THE BUDGET 11 MARCH 2020

TODAY’S BLOG

THE BUDGET 11 MARCH 2020

In order to save you time, I watched the Budget and even had a neat little animated logo designed for the occasion. Prior to the Budget I had hopes of some significant pension reforms – to simplify pensions whilst also hoping for the possibility of a fairer tax system, which means different things to different people – I would probably settle for a more straight-forward one.

In fairness to Rishi Sunak, becoming Chancellor when he did must have felt rather like a “hospital pass”. By which I mean a term used in rugby, where you are passed the ball so that you are the last one to face some enormous opponent who will surely flatten you and send you to hospital for treatment.

As he prepared for his Budget, we were all aware of the gathering momentum of “coronavirus” and the global collapse of the stock markets as investors seem unable to comprehend the impact on trade and the current oil price war between Russia and Saudi Arabia. No small matters and certainly sufficient to cause significant “alarm”.

The Budget

INCOME TAX

Rates remained unchanged – so depending on whether you are a glass half empty or half full, if you allow for inflation, that’s worse, but better than an increase.

  • Personal Allowance: £12,500
  • Basic rate (20%) on the next £37,500
  • Higher rate (40%) on income up to £150,000 (but loss of personal allowance at £100,000 ars previously)
  • Additional rate (45%) on income over £150,000

The only allowance to improve marginally was Capital Gains tax (increased from £12,000 to £12,300), which will be of little comfort today.

PENSIONS

The Lifetime Allowance has increased by inflation to £1,073,100. The precision of this number speaks volumes of the Treasury’s desire to collect every penny.

Anyone earning over £300,000 can only contribute £4,000 to a pension (including employer payments). Otherwise, some relief for Hospital Consultants as the Tapered Annual Allowance was inflated by £90,000 to impact those with incomes over £240,000. This keeps tax calculations complex and required, but likely to kill off public sympathy for the cause to simply abolish the Tapered Annual Allowance. If you really don’t understand this, it probably doesn’t impact you.

ISAs

There remain at a very healthy £20,000 of tax-free growth and tax-free income when withdrawn, unlike a pension which has tax relief and provides taxable income. This also tells you something about the Treasury.

A Junior ISA (JISA) has been greatly increased to allow for a significant £9,000 into a JISA each tax year from 2020/21. No real benefit for adults, but of course a bit of a nod to those funding University. Though this could turn into a large fund over time and some thought ought to be given to how most 18 year-olds handle money.

INHERITANCE TAX

No changes

BUSINESS OWNERS

Those wishing to sell a business that they built will now have much higher taxes to pay on sale as entrepreneurs’ relief was slashed. The 10% tax rate on sale of a business still applies but only on the first £1m rather than the first £10m. That idea that your business is your pension… well, think again the new allowance is lower than the Lifetime Allowance.

CORONAVIRUS – CORVID19

Various special measures have been “initiated” to enable people to have some form of basic minimum income (statutory sick pay) from first signs of illness and self-isolation. This is an attempt to head off concerns that those needing to earn cannot afford to be ill and therefore continue to pose a “threat” to the rest of us. Whether it works remains to be seen – I suspect call centres will be jammed for some time.

As far as I can tell today, a few things are in short supply and probably more expensive than a week ago – toilet paper, hand sanitiser and wisdom.

Dominic Thomas
Solomons IFA

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

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email – info@solomonsifa.co.uk 
Call – 020 8542 8084

WHAT WE’RE ALL ABOUT

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GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email – info@solomonsifa.co.uk    Call – 020 8542 8084

WHAT WE’RE ALL ABOUT

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THE BUDGET 11 MARCH 20202020-03-12T16:59:07+00:00

STAMPS TELL STORIES OF INFLATION

TODAY’S BLOG

THE PRICE OF A STAMP

Royal Mail announced yet another increase to the price of a first-class stamp. As of 23 March 2020, the price will rise from 70p to 76p. Second class rises 4p to 65p. This will possibly have you gasping at yet another increase and recollecting when stamps used to be much cheaper.

This neatly leads me to discuss the topic of inflation. Whatever anyone within the financial world tells you, this is arguably the most devastating element to your financial wellbeing. Imagine you have £100,000 and inflation runs at an average 3% a year. Over the course of 25 years £100,000 is effectively worth £50,000.

Most people should be investing for decades, not days, weeks or months – decades. Your finances need to outlast you. When you enter the adult workforce and ultimately leave it, you have to rely on your investments to provide an income.

First Class 1970,1980,1990,2000,2010

FIVE DECADES OF FIRST CLASS STAMPS

The price of a first-class stamp 10 years ago was 41p. In the millennium year 27p would have covered the cost of your standard first-class letter, which was not that much more than the 22p it cost in 1990. If you remember 1980, you will perhaps remember the 12p first class stamp and a decade before that – well, we hadn’t yet gone decimal, so 5d would have paid for your first-class letter which is around 2p. Over 50 years the price has risen from 2p to 76p for the same service.

