AI scams are getting scarier, tax bills will keep rising and more financial lessons from 2024

There have been plenty of lessons to learn from the chaotic 12 months of 2024.

With the first Labour Budget in 14 years and the Bank of England cutting rates for the first time since 2020, it has been an eventful year for our finances.

Sadly, not many of these changes have been for the best.

According to research from the National Institute of Economic and Social Research, the poorest families in the UK will be £600 worse off per year due to the Budget alone.

In this article, we look at eight key financial trends during the past 12 months – and how you can better manage your money despite a challenging year.

1. Our tax burden will hit record levels…

While we’ve long been concerned about rising taxes at loveMONEY, the past 12 months hammered home the severity of the issue.

Following hikes to Income Tax and Inheritance Tax announced in the Budget, the Office for Budgetary Responsibility predicts the Government’s tax take will rise from 36.4% of GDP today to 38.2% in 2029/30.

This would be the highest tax burden ever recorded and 5.1% above pre-pandemic levels.

The decision to freeze Income Tax thresholds – the amount at which we become liable for the tax – is another blow for anyone already struggling during the cost-of-living crisis.

Under the Government’s plans, these thresholds will remain at their current levels until 2028, meaning those who earn just £12,571 will be dragged into the tax.

2. …with pensioners among the hardest hit

It’s fair to say that this year hasn’t brought the best news for pensioners when it comes to tax.

During her Budget speech, the Chancellor confirmed a 4.1% increase in State Pensions under the triple lock.

This system guarantees payments will rise in line with inflation, average earnings or by 2.5% each year – whichever is greater.

This year’s increases, tied to inflation, will push the full New State Pension to £11,973, placing many pensioners within touching distance of the Income Tax threshold.

According to figures from HMRC, the number of pensioners paying the levy has already leapt by 1.77 million during the past three years, thanks to the freeze.

As infuriating as this situation is, there are ways pensioners can lower their tax liability – for example, by deferring their State Pension or claiming the Marriage Tax Allowance.

You can read more about avoiding the pensions tax raid in this article.

3. Falling energy prices rarely last

Anyone who’d hoped for more stability in the energy markets during 2024 would have been sorely disappointed.

Back in July, there was hope that prices could be on a downward trajectory when regulator Ofgem lowered the Price Cap (the maximum cost per unit of energy) by 12%.

This meant the average household bill fell from £1,928 to £1,690 per year.

It was followed by a further 7% cut in July.

However, the trend did not continue into the second half of the year, with the Price Cap increasing by 10% in October and set to rise by another 1% in January.

It’s a helpful reminder to regularly check the market for new deals to see if you could save by fixing your tariff.

While there aren’t any guarantees, it’s always worth weighing your options if you’re concerned about future increases to the Price Cap.

4. Mortgages remain a mixed bag

With the Bank of England holding the Base Rate at a 16-year high since 2023, rates finally started to come down in the latter half of 2024

The first cut came in August, with the Base Rate falling to 5%, followed by a further reduction to 4.75% in November.

As a result, most borrowers with tracker mortgages – tied to the Base Rate – saw their monthly payments fall almost immediately.

That said, fixed-rate deals have been more volatile.

As expected, some lenders lowered their rates following the Bank of England cut – the typical response when central bank rates fall.

According to research from Zoopla, the average five-year fixed rate was 4.1% in September 2024, down 1% from the previous year.

More surprisingly, however, other providers have hiked rates after the Bank of England’s cuts.

Many experts believe this was in response to increasing numbers of mortgage applications.

5. Savers are getting a rough deal

While a falling Base Rate has historically brought good news for mortgage borrowers, the same usually can’t be said for savers.

When the Bank of England reduces rates, most providers typically slash returns on their savings products.

Predictably, we’ve seen many banks and building societies lowering rates across their product ranges over recent months – with best-buy deals dropping on ISAs, easy-access products and in-credit interest payments for current accounts.

Unfortunately, savers have little control over the Bank of England’s decisions.

However, this situation reinforces the importance of regularly checking your returns to ensure you get a competitive deal.

6. AI is fuelling a new breed of scams

While it’s impossible to deny the exciting potential of AI, this year has also highlighted the dark side of this technology, especially when it comes to scams.

For example, there has been a surge in voice cloning cons – in which cybercriminals use AI to replicate someone’s voice and steal money from that person’s family.

Worryingly, fraudsters only need a brief recording of someone’s voice – often obtained through social media – to create a convincing impersonation.

Equally concerning, a survey from Starling Bank earlier this year found that 46% of people didn’t know this type of crime existed.

If we’re unaware of a scam, it’s almost impossible for us to protect ourselves.

As these scams grow increasingly sophisticated, remaining vigilant is key.

Let’s stick with the voice cloning example. If you receive a panicked call from a loved one needing money, put the phone down and call the person back directly.  This way, you can confirm that everything is as it seems.

Worst AI scams of 2024: insurance fraud, deepfakes and more

7. High-polluting vehicles could cost the Earth

As we recently reported, the Budget brought bad news for drivers of certain high-emitting vehicles.

Under new rules, drivers of 58 premium cars will experience a massive hike in road tax from April 2025, also known as Vehicle Excise Duty or VED.

 As a result, many drivers will see their annual bills double from £2,745 to £5,490.

The change affects cars emitting more than 255g/km of CO2.

Drivers of vehicles emitting between 226 and 255g/km will see their VED rise from £2,340 to £4,680.

Most of the worst-hit brands fall into the high-end or performance category, including Aston Martin, BMW and Bentley.

In contrast, the standard rate of VED will rise in line with inflation, from its current level of £160.

If you’re in the market for a new motor, remember to check the emission levels before you buy – or you could be hit with a massive bill.

8. We’ll need to be savvy about passing on wealth

Traditionally, saving into a pension has been a great way to pass on wealth to your family.

This is because unused funds in your pension pots have been classed as separate from your estate for Inheritance Tax (IHT) purposes, often minimising the amount your beneficiaries pay or helping them avoid the tax entirely.

However, this is set to change.

During her Budget speech, the Chancellor revealed that unused pension pots will now form part of a person’s estate for IHT calculations.

With the changes coming into effect in 2027, those inheriting pensions could face a “double tax hit” as beneficiaries will also pay Income Tax on any withdrawals if the saver is over 75 when they pass away.

According to figures from tax consultancy firm Forbes Dawson, these changes could mean an effective tax rate of 70.5% for some wealthy inheritors.

With few seeing this move coming, it has upended the retirement plans of millions of Brits.

According to a study from Pension Bee, 47% of people are concerned about the Government’s plans, with almost a third reconsidering how they will pass on their wealth.

While there isn’t much we can do to change the Government’s plans, one option could be to ensure you take the entire 25% tax-free lump sum from your pension when you reach the age of 55 – rising to 57 in 2028.

This way, you can minimise the unused amount in your pension pot when you pass away.

Have your say

Has 2024 left you richer or poorer? And what do you think has been the most significant financial shock over the past 12 months?

We’d love to hear your thoughts in the comments below.