Are you focusing on liquidity for short-term needs, long-term growth, or a combination?
- What steps can you take to make your goals actionable? For example, are you prioritising regular contributions or growing a lump sum?
The right tools and support can make your ambitions tangible. A savings calculator shows you how much you’ll need to save to reach your financial goals, while expert financial advice can help you identify opportunities to maximise the returns on your savings.
Breaking your financial goals into measurable milestones creates momentum. With every step, you’re not just saving – you’re building toward something bigger.
2. Don’t settle for low returns
If your money is sitting in a low-interest account, there’s a strong chance it’s not earning its full potential.
According to recent findings, more than £1tn in UK savings earns less than 2% interest, leaving many savers with underwhelming returns.
Knowing your interest rate – and whether it’s competitive – is an important step towards smarter saving. If your current rate isn’t keeping pace with inflation, moving your money to a higher-yield account could transform your financial outcomes. Even small changes in your rate can have a big impact over time.
Cash savings platforms like Flagstone make it surprisingly simple to manage your cash and switch rates. With access to 60+ banks and hundreds of savings products, you can secure competitive rates without the hassle of opening multiple accounts – all from one convenient place.
3. Build or grow your emergency fund
An emergency fund provides a financial cushion for unexpected expenses, like medical bills or job loss. Financial experts often recommend saving three to six months’ worth of essential outgoings. Having this buffer helps you avoid borrowing money or making difficult financial decisions during tough times.
Here are some things to consider:
While accessibility is key for emergency funds, ensure your money is still earning a competitive rate to grow steadily.
4. Review your retirement plans
When it comes to retirement planning, time is your ally. The earlier you start, the more your investments can compound and grow. This means adopting a strategic approach to saving, whether you aim for early retirement or want to maintain the lifestyle you’ve worked hard to build.
If you’re already saving for retirement, now could be a good time to reassess your goals and optimise your strategy. If you haven’t started yet, consider this year an ideal opportunity to take control to protect your quality of life in later years.
To get a clearer picture of your retirement needs, use our pension calculator. It will help you project how much your pension pot could grow over time and how long your savings could sustain you once you retire.
See how much you’ll need for retirement
5. Maximise your tax allowances
Your tax allowances are a valuable tool for preserving and growing your wealth. When used effectively, these allowances enable you to minimise your tax burden and keep more of your income, savings, and investment returns.
Below are some key tax allowances to be aware of.
| Allowance | How it works |
| Personal Allowance |
The Personal Allowance is the amount of income you can earn before you have to pay Income Tax. For the 2024/25 tax year, the standard allowance is £12,570. If your income exceeds £100,000, your allowance is reduced by £1 for every £2 earned above this limit, tapering to £0 at £125,140. |
| Individual Savings Accounts (ISAs) |
Each tax year you can save up to £20,000 in one ISA or split the allowance across multiple accounts. You don’t pay any tax on this allowance or the interest you make. If you withdraw your money from an ISA, there is no Income Tax or Capital Gains Tax to pay. |
| Annual allowance |
The annual allowance is the maximum amount you can contribute to a pension each year before you have to pay Income Tax. The annual allowance for pension savings in the 2024/25 tax year is £60,000. If you’re a higher earner, the allowance is tapered. |
| Capital Gains Tax (CGT) allowance |
Known as the annual exempt amount (AEA), the Capital Gains Tax allowance is the maximum profit you can earn when selling investments or assets before you’re taxed. The allowance for the 2024/25 tax year is £3,000 per person. |
| Inheritance Tax (IHT) allowance |
If the value of your estate is below £325,000 (the nil-rate band) when you pass away, or you leave everything above that threshold to your spouse, civil partner, a charity, or a local sports club, your beneficiaries won’t pay any Inheritance Tax. |
| Dividend allowance |
The dividend allowance allows you to earn a certain amount of dividend income tax-free each tax year. For the 2024/25 tax year, the allowance is £500. |
| Gift Aid relief |
Gift Aid allows you to donate to charities and claim tax relief if you pay higher or additional-rate tax. You can claim back 20% if you're a higher-rate taxpayer or 25% if you're an additional-rate taxpayer. You must include the donation in your Self Assessment tax return to claim the relief. |
6. Plan how you’ll pass on your wealth
Estate planning and wealth transfer strategies are key to preserving your legacy and minimising the impact of taxes. By taking proactive steps now, you can help ensure that your wealth is protected and passed on according to your wishes.
Consider the following:
7. File your tax return early
Filing your tax return early is a smart way to reduce the risk of penalties, potentially get your refund faster, and avoid the notoriously lengthy HMRC hold queues. But it's not just about the numbers – it’s a chance to take control of your financial wellbeing and stay organised, avoiding the stress of last-minute scrambles.
Get ahead of the game by filing it as early as the end of the tax year – on 6 April 2025. Data from HMRC shows that nearly 300,000 early birds filed their tax returns in the first week of the new tax year.
Discover more: benefits of filing your tax return early
Let your savings thrive in 2025
Building better money habits is a journey, not a destination. By implementing small but meaningful changes, you can set yourself up for long-term financial success. Whether you’re focused on growing your savings, safeguarding against life’s uncertainties, or securing your future, these steps will help you take control of your financial wellbeing in 2025 and beyond.