The illustrations that you receive about investments (which are nothing like as beautiful as those of stamps) try to account for inflation, typically assuming 2.5%. CPI (yet another measure of inflation) is currently 1.8%.

IS YOUR MONEY GOING BACK IN TIME?

So, think on this. If your money in the bank is getting less than 1.8% interest, you are losing money. Your purchasing power is shrinking. Whilst this is great for those that owe money, it is terrible for those living off their savings. Yet I regularly come across people that lack into 3 or 5 years fixed rates of interest that are less than inflation. There are a variety of reasons, partly poor alternative cash deposit rates, but also a deep misunderstanding of how investments work and the dreaded “stock market” which news outlets seem to do their best to instils a sense of terror at the daily movements.

THERE IS NEVER A RIGHT TIME TO INVEST

Many of you worry about the right time to invest – the truth is, that it was 50 years ago, but otherwise it is today. Yes, we do not know what will happen to the UK economy, (we never do) we are facing all sorts of significant problems (again) but these will pass (again) being replaced by the next round of bad news and you will still have to live with the consequences of your decisions.

CHECK YOU ARE NOT DESIGNING TO FAIL

As the tax year is drawing to a close, check that you are not holding too much in cash. Certainly, having access to cash is vital – for planned expenses and the occasional mishap. You should have an emergency fund if your income is likely to stop. However, beyond that, you need to deploy your money to work for you over the coming decades so that it grows faster than inflation.

Do not make the mistakes you made a decade ago, holding onto cash and worrying about the financial crisis, or the decade before about Y2K or the one before that… inflation does not reward anxiety, it eats it for breakfast.

Pick up your phone or send me an email. It’s about time that this was mastered. Let’s get started…

Dominic Thomas
Solomons IFA

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

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email – info@solomonsifa.co.uk 
Call – 020 8542 8084

WHAT WE’RE ALL ABOUT

If you would like a no-nonsense one page document explaining what financial planning is all about please enter your email here.

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GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email – info@solomonsifa.co.uk    Call – 020 8542 8084

WHAT WE’RE ALL ABOUT

If you would like a no-nonsense one page document explaining what financial planning is all about please enter your email here.

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STAMPS TELL STORIES OF INFLATION2020-02-22T08:48:01+00:00

TAX YEAR END PLANNING PART 3

TODAY’S BLOG

TAX YEAR END PLANNING PART 3 – IHT

Inheritance Tax is one of the most unpopular taxes, yet it is a tax that you will not pay – your estate might. There are various solutions to reducing or avoiding inheritance tax – talk to me if you want to know more about them. However, each tax year you get some basic allowances that you can use to pass on wealth without any inheritance tax.

  • ANNUAL EXEMPTION

Each tax year you can give away £3,000 free of IHT. If you do not use all of the exemption in one year, you can carry forward the unused element, but only to the following tax year, when it can only be used after that year’s exemption has been exhausted.

  • SMALL GIFTS EXEMPTION

You can give up to £250 outright per tax year free of IHT to as many people as you wish, so long as they do not receive any part of the £3,000 exemption.

  • NORMAL EXPENDITURE EXEMPTION

The normal expenditure exemption is potentially the most valuable of the yearly IHT exemptions and the one most likely to be reformed. Currently, any gift is exempt from IHT provided that:

    • you make it regularly;
    • it is made out of income (including ISA income); and
    • it does not reduce your standard of living.

One way to combine the use of your CGT annual exemption with IHT planning could be to make an outright lifetime gift of investments. Such gifts would count as a disposal for CGT purposes and a potentially exempt transfer for IHT. The recipients of the gifts would start with a base cost for the investment equal to the gift’s value and there would be no IHT to pay at any time, provided you survived for the following seven years (possibly reduced to five under OTS proposals).

ANNUAL GIVING

ISAs – INDIVIDUAL SAVINGS ACCOUNTS

There are five important tax benefits which are common across the different types of ISA:

·         Interest earned on cash or fixed interest securities is free of UK income tax.

·         Dividends are free of UK income tax.

·         Capital gains are free of UK CGT.

·         There is nothing to report on your tax return.

·         On death, the income tax and CGT benefits of your ISAs can effectively be transferred to a surviving spouse or civil partner.

The overall maximum that can be invested in all ISAs in 2019/20 is generally £20,000 (£4,368 for Junior ISAs). There are no carry forward provisions, so like the CGT annual exemption it is a case of use it or lose it.

Dominic Thomas
Solomons IFA

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

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email – info@solomonsifa.co.uk 
Call – 020 8542 8084

WHAT WE’RE ALL ABOUT

If you would like a no-nonsense one page document explaining what financial planning is all about please enter your email here.

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GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email – info@solomonsifa.co.uk    Call – 020 8542 8084

WHAT WE’RE ALL ABOUT

If you would like a no-nonsense one page document explaining what financial planning is all about please enter your email here.

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TAX YEAR END PLANNING PART 32020-02-18T19:26:04+00:00
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