Financial News Archives - Financial Planning in Surrey

Contract for difference?

Dominic Thomas
Oct 2024 • 3 min read

Contract for difference?

I’m going to be blunt. If you come across a Contract for Difference (CFD) or more accurately someone trying to sell you one, run.

A CFD is a highly complex financial instrument. I’m not going to bore you with the detail. You can see it here if you wish: https://www.investopedia.com/terms/c/contractfordifferences.asp. Anyway, as is often the case, a man in a smart suit or sounding like he probably owns several of them from Savile Row (showing my age) is to be avoided. For good measure, I’d suggest that Forex (foreign exchange trading) when combined with ‘investment advice’ would also be best left well alone. Unless of course you quite like losing your life savings – which I know you don’t.

So, with the regularity of a tax year, news of yet another FCA fine to such a shark graces my inbox. This time the fine was slashed by over 75% from £1,215,000 to just £276,100 (well it is ‘just’ for a firm like that). The firm being Forex TB Limited (FXTB). This is for giving investment advice when they have no permission or right to do so. The fine was slashed as it would mean FXTB would face financial hardship. I would have thought the sector would be better off without an unauthorised firm quite obviously not giving a fig about the rules. I certainly don’t wonder why my regulatory fees rise each year when the fines for the culprits are soft. Still, at least they don’t have a license and have held no FCA permissions since last October. What a relief.

FXTB appear to have been fairly standard financial crooks, at least that is my reading of the FCA statement, which I quote:

“FXTB pressured customers to put their money at risk through CFD trading, even encouraging them to borrow money from friends or family in some cases.

Compounding these failings, FXTB frequently provided its customers with investment advice, despite not being authorised to do so.

FXTB’s customers were inexperienced in trading and did not always understand the risks associated with CFDs, which were also not fully explained to them. FXTB also enabled customers to become ‘Professional Clients’ by encouraging them to provide false information. This meant these consumers lost the protections that as ‘retail clients’ they would have had.”

In short, there is enough risk and return available in normal mainstream investment funds without going off-piste into really nuanced trading techniques, and yes before you ask, I would include cryptocurrency in the same category until further notice.

You can read the full FCA statement here: https://www.fca.org.uk/news/press-releases/fca-fines-fxtb-unfair-customer-treatment-practices

OK, so you wouldn’t fall for this, after all you pay us to advise you – but what about your friends, family and peers; you know the ones you worry about that might very well get sucked into this sort of stuff. Introduce us.

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Contract for difference?Jemima Thomas2024-10-21T10:44:08+01:00

Budget or canary? A Whimsical Reduction

Dominic Thomas
March 2024 • 5 min read

Budget or canary? A Whimsical Reduction

There was another Budget today, my inbox and the media interest will likely pass over the next 48 hours until a ‘howler’ is found in the sums. Unlike politicians, let me extend my neck … this was possibly the last Conservative budget for a while and an attempt to rescue votes that would otherwise slip away. It contained the traditional narrative of putting money back in your own pocket (having taken it) rather than asking you to reach a little deeper for more. Anyway the 98 pages of light reading provide a distraction …

Owners of commercial property will pay less capital gains tax, 4% less or a reduction of 14%, or 28% reducing to 24% for higher and additional rate taxpayers, depending on how you like your spin. Over the last decade we have all witnessed the decline of retailers and shopping centres, the pandemic added to their misery and extended it to the office sector which has gradually spun the dial on remote working whilst watching energy bills soar and staffing levels make the place feel like an episode from The Last of Us.

Employees and the self employed have had national insurance cut by 2%, the tax that doesn’t really build up for your pension, other than in a pay to play sense. This is not applied to employers who do the employing and of course pensioners at State Pension age or above do not pay national insurance but actually receive the State Pension.

Some sense is being finally applied to the Child Benefit system for ‘High Earning Families’ where previously only one person had to earn above £50,000 for the tapering of financial help to begin. This has been raised to £60,000 and will eventually be applied to household income rather than individuals (it was previously possible for a couple to earn £49,000 each and avoid any reductions). Sadly for most people the reality of juggling childcare and credits, whilst manipulating income is really a gigantic hassle merely to demonstrate that they qualify to not have to refund money that has already been spent.

