What has 2016 meant for your money?

We run through how the events of the last 12 months have affected your finances.

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Has there ever been a more eventful 12 months than 2016? It has been an action-packed year, with a number of big developments impacting our bank balances.

Here’s a quick reminder of what’s happened - click the link to navigate the page…

Brexit

The vote to leave the European Union has undoubtedly been the big news story of the year.

However, it’s still a little unclear exactly what it means for our money; before the vote there were dire warnings that it would cost us all thousands, but the economy has actually grown since the vote.

It’s very much a case of wait and see before we can know for sure how it will affect us financially.

New record base rate

The Bank of England cut the base rate in August in response to the Brexit vote, to a new record low of 0.25% from its previous low of 0.5%.

That’s good news for borrowers - mortgages and personal loans have got even cheaper. However, it’s not such good news for savers, who are already struggling to get a decent return on their cash.

You can read more on the interest rate cut here.

The personal savings allowance

Better news for savers came in the form of the personal savings allowance, which came into force in April.

It allows basic-rate taxpayers to pocket £1,000 of interest from their savings tax-free each year. Higher-rate taxpayers get a £500 personal savings allowance each year, but there’s no allowance for additional rate taxpayers.

It’s a significant change for the vast majority of savers - a massive 95% of us will no longer pay tax on the interest our savings pots accrue.Innovative Finance ISAs launched

Another perk for savers has been the launch of the Innovative Finance ISA.

This is a tax-free wrapper for the money you invest with peer-to-peer lenders. You can choose to use some of your annual £15,240 ISA limit to invest with a peer-to-peer firm, alongside saving in cash or stocks and shares.

So far 17 firms have been authorised by the Financial Conduct Authority to offer Innovative Finance ISAs, but the biggest peer-to-peer names - the likes of Zopa and RateSetter - aren’t among them.

So if you want to enjoy tax-free returns from those firms, beyond the personal savings allowance (which applies to peer-to-peer accounts as well as conventional savings deals) you will have to wait a little longer.

Just be aware that peer-to-peer accounts are loan based funding accounts and are therefore not the same as traditional savings accounts, and rates are not guaranteed.

What’s more, although peer-to-peer lending is regulated by the Financial Conduct Authority, your money is NOT protected by the Financial Services Compensation Scheme. There is a risk you may lose some or all of your initial investment.

Current account interest rate cuts

While the interest rates on savings accounts have remained less than inspiring, many savvy savers have turned to current accounts, some of which actually offer a more impressive return.

Sadly, a number of the best-paying current accounts announced interest rate cuts this year.

TSB’s Classic Plus account, for example, which pays 5.00% AER (variable) on balances of up to £2,000, will see its rate cut to 3.00% AER (variable) on balances of up to £1,500 from January 4.

You’ll need to pay in £500 a month and register for internet banking, paperless statements and paperless correspondence to earn interest.

Meanwhile, from January 8, Lloyds is halving the rate on its Club Lloyds account to 2.00% AER (variable) on balances of up to £5,000.

However, it’s also lowering the monthly account fee from £5 to £3 if you don’t pay in £1,500 or more a month. You’ll need to have at least two direct debits on the account.

Santander has already halved the interest it pays on its 123 current account and now pays 1.50% AER (variable) on balances of up to £20,000. To qualify, you must pay in £500 or more a month and have at least two active direct debits on the account, as well as pay a £5 monthly fee.

Broadband charges made clearer

Since October 31, broadband providers have been forced to change their advertising to make it easier to work out exactly what you’ll have to pay.

Broadband ads now must:

  • Show all-inclusive up-front and monthly costs and not separate out the cost of line rental
  • Give greater prominence to the contract length and any post-discount pricing
  • Give greater prominence to up-front costs.

This should make comparing broadband packages easier, and you can find out more about the changes here.

The longest ever 0% credit card deals

It’s been a good year for borrowers looking to make use of 0% interest credit cards.

Virgin launched a card offering an incredible 30 months at 0% on purchases, though it has now been withdrawn.

Today the longest deal is the Sainsbury’s Bank credit card which offers 0% on purchases for 28 months. The card has a representative rate of 18.9% APR (variable)*.

The year also saw the longest ever 0% balance transfer card from Sainsbury’s Bank at 42 months, with a 4% transfer fee, though that has also now been pulled.

However, the Halifax Balance Transfer credit card offers 41 months at 0% on balance transfers, so long as they are carried out within the first 90 days.

The card has a 3.18% fee – an initial fee of 3.5% applies, but 0.32% is refunded if you make your transfer within the first 90 days (after this the fee is 3%, but you won’t then get the 41 months at 0%).

Once the 0% window is up, you’ll pay 18.95% pa (variable). The card has a representative rate of 18.9% APR (variable)*.

Energy switch guarantee

A host of the nation’s major energy suppliers signed up to the Energy Switch Guarantee back in June. It’s designed to make switching supplier much less painful.

If you see the Energy Switch Guarantee logo, you know that the following is guaranteed:

  • The supplier you’re switching to will handle the whole process
  • The switch will be completed in 21 days
  • You can stay with your old supplier until the switch, ensuring you won’t get cut off
  • If you change your mind within 14 days you can stay with your existing supplier
  • Any credit on your old account will be refunded within 14 days of your final bill.

Cheaper home insurance in flood risk areas

Getting home insurance can be a nightmare if you live in an area designated as being at a greater risk of flooding.

However, 2016 saw the launch of Flood Re, a new scheme designed to make insurance more affordable for those homeowners.

Essentially it involves insurers paying Flood Re, which has been set up by the government, to cover the flood risk for those at-risk properties, thereby cutting the amount they charge for buildings and contents insurance.

You can read more details on how Flood Re works here.

Insurance Premium Tax

Insurance Premium Tax (IPT) is a tax added onto any insurance policy you buy, and it looks like the government has identified it as a good way to raise some extra funds.

In March’s Budget it was increased from 9.5% to 10%, while in last month’s Autumn Statement it was announced that IPT will rise to 12% from next June.

This increase will add around £11 a year to the average car insurance deal, making it more important than ever to shop around at renewal.

The launch of the iPhone 7

It’s been a good year for tech lovers, with the launch of the latest iPhone model, a snazzy water-resistant handset with enhanced front and rear-facing cameras, as well as Retina Flash to ensure those selfies are absolutely perfect every time.

Tougher rules for landlords

There have been a couple of changes this year which have made life a little tougher for landlords.

First came the new additional Stamp Duty charge for second homes, an extra 3% compared to those of us buying a home to live in ourselves. You can find out more here.

In addition, landlords are no longer able to automatically deduct 10% of their rental profits as notional wear and tear. They can only claim tax relief on costs they have actually incurred. What’s more, they will have to keep the receipts to prove it.

By John Fitzsimons

*Representative Example: If you spend £1,200 at a purchase interest rate of 18.95% p.a. (variable) your representative rate will be 18.9% APR (variable).

Please note: any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.

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