Check In to Check Up: Your Mid-Year Financial Health Examination

We're officially six months into the year. Regardless of how the first half went, the second half is still brimming with opportunities. As part of your mid-year reset, you should consider checking over your financials to see if your investments are working as hard as they can be to meet your short and long-term financial goals.

We’ve outlined three different approaches below for individuals, freelancers and business owners to consider when conducting financial health check-ups. These approaches will help you understand the key areas to review, the potential adjustments you might need to consider, and how to ensure your finances are robust, resilient, and primed to deliver on your financial objectives in the year's second half.

Individuals

A lot can change in six months, particularly in this volatile economic environment, so if you have a lot of assets to oversee, a financial check-up becomes even more crucial. Not to mention, the tax planning advantages could be substantial.

For individuals, starting with a review of your investment portfolio tackles whether you need to rebalance the holdings to ensure you’re getting the most out of the market right now. In 2023 bonds are performing well due to higher interest rates, as are some international investments like the Japanese stock market. Consider whether a rebalance is necessary and act accordingly.

Now we’re halfway through the year, it’s also a good time to check over your retirement situation. Check whether you're maxing out your yearly contributions and taking full advantage of employer matches, tax relief and other benefits to help ensure you’re doing the most for your future tax-efficiently.

On that note, you can also review your tax and estate planning options. Now might finally be the time to get a professional to look over your will or ask an accountant to help ensure your financials are as tax efficient as possible, such as making the most of charitable gifts and succession planning.

Freelancers

This year’s uncertainty around the global economy may have been difficult for freelancers if work’s dried up, so revisiting your pricing, adjusting the rest of the year’s budget and looking at how to reduce costs can all save money.

A change in your freelance earnings also has tax implications, as you need to pay tax on your earnings to HMRC in advance. Getting in touch with your accountant if there’s been a significant adjustment can help ensure you’re not over or underpaying tax for the year, leading to nasty surprises later down the line.

Or, you might have had the opposite situation and earned more this year. Great! In that case, you could consider increasing your pension contributions to ensure you’ve got enough in the bank for retirement or build up an emergency fund to help weather the dry spells.

If your turnover is over £85,000, you must register for VAT - not doing so can lead to fines from HMRC. If you’re concerned that you might be nearing the threshold, speak to your accountant about the next steps.

Business owners

The business landscape can be dynamic and unpredictable, so regular financial reviews can help you as a business owner to adapt to changes quickly and deftly navigate challenges.

To begin your mid-year financial review, start with the heart of your business's financial story: your financial statements. These include your income statement, balance sheet, and cash flow statement. Review them to determine whether cash flow is healthy and if the company is making a profit. Casting a weather eye over expenses and what’s generating revenue can also give you insights on improving your sales process and making cost efficiencies.

Mid-year is also a good time for you as a business owner to evaluate the company’s tax situation. If your business is booming, you might need to adjust your estimated tax payments to avoid falling short at the year's end. Conversely, planning for selective capital expenditures could be an opportune strategy if your business faces headwinds, as these investments can provide qualifying tax reliefs. 

A range of tax deductions and credits are also available that could lower your tax burden. An accountant can help you identify and take advantage of these, plus keep you informed of any recent or upcoming changes in tax legislation that could affect your business, helping you stay compliant and strategic in your tax planning.

Final thoughts

Regularly reviewing and adjusting your financial plan is integral to achieving your financial goals. Whether you're an individual or HNWI, a freelancer juggling multiple income streams, or a business owner steering a complex operation, staying on top of your finances can significantly affect your financial health.

If you have any questions or need further advice on your mid-year financial check-up, don't hesitate to get in touch. BXD Accounting can help you maximise the potential of the rest of 2023 and set you on the path to financial success.