Those working in the Public Sector are under constant scrutiny for their productivity by (forgive the Thomas the Tank Engine sounding terms) the National Statistician and Comptroller and Auditor General who assert that “tens of billions” can be saved through higher production and less fraud, better project management and better Government technology. How many tens is unclear, one might say there is a touch of Yes Minister as any tech project the Government designs and procures usually fails to work. The fraud checking might do well to exercise a little more vigor in relation to Pandemic VIP lanes and contracts.

There will be more nurses (well nursing and midwifery places) by 2031. So we should expect delays and pressure on our NHS for another seven years. Similarly, medical schools will be aiming to achieve 15,000 places in the same timeframe. Student digs around St George’s look set to thrive. Assuming entry to medical school is at 18 at the earliest, this is likely aimed at your bright 11-year-old who has not yet started secondary school. A hard sell to most 11-year-olds from generation alpha. There were about 778,803 live births in the UK in 2013, almost 2% of them are going to be doctors then, a fair chance they will be called Oliver or Amelia.

Now you see why we need the National Statistician who is also suggesting that doctors waste around 13million hours on poor IT. A BMA study found that only 4% of doctors believe that the IT they use is “completely adequate”. The Government of efficiency has been in power since 2010 … around the time of the iPhone 4, the pre-fibre days with speeds of up to 100Mbit/s. I imagine the plan to test AI to automate GP letters and discharge summaries will provide ample resource for comedians and there are assurances that it will not be called horayitzgon..

The need for yet another version of an ISA isn’t welcomed by me. It’s a little hallucinogenic, a nod to nostalgia, Blighty and Brexit whilst having its trace in the origins of the PEP (remember them – the Personal Equity Plan) which was originally restricted to UK shares. The new £5,000 UK ISA (in addition to your £20,000 ISA) must be held in UK equities. One for the purists, but also the mathematicians who will be able to encompass allocation to the UK of £5,000 within a portfolio, but making ‘models’ a challenge. Expect another acronym perhaps £UKISA?.

There will also be a British Bond (I’m not sure how that differs from any other one created by the UK Government) but anyhow a 3-year Bond will soon be making its way over the horizon, available from April at a Post Office near you, just don’t mention the subpostmasters.

Your petrol, beer and wine aren’t changing, though your consumption may. Actually, strictly speaking the tax rate isn’t changing, I suspect the price already has since this morning. The Chancellor believes that inflation will reduce, so expect interest rates to do the same.

The threshold for small businesses registering and collecting VAT for HMRC will increase from £85,000 of revenue to £90,000. One for the builders who have a different company name for every room of your house-build to navigate with a little more ease.

In the 98 pages I can find no change to the annual allowance for pensions or the main ISA, LISA, JISA. Let’s hope this is not an error, if it is we now know that Fujitsu can ~~‘remote in’~~ to make some changes. There is no change to the capital gains tax allowance which reduces to £3,000 on 06/04/24. There is no change to the personal allowance, income tax thresholds or tax rates … which is as expected, but of course means a reduction in tax allowances when measured against inflation or a tax increase depending on your flavour of politics. There is a change for inheritance tax, but only if you have married someone from outside the UK and it doesn’t apply until 2025.

There is a continued attempt to entice businesses to money launder – I mean list in London – with not a hint of tropical offshore waters with a scheme called PISCES (that’s Private Intermittent Securities and Capital Exchange System to you and I). Having also witnessed the decline in pension funds owning UK shares (some vote a while back about cheese and wine) by 6%, the Government continue to attempt to ‘buck the market’ (something no Thatcherite would ever do) by forcing pensions to hold an allocation in UK companies. Discussions with the FCA and Pensions Regulator are due to begin in the Spring (note the daffodils are already out). This is possibly to be combined with a ‘Value For Money’ pensions framework … something that all three bodies have, in theory, been overseeing already. Anyway … it would be remiss of me to fail to point out that it has been Government policy to reduce the Annual Allowance, introduce the tapered annual allowance, reduce the Lifetime Allowance, introduce the Money Purchase Annual Allowance and imposed HMRC calculations for all – aimed in fact to deliberately reduce the value of pensions since 2010 (at the time, the Lifetime Allowance was £1.8m, the annual allowance was capped at £255,000).

