Your financial situation does not stay the same year to year. Circumstances change. Interest rates change. Tax rules change. Products change. If you are not reviewing your finances regularly, you could be losing money without realising it. An annual financial health check ensures you stay on track, avoid costly mistakes, and make the most of every pound.
This guide walks you through a complete annual money MOT, covering every area that matters for UK residents.
Why Do an Annual Financial Review?
Think of your finances like a car. You would not skip an MOT — your money deserves the same attention. Here is why an annual review matters:
- Circumstances change: Marriage, children, job changes, inheritance — life events affect your financial needs
- Rates change: Savings rates, mortgage rates, and tax thresholds shift every year
- Products change: Your current accounts, insurance, and investments may no longer be the best deals available
- You could be losing money: Outdated products, unused ISA allowances, and wrong tax codes all cost you money
- Goals change: What you needed five years ago may not be what you need today
Set aside one Saturday a year to work through this checklist. It could save you hundreds or even thousands of pounds.
Emergency Fund
An emergency fund is money set aside for unexpected expenses — job loss, car repairs, medical bills. Without one, you may be forced into expensive borrowing.
Check these points:
- Do you have 3 to 6 months of essential expenses saved? Essential expenses include rent or mortgage, council tax, utilities, food, and transport
- Where is your emergency fund held? It should be in an easy access savings account where you can withdraw within 24 hours
- Is your emergency fund earning a competitive interest rate? Check current best easy access rates
- Has your monthly spending changed? Recalculate how much you actually need
Target: 3 to 6 months of essential expenses in an easy access savings account. If you have dependents or are self-employed, aim for 6 months.
Pension
Your pension is likely your largest financial asset after your home. Neglecting it can cost you tens of thousands in retirement.
Check these points:
- Are you contributing enough? The minimum auto-enrolment contribution is 8% of qualifying earnings (including employer contribution), but most people need more
- Is your employer matching additional contributions? Some employers will match contributions up to a higher level — check your scheme rules
- Check your pension value. Log in to your pension provider’s website or use the government’s pension tracer to find old pensions
- What are the fees? High fees eat into your returns over decades. Check the annual management charge (AMC)
- Are your investments appropriate for your age and risk tolerance? A 25-year-old and a 55-year-old should not hold the same mix
- Consider increasing contributions by 1% each year. Tax relief means it costs you less than you think
Tip: If you have multiple old pensions from previous employers, consider consolidating them into one provider for easier management — but check for exit fees and protected benefits first.
ISA Allowance
Every UK resident aged 18 or over gets a £20,000 ISA allowance each tax year. Any gains within an ISA are free of capital gains tax and income tax.
Check these points:
- Have you used your full £20,000 allowance for this tax year? The tax year runs from 6 April to 5 April
- Which type of ISA suits you best?
| ISA Type | Best For | Key Benefit |
|---|---|---|
| Cash ISA | Short-term savings, low risk | Tax-free interest, no market risk |
| Stocks & Shares ISA | Long-term investing (5+ years) | Tax-free gains and dividends |
| Lifetime ISA | Under 40s saving for first home or retirement | 25% government bonus up to £1,000 per year |
| Innovative Finance ISA | Peer-to-peer lending | Tax-free interest from P2P loans |
- If you are under 40 and saving for a first home, a Lifetime ISA should be your first port of call — the 25% bonus is free money
- If you have maximised your Lifetime ISA, use a Stocks & Shares ISA for long-term growth or a Cash ISA for short-term savings
Tip: You can split your allowance across multiple ISAs, but you can only pay into one of each type per tax year.
Insurance
Insurance protects your income and your family. Many people are either uninsured or underinsured.
Check these points:
- Life insurance: Do you have cover? If anyone depends on your income, you need life insurance. Check the payout amount — is it enough to cover your mortgage and provide for your family?
- Income protection: If you could not work due to illness or injury, how long could you survive on savings? Income protection replaces a proportion of your salary until retirement age
- Critical illness cover: This pays a lump sum if you are diagnosed with a serious condition. Consider whether this is needed alongside income protection
- Home insurance: Do you have buildings and contents insurance? Are you covered for the full rebuild cost and replacement value?
- Car insurance: Are you paying too much? Compare renewal quotes 30 days before your renewal date
Tip: Review coverage amounts annually. A life insurance policy taken out 10 years ago may no longer be adequate if your mortgage has grown or you have had children.
