Junior ISA – a nicer ISA?

You are possibly as irritated by the Halifax “ISA ISA baby” TV advert as me. For once there is now an actual baby ISA – though the Government are calling it a “Junior ISA”. It will be launched in November and allow parents or children to invest up to £3,000 per tax year. This is meant to be a replacement to the Child Trust Fund – which provided a new baby with £250 and the ability to save £1200 a year into it. This has now been scrapped by the Coalition Government. If you have one (or more accurately your child has a CTF) you (or s/he) cannot have a Junior ISA, but to fair things up, the limits for pre-existing CTFs have been raised to the same £3000 level.
So this is one for the University fees… well it could be, in practice the child will be able to get their hands on the money as soon as they turn 18.. which for many 18 year olds may be one temptation too far. The advantage of this new system is that there are no restrictions on the investment. It can be a proper investment portfolio and/or cash.  At the moment 16 year olds can have a Cash ISA but not a stocks and shares ISA until aged 18.
Most of the financial services industry will welcome this new initiative (a way of getting people in the habit of saving and of course getting paid for investing the money). In practice or rather reality, the frightening truth is that most people are not even saving £300 a month towards their own pension, let alone their children’s future. So I doubt that this will be a big earner for the financial services industry and will invaribably be one of several options for families with reasonable wealth to use – but not the majority.
Of course we will wait to see who decides to offer this product to clients and the detail, which I cannot find anywhere on the HMRC site – except one document, which says relatively little of note.
We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
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Junior ISA – a nicer ISA?2023-12-01T12:51:39+00:00

The Story Behind The Credit Crunch

On Monday evening I went along to see a special screening of the film “The Inside Job”.  This is an Oscar winning documentary by Charles Ferguson. Here is the trailer as a teaser.
It is an amazing film and I would encourage everyone to see it. You won’t like it – in fact it will make your blood boil. I was there with guests and supporters of the highly creative and innovative “Tipping Point Film Fund” which supports provocative and challenging non-fiction films with an international reach. The TPFF is a not for profit co-operative raising donations from individuals, groups and organisations who believe in using the power of film to make change. TPFF provides development and production funding, as well as campaigning outreach support to each film we work with. These elements combine to make Tipping Point Film Fund a unique and exciting new venture.
The film speaks for itself, but we were also able to talk with John Christensen, Director of the Tax Justice Network, who had quite a lot to say about the state of Economists, the tax system and how we might raise awareness of the great injustice that has been done to most of the world with the failure of anyone to be held to account for the credit crunch.
The film is deliberately provactive, but I find it hard for anyone to believe that what we have lived through and the many millions that continue to suffer more significantly as a result of unregulated greed is a system that  is simply a “part of life”. I obviously deal with lots of people working withing the financial services industry and have never yet met anyone that deliberately wants to ruin other people’s lives. Yet with weak regulation – particularly of the derivative markets and frankly the lending policy of most banks, this is what we are left with. As yet little has changed. It is fairly normal human nature to quickly forget and move on, yet the crisis could happen again and next time… well it could be a lot worse.
Sorry if you find this too political, but I don’t think that as a financial adviser I should keep quiet when something stinks. I am obviously passionate about creating and preserving wealth and financial security for my clients, but I don’t have any client that wants wealth at any price.
We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
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The Story Behind The Credit Crunch2023-12-01T12:51:39+00:00

Business Update

Not just good with food, but also good with making a profit, The Co-operative Group reported an increase in pre-tax profits of £545.7m for 2010, compared with £367.9m the year before, whilst group sales rose almost 10% to £13.7bn. Here is their “revolution” video – have a look.

Don’t forget that this extra profit is all subject to corporation tax which all goes to help reduce the national deficit. This is a rather different story than that of “the one that got away” Northern Rock, that is effectively owned by us all is to make a further 680 of its remaining 2,600 employees redundant by the end of the year; the news comes after the nationalised bank announced a £232m operating loss for 2010. Not such good news.