Above all, the Chancellor reaffirmed belief in owning property, particularly in Surrey, which is to become a fiefdom under the level 2 devolution agreement. This despite local councils being unable to balance their own books, or perhaps because of it?

Carry on.

References:

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Budget or canary? A Whimsical ReductionJemima Thomas2024-03-07T16:44:39+00:00

Last exit before…

Dominic Thomas
Jan 2024 • 7 min read

Last exit before…

As a minnow, I’m supposed to celebrate the move made by St James’s Place who are now promising to remove their exit fees whilst also reviewing their fee structure. Hefty exit penalties applied to their pensions and Investment Bonds in particular. According to their current, outgoing Chief Executive, the changes will come into effect in the second half of 2025.

Some suggest that this is the regulator placing pressure on SJP. I might suggest that treating customers fairly (TCF) was introduced by the regulator in 2006, so one might conclude that it has taken them nearly two decades to comply. Then from 2013 fees or rather adviser remuneration had to be agreed with the client under what was known as RDR (Retail Distribution Review) and a banning of commission. The introduction of the new Consumer Duty rules in July 2023 together with some scathing pieces in mainstream media and a drop in their share price (halving since the end of July as investors appreciate that previous revenues may be ‘threatened’) all appear to have prompted appeasement. One might say that the penny finally dropped.

SJP are obviously a financially successful company, some very flattering marketing materials and beautiful offices, which would be the envy of most in the sector. Their advisers currently make up about 1 in 10 of all advisers. They are also a restricted firm, meaning that they sell a limited range of financial products and funds, unlike an independent firm who selects from the whole market.

SJP Share price (30/10-2003 -17/10/2023)

One thing is for certain, there is no denying that their 900,000 clients with around £168bn generally like what they do, despite expensive and rather poor performance of investment portfolios. The truth is that SJP are excellent at branding, and this extends to the advisers (who work and market themselves as ‘partners’) who they put in front of clients. They are well trained and very good at relationship selling (for the record – selling is a good and necessary skill and process). It’s rarely easy to move someone away from SJP by merely stating facts about price and performance.

As someone who believes that the UK needs better advice and more people in receipt of it (including politicians and their Parties), I don’t really have much of a problem with SJP other than until now it has been incredibly difficult to properly compare their charges (because they have been deliberately obfuscated – I don’t think there is another way to honestly view it). They are now set to address this which will almost certainly mean their profit margins are lower, but also that some, perhaps not many, of their clients will seek advice elsewhere.

My main gripe is that our sector needs to earn and demonstrate trust and fairness whilst having integrity. It has taken the regulator far too long to take seriously what the entire sector has known about SJP charges for decades … it’s not the amount, but the lack of clarity.

A POTTED HISTORY AND OTHER PEOPLE’S MONEY

St James’s Place was formed in 1991 but under the name of the Rothschild Assurance Group and began trading in 1992. The name changed formally in October 2000 not long after Halifax took a majority stake (60%) in the business. You may recall that Halifax merged with the Bank of Scotland forming HBOS in 2001. We had the credit crunch and despite Lloyds writing off £200m of US subprime debt in December 2007 and then seeing first half profits fall 70% in 2008, they stepped in to acquire HBOS, but traders were ripping them to shreds seeing the share price halve at one point. On October 13, 2008, Alistair Darling announced that the UK Government was bringing the banking system back from the brink, with a 43.4% stake in Lloyds. Just four months later Lloyds stunned the City announcing £11bn in losses at HBOS; and before the end of 2009, the Government stumped up a further £5.7bn for Lloyds. It wasn’t until the end of 2013 that Lloyds finally disposed of its holding in SJP just a few months before it moved from its FTSE250 listing into the illustrious FTSE100.

By way of comparison, I formed Solomon’s in 1999 and it remains independently owned and operating as an independent financial adviser. Since the outset, we removed commission from all protection products and implemented a level playing field of fees, meaning that there was no higher adviser fee for any particular investment product (Investment Bonds and Pensions normally paid advisers much more). There have never been exit penalties on anything we have arranged, except specific products such as VCT, EIS and SEIS, which is due to HMRC regulations regarding minimum durations to qualify for tax relief and nothing to do with advisers or indeed the product providers.