Debt Audit
Unmanaged debt is one of the biggest threats to financial health. An annual debt audit keeps you in control.
Check these points:
- List every debt you owe: credit cards, loans, car finance, student loans, family loans, buy now pay later agreements
- For each debt, record: balance owed, interest rate, minimum monthly payment, and remaining term
- Sort debts by interest rate. The most expensive debt (highest interest) should be paid off first — this is the avalanche method
- Are you paying more than 10% interest on any debt? If so, consider whether you can transfer the balance to a 0% balance transfer card or consolidate into a cheaper personal loan
- Check if you qualify for a 0% balance transfer card. Many offer 12 to 24 months at 0%, but there is usually a transfer fee of 1% to 3%
- Are you making more than minimum payments? Minimum payments keep you in debt for decades
Tip: If you are struggling with debt, contact StepChange (0800 138 1111) for free, confidential advice. Never pay for debt advice.
Credit Report
Your credit report affects your ability to get mortgages, credit cards, loans, and even mobile phone contracts. Errors on your report can cost you money through higher interest rates.
Check these points:
- Check your credit report with all three credit reference agencies: Experian, Equifax, and TransUnion
- You can access your report for free via ClearScore (Equifax), Credit Club (Experian), or Credit Karma (TransUnion)
- Look for errors: incorrect addresses, accounts you do not recognise, late payments you do not agree with
- Check for links to other people (financial associations) — if you are linked to someone with poor credit, it could affect you
- Make sure you are on the electoral roll at your current address — this is one of the easiest ways to boost your score
- Check for any defaults or CCJs (County Court Judgements) and take steps to resolve them
Tip: Check your credit report at least once a year, ideally before applying for any major credit product.
Will and Lasting Power of Attorney
If you die without a will (intestate), the law decides who inherits your assets — which may not be what you want. A Lasting Power of Attorney (LPA) ensures someone you trust can make decisions on your behalf if you lose capacity.
Check these points:
- Do you have a will? If not, write one immediately
- Is your will up to date? Major life events — marriage, divorce, children, property purchase — should trigger a will update
- Does your will reflect your current wishes? Who inherits your property, savings, and possessions? Who is named as guardian for minor children?
- Do you have a Lasting Power of Attorney? There are two types:
| LPA Type | Covers |
|---|---|
| Property and Financial Affairs | Managing your money, property, and bills |
| Health and Welfare | Decisions about your care and medical treatment |
- Have you registered your LPAs with the Office of the Public Guardian? An unregistered LPA cannot be used
- Have you discussed your wishes with the people you have named as attorneys?
Tip: An LPA costs £82 per type to register (as of 2025/26). Do it while you still have capacity — once you lose mental capacity, you can no longer set one up.
Tax Code
Your tax code tells your employer how much income tax to deduct. An incorrect tax code means you could be overpaying or underpaying tax.
Check these points:
- Find your tax code on your payslip or P60
- Check it matches your circumstances. Common codes include 1257L (standard personal allowance of £12,570)
- If you have multiple jobs, you may have more than one tax code
- Use the HMRC online tool to check your tax code is correct
- If you have been given an emergency tax code (starting with W1, M1, or X), this should be resolved — but check it is
- If you have paid too much tax, you can claim a refund from HMRC
Tip: Each year, HMRC sends you a tax code notification. Do not throw it away — check it carefully.
Savings Rate
Your savings rate is the percentage of your income that you save. The higher your savings rate, the faster you build wealth and reach financial independence.
Check these points:
- Calculate your savings rate: (total saved per month / net monthly income) x 100
- What is your current savings rate? Most financial experts recommend 10% to 20% of your income
- Are you saving automatically? Setting up a standing order on payday ensures you pay yourself first
- Are you saving for the right goals? Separate savings for short-term (holiday, car), medium-term (house deposit), and long-term (retirement)
Target savings rates:
| Savings Rate | What It Means |
|---|---|
| 0% to 5% | You are living paycheque to paycheque — urgent action needed |
| 5% to 10% | You are building some savings but need to do more |
| 10% to 20% | Solid savings habit — keep going |
| 20% to 50% | Aggressive saving — you will reach financial goals faster |
| 50%+ | Extreme saving — possible with high income or very low expenses |
Investment Allocation
If you invest, your portfolio should match your goals, timeline, and risk tolerance. Markets change. Your allocation may drift over time.