The white van driver may be happy that Vauxhall’s Luton factory has been awarded a contract in a joint venture with Renault to build the next version of the carmaker’s Vivaro van from 2013, but the local Luton economy will also benefit from securing up to 6,000 jobs and saving the plant from closure.

Meanwhile the prestige sports-car maker Porsche will start a £4.4bn share sale at the end of this month to reduce its debt to £1.3bn. Its a shame they don’t reduce the price of their cars too.

The hoo-hah surrounding airport owner BAA has been concluded with the not terribly surprising news that they have been ordered to sell Stansted and either Glasgow or Edinburgh airports by the Competition Commission following a ruling by in 2009 that the Airport operator must sell three of its seven UK airports; BAA has already sold Gatwick. I doubt that this will have much impact on your choice of airport though.

Pharmaceutical giant AstraZeneca has reached agreement on tax payments and will pay £690m to cover US tax payments between 2000 and 2010; as a result earnings this year will be higher for the Anglo-Swedish drug maker as it will be paying lower taxes.Their 2010 annual report is here.

The world’s biggest miner BHP Billiton keeps digging and announced it’s expanding its Australian mining projects, worth £5.9bn in capital investments, as it tries to keep up with rising demand in Asia. The pace of change in China remains rampant as does its hunger for resources to make it into the world’s leading economy – Asia’s biggest refiner Sinopec reported net profits for 2010 were £6.8bn, 13.7% higher than the year before, as domestic demand and rising oil prices increased.

We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
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Business Update2023-12-01T12:51:40+00:00

Tax Year End

We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
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Tax Year End2023-12-01T12:51:41+00:00

Finally becoming Equitable

Equitable Life are beginning to dish up some revenue to policyholders. They plan to hand out 12.5% of policy values to policyholders, this is effectively taken from their reserves which they suggest have been built up sufficiently. This is presumably a part of a long drawn out closure and “profit sharing” which by these maths looks likely to take 8 years. Never-the-less this is good news for anyone with the misfortune to have an Equitable Life policy. The full press release is found here. Oh and here’s an Equitable Life advert… in which Buzz Aldrin features. Regrettably the signs of overambitious nonsense were there to see at the time, in truth it was easier to put man on the moon than keep a guaranteed annuity rate of over 14%.

We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
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Finally becoming Equitable2023-12-01T12:51:41+00:00

