Open Banking, new payment technology and a volatile financial market: 2018 is set to be a year of transformation for personal finances. Get ahead of the trends by making these resolutions for the coming year.
A new year is an opportunity to take charge of your finances – and the coming 12 months promise a raft of opportunities to change the way you manage your money.
Which? explains the biggest developments expected in 2018 and how you can take advantage of the changes.
1. Take control with Open Banking
From January 2018, you’ll be able to see all of your accounts on a single website or app – putting you in control of your money.
New EU rules will require banks, buildings societies and other financial product providers to let customers easily access and share their financial data. This move – known as Open Banking – will include all payment accounts, including current accounts, flexible savings accounts, e-money accounts and credit cards.
As part of the change, the Competition and Markets Authority is obliging the nine largest current account providers (Allied Irish Bank, Bank of Ireland, Barclays, Danske, HSBC, Lloyds Banking Group, Nationwide, RBS Group, Santander) to open up their customers’ data via ‘open APIs’.
Open API technology is used to provide integrated digital services – for example, allowing you to track your transactions via a savings app.
How can I benefit from Open Banking?
Once its up and running, Open Banking will allow you to easily monitor the performance of your products – and switch them to a more competitive provider with minimal fuss.
You’ll also be able to give third-party apps access to your banking data without revealing your login details (as you must do now). To access the Open Banking Directory, apps will need to be appropriately regulated, though there is some concern that unregulated providers may try to take advantage of the platform.
But banks will require your explicit consent to share your data with third-parties – so your information won’t be shared without your knowledge.
- Find out more: Open Banking – our guide to sharing your data
2. Save a deposit with a Lifetime Isa
In April 2018, the Lifetime Isa will celebrate its first birthday – and for people who have already held their fund for a year, cash will become available for retirement or buying a house.
If you save within a Lifetime Isa, the government will contribute £1 for every £4 you deposit – though only the first £4,000 a year is eligible for the boost. From the 2018/2019 tax year, the bonus will be paid monthly, so you can benefit from compound growth.
A Lifetime Isa won’t be right for everyone. If you’re over 60, or buying your first home, you can take the money tax-free. But if you withdraw for any other reason, you’ll face a 25% penalty.
There are some limits – the home you buy, for example, must be worth less than £450,000. But if you’re hoping to become a homeowner, this could be a great way to supercharge your savings plan.
It’s also worth remembering that there is only one cash Lifetime Isa available at moment, from Skipton Building Society. The only other option is to invest in a stocks and shares Lifetime Isa, which may not be suitable for those building a savings deposit and don’t want to put any of their cash at risk.
- Find out more: Lifetime Isa – the ins and outs
3. Pay less tax with a larger personal allowance
The Autumn Budget 2017 brought a long-anticipated increase to the personal allowance, which is the amount you can earn before you start paying income tax.
For the 2018/2019 tax year, the personal allowance rose from £11,500 to £11,850, part of the government’s plan to boost it to £12,500 by 2020.
The higher-rate threshold also increased from £45,000 to £46,350 – with the view to hitting £50,000 by 2020.
If you’ve been thinking of lobbying for a pay rise, it’s a better time than ever.
In the current tax year, a person earning £50,000 a year will pay £8,700 in income tax. Next year, that same employee will pay £8,359 – putting an additional £341 in their pocket.
- Calculate your likely tax bill with our income tax calculator
4. Profit from predicted interest rate changes
The Bank of England’s base rate influences the interest you pay on loans and earn on savings.
At its November meeting, the Monetary Policy Committee voted to raise the base rate from 0.25% to 0.5%, the first increase in a decade – and further hikes are on the horizon. In three years’ time, the MPC predicted the base rate would hit 1%, a level last seen in February 2009.
What does this mean for you? If you have a mortgage – or are hoping to buy a property this year – it’s worth considering a fixed-term deal that will allow you to lock in a low rate of interest.
Alternatively, savings products are starting to look more and more attractive, as providers pass the boost on to their customers. The average rate for regular savings accounts jumped from 2.01% in early November to 2.09% a month later, so it’s worth shopping around to make sure you’re getting the best deal.
- Find out more: What the base rate means for your mortgage deal
5. Get your head around Blockchain
Crypto-currency Bitcoin has hit headlines recently, with a wild surge in value leading many market commentators to decry it as an investment bubble.
But Blockchain, the technology underlying Bitcoin, is increasingly being explored by the financial services sector. Blockchain automates transactions between payer and payee, and creates an electronic record of payment, without money being passed through a financial institution.
A number of major banks have begun exploring the use of Blockchain technology – in September, Barclays partnered with a start-up to carry out the world’s first trade transaction via Blockchain.
While still in its infancy, Blockchain may have a major impact on the way payments are made, making them faster, cheaper and easier to track. Keeping an eye on this sector could put you in a good position to seize opportunities as they develop.
6. Wave goodbye to rip-off card fees
From 13 January 2018, retailers will be banned from charging you to use your credit or debit card.
Currently, retailers are allowed to levy a fee to use your card, provided it’s not ‘excessive’ – though some charge up to 3%. But under EU regulations, implemented in the UK from next year, you won’t be charged any fees at all for making a payment by card.
This means you won’t be penalised for using your credit card at the till or shopping online. Don’t forget that using your credit card will give you protection under Section 75 if things go wrong with your purchase, so it’s worth paying on credit if you’re waiting for a delivery.
7. Top up your funds with Help to Save
From next year, the government will offer lower-income workers an additional bonus on their savings.
With a Help to Save account, you can deposit up to £50 a month. After two years, you’ll get a 50% bonus on the highest balance achieved – and then again two years later.
So if you save the maximum amount of £2,400 over four years, the government will give you an additional £1,200.
The account is open to people who receive Working Tax Credits or Universal Credit, and have a household income or individual income of at least £542.88 in their last monthly assessment period. A trial is due to start in January 2018, with a full roll-out by October.