Clearly, we do not have 900,000 clients nor do we have £168bn under management. We have saved our clients an awful lot in costs for investments (cheaper than 99% of the sector), platforms, product selection, reduced losses and taxation. Hopefully our clients are also reassured that they have ample financial protection should the worst happen (we have seen how this has made substantial differences to those who have experienced such matters). In addition, having a clear financial plan that provides for your personal lifestyle choices rather than an assumption that you must want a yacht. Our clients are able to achieve high degree of peace of mind, whilst living in the reality of an uncertain, flawed and at times broken world.

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Last exit before…Jemima Thomas2024-02-01T09:20:06+00:00

Taxing times

Dominic Thomas
Jan 2024 • 5 min read

Taxing times

Tax is perhaps one of the most divisive issues. At the time of writing, just before the Christmas break 2023, the Scottish Government has announced that it is imposing the additional rate of income tax (45%) at a much lower level. Unlike England and Wales, the Additional Rate will start at £75,000.

Here in England and Wales, the 45% rate starts at that “only a quango could come up with it” number of £125,140 for tax year 2023/24. So someone earning more than £125,140 pays 45% income tax, but in Scotland the line is drawn much sooner.

By comparison, a Scottish resident earning £125,140 will pay an extra £2,507 on the same income. I doubt that the extra tax is enough to prompt thoughts about moving south, but it may well alter behaviour at the ballot box.

As a reminder, the tax rates for this tax year (2023/24) which comes to a close on 5^th April 2024 are as follows:

Band	Taxable Income	Tax Rate
Personal Allowance	Up to £12,570	0%
Basic rate	£12,571-£50,270	20%
Higher Rate	£50,271-£125,140	40%
Additional Rate	Over £125,140	45%

These are the income tax rates on earned income, not dividends (which have lower tax rates).

If you are breathing a sigh of relief because you live in England or Wales, remember that this tax year saw the Government reduce the higher rate band so that Additional Rate begins at £125,140 rather than £150,000.

Most of us have been impacted by inflation, yet the personal allowance remained frozen as did the basic rate tax band. So more people pay more income tax. This is what the media and whoever is in opposition, like to call “stealth taxes” basically an increase in tax in real terms.

Additional Rate tax was introduced in the tax year 2010-11, and saw 236,000 people pay 45% raising £34.5billion. Ten years later, the HMRC 2020-21 data saw this number increase to 481,000. There is no doubt that whichever way one observes the data produced by HMRC, we all pay more tax.

There are of course some things that you can do about reducing tax or even obtaining tax reliefs, these are all part of a good financial plan. However what I often observe is how little attention is paid to good arrangement of financial ‘stuff’ so that you can minimise tax payments. How much and where from become really important when drawing money from your portfolio. It’s one thing to get tax relief or use an allowance, it’s another to draw money out so that you pay less than 20% tax.

I recently produced a White Paper that you may find of interest called ‘Understanding Adviser Fees’, which includes and explanation about the value that we bring. Whilst I firmly believe that every little helps, if you focus purely on costs and ignore taxes, you will quickly wonder why you bothered. You can find the paper (which is designed to be readable – feedback welcome) here.

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Taxing timesJemima Thomas2024-02-01T09:21:01+00:00

Crypto King

Dominic Thomas
Oct 2023 • 3 min read

Crypto King

The appeal of cryptocurrencies is really twofold, firstly some people seem to be making a lot of money from investments into them. Secondly, some people seem to be making a load of money from investing into them. Oh, ok the better reason, is that digital currency enables finance to be arranged more promptly without the dreaded interference of those nasty ‘Bankers’ and avoid problems of exchange rates.

Perhaps I am oversimplifying, but the truth is that cryptocurrency is generally fuelled by greed and a belief that money is very easy to make. The evidence for investment is generally a conversation with a specialist or anecdotal discussions with friends and perhaps a bit of ‘research’ online.