Budget 2011 Summary

Income Tax and National Insurance
The Chancellor announced that the Government will consult in 2011 on the merger of income tax and National Insurance Contributions (NICs). The Chancellor also confirmed that this was about simplification and there was no intention to extend the scope of NICs. He was fairly clear that this process might take several years before becoming a reality.
From April 2012 there will be a further substantial increase in the personal allowance. This is in addition to the previously announced £1,000 increase to £7,475 from April 2011. From April 2012 the personal allowance will increase to £8,105. There will also be a corresponding decrease to the basic rate limit, reducing from the 2011/2012 level of £35,000 to £34,370 for 2012/2013.
The increases mean that basic rate taxpayers who remain within the reduced basic rate band will be £200 better off in 2011/2012 and a further £126 better off in 2012/2013 in cash terms.
The Chancellor confirmed that the 50% tax rate was a temporary measure but will continue for 2011/2012. This means that investment products that allow the deferral of income tax, such as life insurance investment bonds and capital redemption bonds, may become a more attractive option.
The 1% National Insurance (NI) rise will still apply from April 2011, but employers will benefit from an increased secondary threshold which will reduce the impact of the increase. Many employees can still reduce the impact of increased NI charges by using salary exchange (sacrifice).
Pensions and State Benefits
The Government confirmed previous announcements regarding restrictions to pensions tax relief and changes to annuitisation and pension income rules.
Otherwise this was a relatively quiet Budget for pensions, with the only other major announcements being limited to State pensions and employer financed retirement benefit schemes (EFRBS), covered below, and the Government’s intention to take forward proposals to reform public sector pension provision.
Apart from additional, outline information concerning managing longevity in relation to the State Pension Age and the flat rate state pension the Government reaffirmed information on State benefits that had been previously announced in one or more of the June 2010 Budget, the October 2010 comprehensive spending review, or the December 2010 Autumn tax update.
Capital Gains Tax
The significant increase to the lifetime limit on Capital Gains qualifying for entrepreneurs’ relief from £5 million to £10 million should be a boost to many business owners looking to dispose of their business.
Tax Efficient Investments
The annual ISA subscription limit has increased to £10,680 (£5,340 for cash ISAs) for 2011/2012 and will increase in line with CPI for the September preceding the tax year from 2012/2013 onwards.
The Government will introduce new Junior ISAs as a tax-free savings option for children, following the end of Child Trust Fund eligibility from January 2011. Junior ISAs should be available by Autumn 2011.
The rate of income tax relief under enterprise investment scheme (EIS) investments is to be increased to 30% from 6 April 2011.
The annual amount that an individual can invest under the EIS will be increased to £1 million, but not until April 2012.
Inheritance Tax
• The nil rate band is frozen at £325,000 for tax years up to and including 2014/2015, after which point the Consumer Prices Index (CPI) will be used as the default indexation assumption.
• From 6 April 2012, the Government will introduce a reduced rate of inheritance tax (IHT) of 36% for estates leaving 10% or more to charity. The relief is designed so that the benefit of the tax saving is reflected in the gifts received by charities and not in payments to other beneficiaries. The Government will be consulting on the detailed implementation of this measure and will issue a consultation document before the summer.
• HMRC also this week published guidance on the application of the Disclosure of Tax Avoidance Schemes (DOTAS) regime to inheritance tax. The regime will require the disclosure of arrangements that seek to avoid or reduce IHT charges that would otherwise apply on the transfer of property to a relevant property trust. The regulations implementing the changes will come into effect on 6 April 2011.
 
Corporation Tax
The Government extended its previous cuts to corporation tax
• A 2% cut to the main rate of corporation tax from April 2011.
• Successive reductions of 1% each year to a rate of 23% by 1 April 2014.
• The smaller companies’ rate also reduces by 1% to 20% from 1 April 2011
 
Anti-Avoidance
As a result of a consultation process the Government has amended draft legislation containing previously announced anti avoidance measures aimed at stopping most businesses using employee benefit trusts (EBTs) and employer financed retirement benefit schemes (EFRBS).
The purpose of the amendments is to take those arrangements that cannot be used for the avoidance or deferral of income tax and national insurance, such as share incentive schemes and genuine deferred remuneration schemes, out of the legislation’s remit.
The draft legislation provides that PAYE will apply to rewards, recognitions or loans earmarked for, or made available for, the benefit of a current, former or prospective employee in cash or assets using an EBT or EFRBS on or after 6 April 2011.
In addition anti-forestalling provisions mean that amounts paid or assets provided using EBTs or EFRBS between 9 December 2010 and 5 April 2011 will also be subject to PAYE.
There is an opportunity to reduce these charges to the extent that payments made, or assets used, before 6 April 2011 are repaid / returned before 6 April 2012.
HMRC will also continue to challenge existing EBTs and EFRBS where they do not feel they are effective in avoiding tax under the law applying before 9 December 2010.
We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
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Budget 2011 Summary2023-12-01T12:51:42+00:00

A Question of U Turn Economics?