Check these points:
- Review your overall asset allocation. Do you have the right mix of equities, bonds, cash, and other assets?
- Has your portfolio drifted from your target allocation? If equities have grown strongly, you may now be overweight in equities
- Rebalance if needed — sell some of what has grown and buy more of what has underperformed to return to your target mix
- Are you too concentrated in one area? A common mistake is having too much in employer shares or a single sector
- Check fees across all your investment accounts. High fees compound over time
- Consider your time horizon. The longer your time horizon, the more risk you can afford to take
Tip: If you are unsure about investment allocation, speak to an independent financial adviser (IFA). Look for one who charges a flat fee rather than commission.
Free Tools and Resources
You do not need to pay for financial advice to get started. These free tools can help:
- MoneyHelper (moneyhelper.org.uk): Government-backed guidance on all aspects of personal finance
- Pension Tracer: Find lost pensions from previous employers
- Benefits Calculator: Check if you are entitled to any benefits or tax credits
- ClearScore: Free credit report and score (based on Equifax data)
- Credit Club: Free credit report and score (based on Experian data)
- Credit Karma: Free credit report and score (based on TransUnion data)
- MoneySavingExpert: Compare savings rates, credit cards, insurance, and more
- StepChange: Free debt advice and debt management plans
- Citizens Advice: Free guidance on benefits, debt, housing, and legal issues
Worked Example: The Johnsons’ Annual Review
Mark and Priya Johnson earn a combined £70,000 per year. They decide to do their annual financial health check in June.
Emergency Fund: They have £9,000 in easy access savings. Their monthly essential expenses are £2,800. Three months would be £8,400. They are covered. Status: Pass.
Pension: Mark contributes 5% and his employer matches 5%. Priya contributes 5% and her employer matches 3%. They are above the auto-enrolment minimum but could do better. Action: Both increase contributions to 7%.
ISA Allowance: Neither Mark nor Priya has used their ISA allowance this year. Action: Open Stocks & Shares ISAs and set up monthly contributions of £500 each.
Insurance: They both have life insurance from when they bought their home, but the cover is £150,000 each. Their mortgage is now £250,000 and they have two children. Action: Increase life insurance to £300,000 each and add income protection cover.
Debt Audit: Mark has a credit card with a £3,000 balance at 19% interest. Action: Transfer to a 0% balance transfer card and pay off within 18 months.
Credit Report: Neither has checked their credit report in two years. Action: Both check reports on ClearScore, Credit Club, and Credit Karma.
Will and LPA: They made wills when their first child was born but have not updated them since. Neither has an LPA. Action: Update wills and register LPAs.
Tax Code: Both have the standard 1257L code, which is correct. Status: Pass.
Savings Rate: They currently save about 6% of their net income. Action: Increase to 12% by redirecting the credit card payment and increasing pension contributions.
Total annual impact of their review: Better pension growth, £12,000 more ISA savings, £300,000 life cover each, a plan to clear credit card debt, updated wills, and LPAs in place.
Tips for Your Annual Money MOT
- Set a calendar reminder. Pick a date each year — the first Saturday of June works well — and block out two hours
- Review every product. Do not just check accounts you use regularly. Find old pensions, forgotten savings, and outdated insurance policies
- Compare rates. Your current accounts, savings, insurance, and credit cards should all be checked against current best-buy tables
- Cancel unused subscriptions. Gym memberships, streaming services, and app subscriptions add up — cancel anything you do not use
- Get professional advice if needed. If your finances are complex, a one-off session with an independent financial adviser (IFA) can pay for itself. Look for advisers on Unbiased (unbiased.co.uk)
- Keep records. Store your financial documents, passwords, and account details in one secure place
- Talk about money. Discuss finances with your partner or a trusted friend — many financial mistakes happen because people do not talk about money
Summary
An annual financial health check takes a few hours but can save you thousands. By reviewing your emergency fund, pensions, ISAs, insurance, debts, credit report, will, tax code, savings rate, and investments each year, you stay in control of your money and avoid costly mistakes.
Start today. Set a date. Work through this checklist. Your future self will thank you.
For more guidance, visit MoneyHelper or speak to an independent financial adviser.