Let me be clear, I am not saying that the banking system is good, it’s terrible frankly, but there is something to be said for ‘better the devil you know’ than the backroom hack shops beholden to organised crime. I am not a crypto expert, I know a couple, but as of right now in 2023, I cannot see a good reason for the typical long-term investor to muck around in the sector.

We see story after story of failed currencies and platforms, where supposed fortunes become worthless. Unlike your portfolio, there are no real assets behind most cryptocurrencies, often just other cryptocurrencies.

I will likely be proven wrong by a friend of yours who makes several million from a couple of pounds. I can live with that, but can you live with your investment portfolio becoming worthless?

The mistakes that investors consistently make are invariably due to four key beliefs

They know what they are doing
They have done their ‘research’
The opportunity is too good to miss
This time it’s different.

Delusion is very powerful and is alive and well in all aspects of professional life. You may have read the BBC story about the ‘King of Crypto’ (Sam Bankman-Fried and FTX). Panorama had a look at the whole sorry mess (have a look on BBC iplayer).

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Crypto KingJemima Thomas2023-12-04T12:17:19+00:00

Inflammatory budget?

Dominic Thomas
March 2023 • 10 min read

Inflammatory budget?

These are the days of being offended. It seems that, unsurprisingly, opposition parties and in particular the Labour party are having kittens about announcements around pensions in the Budget. The criticism is that this helps the rich and not the poor. There is some truth in this of course, but this goes to the political heart of wealth redistribution. In case you are concerned about my political bias, I don’t like any of them.

A million pounds seems like a lot, (it is!) but it’s not as much as it was. The sense we have of £1m is due to ‘anchoring’ as most of us grew up believing that £1m was a lot of money; a millionaire was a very rich person. Search for a home online in the south east and quickly you appreciate that perhaps a million doesn’t buy very much. The TV show “Who Wants to be a Millionaire” with the prize of £1m was first aired in April 1998, almost 25 years ago. £1m then bought you rather more than the same prize fund does today. In fact in real terms, the prize should be adjusted to £1,776,802 … but that doesn’t really fit with the show’s title.

An adult approach is of course to recognise the impact of inflation. I’m going to speculate that politicians know this, but are always selective about the things that vex them. Your house is worth more perhaps because you have done some refurbishment, but also due to inflation. Anyone living in the South East (or indeed swathes of the country) knows that house prices are eye-watering and this is a problem for those trying to buy and for those paying inheritance tax. Inflation in house prices has been higher.

THE PENSION REFORMS WERE REALLY ABOUT NHS CONSULTANTS

The main thrust of the pension reforms are aimed at NHS Consultants, because they have been leaving in droves, because simply by working a normal week they end up owing tax on income that they have not had, in a pension they dont get until 67 at best. Ask any doctor. If we assume health and the NHS is important, it would seem that Labour politicians suggesting that they will reverse pension changes announced in the Spring Budget 2023 have not understood very much at all. If Labour are serious about looking after the health of the nation, we need to rethink pension rules that basically punish them from working. Sadly, few politicians understand the true impact of pension rules.

An alternative would perhaps be to have a simplistic approach, cut doctors and those in similar schemes out of the annual allowance tax calculations entirely. I suspect this would make them happy, it would certainly make my life easier. However the NHS pension is a Defined Benefit or Final Salary scheme, what you do for one, legally you have to do for others. The only other group of people with excellent “old school” final salary pensions are people with long service in big companies or institutions and almost certainly on high incomes – precisely the sort of people that Labour seem to loathe along with their multinational employers. So such a “cut out the problem” isnt actually a solution.

Reality is always an irritation for an MP or political party of any persuasion. A few non-partisan (I hope) facts for you to consider. The last time Labour won an election was in 2005. David Cameron formed a Coalition Government following the election in May 2010 (tax year 2010/11).