It would appear that a room full of economists are about as good at predicting the future as the weather forecasters. We have all read and heard the arguments about inflation creeping (or spiking) into our spending patterns and having a negative effect upon the money in our pocket, but now it seems that several of them believe that inflation is under control and could even morph into deflation. Quite a U-Turn.
One does have to question the validity of such statements and I cannot help but feel that there is a degree of spin going on so as to push the Bank of England not to raise rates. Several of these economists met today and appear to agree that inflation will be pushed down sharply next year to move below the Bank of England’s 2 per cent target, and say it is possible we will see deflation next year. The wonderfully named “Office of Budget Responsibility” (sounds like a Two Ronnies sketch) has forecast that inflation will peak this year before starting to come down next year and returning to the 2 per cent target by 2013.
There was a Treasury select committee meeting today following the Budget. It was asked whether the basis for the Budget and forecasts were or are sound. The now famous Roger Bootle who predicted the crash and ended up having the last laugh on those that did not take his book too seriously, said: “My own view it is the standard thing to do to assume that inflation will go back to target. The forces are in place to bring inflation sharply down next year. I doubt it will stop at the target and we will actually end up with inflation much lower than 2 per cent and not only that but inflation will be driven into negative territory.”
The National Institute of Economic and Social Research  (NIESR) also gave evidence to the committee and sugggested that the prospects for inflation were uncertain, with a 90 per cent chance that in 2012 inflation will be somewhere between 0 and 4 per cent. (I can hear you laughing!) Yes believe it or not a statement that a range of between 0% and 4% is what some people think is a reasonable outcome for their time and employment at NIESR.
This is all somewhat of an about turn at a time when the calculator gang over at the Office for National Statistics put a figure on the Consumer Prices Index measure of inflation which rose from 4 per cent to 4.4 per cent in February, the highest level since 2008.
Convinced enough to bet your mortgage on this? me neither.
We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
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A Question of U Turn Economics?2023-12-01T12:51:43+00:00

Budget 2011: New IHT Rule

The Chancellor introduced an alteration to the Inheritance Tax rules in yesterday’s Budget. This will possibly help chairities with perhaps slightly larger gifts.
Example 1
Let us suppose that an estate is worth £800,000 and that the couple have died without using any other forms of tax planning. Prior to the budget the tax levied would be 40% of the balance above the nil rate band (with a couple, this is effectively doubled from £325,000 to £650,000) so 40% of the remaining £150,000. An IHT payment of £60,000 to HMRC. The balance of £740,000 would be paid to the beneficiaries of the Will.
The Budget states that if 10% of an estate is gifted then the tax liability would also reduce by 10% from 40% to 36%.
Returning to our example, an £800,000 estate, gifted £80,000 leaves a £720,000 estate (£80,000 to charity). Using both nil rate bands (£650,000) the taxable estate is £70,000 which would not be taxed at 40% resulting in a payment of £28,000 but 36% resulting in an IHT payment of £25,200. The beneficiaries of the Will inherit £694,800.
The only change in the rule is the reduction to the IHT tax from 40% to 36% as any gift to charity from an estate is paid tax-free to the charity and falls outside the estate for tax calculations.
Please note that the nil rate band of £325,000 per person is frozen until April 2015. However after this date CPI (Consumer Price Index) will be applied to the allowance.
Example 2
By way of another example, say a larger estate worth £10m and assuming that no other tax planning has been performed. Before the budget, the tax liability would have been £3.74m with the remaining £6.26m passing to beneficiaries of the Will. In the new Budget a gift of £1m must be made to charity leaving an estate of £9m. If this sum had been given before the Budget the resulting tax payment would be £3.34m following the Budget it is reduced to £3.006m a saving of £334,000. The beneficiaries inherit £5.334m.