Under the new proposals, those earning £200,000 or more do not get an automatic allowance of £60,000 into pensions. This is the threshold at which a lot of calculations need to be done, some doctors will still have to do this. As a result, they may well suffer a reduced annual allowance (how much they can put into a pension).
Those earning £260,000 or more will certainly have a reduced (tapered) annual allowance from £60,000 and will need to do some sums.
Those earning £360,000 or more can only contribute £10,000 gross into pensions, which is less than they can pay into an ISA. So these three facts would suggest that Labour are not happy that people paying 45% tax and have no personal allowance are somehow able to load pensions like a kid in a sweet shop. Its not true.
The tax-free cash from a pension is capped at 25% of today’s lifetime allowance (£268,275). That means those retiring in the future have an allowance that does not keep pace with inflation, meaning in real-terms lower tax-free cash sums will be available. Tax-free cash of 25% of £1.8m or Primary/Enhanced protection, was higher under the last Labour Government than at any point since. Pension income is taxable, it is a future revenue for HMRC. It is also a possible solution to care costs rather than the State paying, I digress.
The last Labour Government had an annual allowance (how much can be paid into a pension) of £255,000, there was no Tapered or reduced Annual Allowance.
The main gripe of Labour about salary austerity wage inflation would appear not to apply to pension benefits being inflation/austerity-repaired since 2010. In short, the LTA would be £1.8m+ inflation, the Annual Allowance would be £255,000+inflation. Tax-free cash from pensions would be higher at a minimum of £450,000+ inflation. Additionally, the £100,000 income threshold for loss of the personal allowance has reduced in real terms. In short they are using the same facts to argue for higher wages, but not higher allowances that benefit… well, taxpayers.
A-Day was introduced by Labour and will turn adult (18) on 6/4/2023. Perhaps adults should be allowed to save for their own financial independence rather than penalised/restricted on both what you can pay in and what you can take out. The original intention of pension simplification and A-Day was to increase the Lifetime Allowance, it started at £1.5m and increased substantially each year until 2010.
The current Government will, from 6/4/2023 take more tax, starting the 45% rate of tax at £125,140 rather than £150,000. There are more people are paying additional rate tax.
The personal allowance is currently £12,570 (up substantially from 2010 but removed from those earning over £100,000. In tax year 2009/10 it was £6,475, the rule to gradually remove the personal allowance for those earning £100,000+ came into effect in 2010/11 set by Labour, in the likely event of a change of Government and in light of the credit crunch.
According to the Bank of England’s own inflation calculator, £100 in 2010 would be £141.10 now. If this were applied the following might be observed.

The £6,475 personal allowance would be lower at £9,155.82 (its actually £12,570, so brownie points for Conservatives?)
£100,000 income before loss of personal allowance would be £141,402 (it’s still £100,000)
The Lifetime allowance of £1,800,000 would be £2,545,248 (its currently £1,073,100 and about to be abolished, this is what they are complaining about)
25% tax free cash would be £636,312 but it is not even half that amount, capped at £268,275, reducing in real terms every year.
The annual allowance of £255,000 would have become £360,576, yet apparently it is act of serving the wealthy to increase it from 6/4/23 from £40,000 to £60,000. Note that those “rich people” earning over £360,000 will be able to put in £10,000 as opposed to £4,000 into their pension, which has been the case for several years now. Just for the record someone earning £360,000 pays a lot of income tax.
In Labour’s last tax year, the basic rate of income tax (20%) applied to £37,400 if this had been linked to inflation, it would now be £52,885, the higher rate extended up to £150,000, which would otherwise be £212,104. In short, Conservatives have evidently cut allowances and increased tax

Chancellors of all persuasions have a knack are implying positive changes are their own doing all whilst completely ignoring the impact of inflation. You think you have been paying more tax? Well, clearly you have. We all have paid for the mismanagement of the economy by our underqualified political masters. Despite what is said in the media, even by supposed pension experts, if you earn more than £360,000 you can only place £10,000 into a pension and get tax relief, for the record a minor (child) can place £9,000 into a tax free Junior ISA.

We will have to see if Labour really will win an election and then change the lifetime allowance again. It seems entirely unhelpful to keep messing around with people’s planning for retirement and financial independence, apparently this is democracy in action. It would seem that politicians from both parties do not really like you benefitting from earning more, particularly if you earn between £100,000 and £200,000 or have I missed something? As for the media, well they don’t like you either unless you own the newspaper you are reading.