My Thoughts
 

I’m not sure how much headline this small change will create. In practice, it would be difficult to be specific about specific amounts of money given to charity as the estate would need to be valued at the date of death, so using the first example, if you had decided to leave your favourite charity £80,000 this may not actually be 10% of the estate. The value will fluctuate on a daily basis. So in order to take advantage of the new legislation you would actually need to amend your Will to make a provision to gift 10% of the net value of the estate to charity. This is perfectly possible to do, but of course may not take account of your family circumstances at the time. Only 1 in 7 people have a valid Will which in of course suggests that few people really plan ahead. So whilst, this is good news potentially for Charities, in practice unless you amend your Will few will see the benefit, unless you have already made a provision to give a sum that is probably substantially more than 10% of your estate. So if this is something that you wish to do (and remember IHT legislation does alter) you need to pay a visit to your Solicitor to review your Will. There is a guide to making a Will within the resources section of my website.
We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
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Budget 2011: New IHT Rule2023-12-01T12:51:43+00:00

Budget Information

I will post a few of the key points that are more likely to be of interest to most clients as I digest the contents of the Chancellors Budget. Running at a mere 104 pages, you will appreciate that I have not yet uncovered all the detail. No doubt tonights news will have a fair amount to say, which will  probably merely reinforce views of the Coalition Government. I’m reminded that “we” often look for evidence to support our already formed opinion.
In truth, I have to admit that most Budgets sound fairly sensible – generally having an attempt at trying to grow the economy and improve society. The constant noise playground antics of the House of Commons does little to really leave us feeling that politicians are mature adults, but as individuals, most of us would probably admit that they do seem to be. I will do my best to get beneath the spin, I suspect that, as with most Budgets there is a significant amount of “moving the deckchairs around” let us hope that it is one that actually achieves some of the sentiments outlined – for all our sakes.
We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
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Budget Information2023-12-01T12:51:44+00:00

Who has eaten all the pies? Business Updates

It seems that someone has been eating an awful lot of pies. I’m not sure if the news that the UK’s largest bakery has increased sales and profits dramatically is good for the health of the nation, but it is certainly adding to the wealth of the nation. Greggs, which has 1,500 stores, has announced  £52.2m of profit in 2010- a new  record; it said that profits were up by 7.9% from a year ago, although same-store sales were up by just 0.2%. Which seems to suggest that efficiency was found in reducing cost rather than increasing sales… perhaps those pies weren’t quite so large as before. This is washed down with the news that the UK’s biggest pub group Punch Taverns is to split in two, halving its business to 3,000 pubs, having struggled with debts of £3.3bn last year.
2011 Royal Mail Thunderbird stamps
Royal Mail announced it will cut more than 1,700 jobs of which 1,000 are managers. One of the main criticisms of Royal Mail is that it has become bloated on management and this represents a significant effort to address that criticism. The plan is to close two mail centres in London as it expects the volume of mail posted in the capital to have halved from 2006 levels by 2014; the company said it had cut 65,000 positions since 2002. This is a reflection of the world turning to online functionality, no more bank statements, mobile phone statements through the post. So we are all as safe as houses then…sadly I expect our rather poor postal service in SW20 to worsen rather than improve.
As we have all been hoping and praying that the Japanese can avoid nuclear meltdown, our thoughts returned again to how we use and generate energy. Centrica, has announced that it will purchase New York-based energy retailer Gateway Energy Services, which has 275,000 gas and electricity customer accounts, for £55m. Meanwhile Essar Energy reported pre-tax profits for 2010 rose to £365.5m from £285.7m the previous year, whilst revenues were up 42% to £10bn; the Indian energy giant, which joined the FTSE 100 in June last year, also benefited from new power stations in the emerging country.
The world of telecoms continues to remain one of the frontiers of competitive market share action as AT&T announced that they will buy rival T-Mobile USA from Deutsche Telekom AG, making it the largest mobile phone company in the US, in a deal worth £24bn; this will give the US phone company about 43% market share, ahead of industry leader Verizon Wireless. The world’s largest potential market for mobile usage is naturally in China. So it is interesting to note that China Mobile reported net profits rose 3.9% to £11.3bn while revenue was up by more than 7%; having the most subscribers in the world, the mobile phone operator has said its profits increased as more music and video was downloaded.
So here is the “headsup” on the look of the logo that may one day appear on your emailed mobile statement.
We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
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Who has eaten all the pies? Business Updates2023-12-01T12:51:44+00:00
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