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Inflammatory budget?Jemima Thomas2023-12-01T12:12:35+00:00

The November budget

The problem of having a deadline for publication is that life tends to throw up some new important information just at the wrong time. The chaos of the ‘mini-budget’ resulted in a new Prime Minister and Chancellor. The Budget on 17^th November was set to herald tax rises. So, what has been announced?

NOVEMBER – INCOME TAX

Tax thresholds have been frozen, save the additional rate of tax threshold, which now begins sooner, meaning that more people will pay 45% tax, starting at £125,140 instead of £150,000. What this means in practice for someone now brought into additional rate (earning £150,000) is that they pay 5% more income tax on their earnings above £125,140. If you earn £150,000 you would pay £1,243 more income tax as a result of this change, (£11,187 as opposed to £9,944) effectively £103.58 a month more. Whilst politicians talk of short-term pain, the projections show this measure for 5 years.

NOVEMBER – CAPITAL GAINS TAX

Capital Gains allowances have been cut substantially, reducing from £12,500 to £6,000 from April 2023 and then to £3,000 from April 2024. Trusts have a CGT allowance of half the personal allowance. So realising gains this tax year will be more effective than in future years.

As a reminder, this is the permitted gains on assets being sold with a 0% tax rate before being taxed at 10% or 20%, unless that asset is a second property in which case its 18% or 28%. So if you are a landlord, sell before April 5^th to maximise your allowances.

I had expected the rates of tax to increase in line with income taxes rather than the allowance being altered and mostly scrapped entirely. In any event, capital gains tax allowance reductions makes your annual ISA, Pension, VCT, EIS allowances all even more attractive, sheltering funds from CGT in different ways.

NOVEMBER- DIVIDENDS

The Dividend allowance has also been slashed. This will mostly impact those with a small business whereby family members or staff can have a share of profits (dividends) tax free. The first £2,000 of dividends are currently tax free, this will reduce to £1,000 from the new tax year and then £500 in the next ..

NOVEMBER – PENSIONS

It would seem that there are no changes, which is frankly a bit of a surprise. The annual allowance remains at £40,000 unless you have income over £200,000 when a reduced (tapered) allowance would apply. The Lifetime Allowance has remained in place. If you are an NHS employee, I cannot find anything in the 70 page statement to help you with your annual allowance problems and there is nothing about the tapered annual allowance. So, sadly, more senior doctors will likely reduce their NHS hours or otherwise face tax charges on income that they have not had. We can help crunch the numbers, but if anyone is in a position to ‘get it’, Mr Hunt is but seems to have chosen not to.

NOVEMBER – STATE PENSIONS

If you are receiving your State Pension, it’s going to increase by 10% in April. If you haven’t started taking yours, well you are also likely to have to wait until you are much older to get one. Everyone knows this is a political ‘hot potato’ and the younger generations are unlikely to receive a State Pension until at least 68 (and this will probably be increased in the announcement in early 2023).

NOVEMBER – FEELING FROZEN?

You are going to need to ‘let it go’ … that is – hopes of seeing the end of frozen allowances ending any time soon. The personal allowance, slice of basic rate and higher rate tax tiers were all frozen anyway, but the deep freeze has been extended by two further years. Due to inflation and rising salaries, this will in itself raise more tax. This is part of what critics call ‘stealth taxes’ – the sort you don’t really register (much like inflation eroding your cash) – you only tend to notice after a few years of going backwards.

The Energy Price Guarantee will be maintained through the Winter, limiting typical energy bills to £2,500, this will increase to £3,000 from April. It is generally expected that energy prices will remain high for the next 12 months. To be blunt, nobody knows because it all rather depends on the Russians. One point to note is that the energy savings you may be making now will likely continue as the Government intend to reduce energy consumption by 15% by the end of the decade. To put that into perspective, that’s about the same as making your use of energy in 10 months last a year.

PROPERTY

The British obsession with houses continues to be supported by Government policy. The tax when buying property (Stamp Duty Land Tax) was reduced in September doubling the first tier of SDLT with a 0% tax rate from £125,000 to £250,000. For First Time Buyers this is extended from £300,000 to £425,000. These measures will end on 31^st March 2025. If you are going to move or buy your first home and want to benefit from this fully, do so before March 2025.

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

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The November budgetJemima Thomas2023-12-01T12:12:41+00:00