Autumn Statement

George Osborne stuck his head above the pulpit today to deliver the Autumn statement. Perhaps the most predictable lynching of the year, with a general acknowledgement that things aren’t going as well as planned or expected. Many will say how they would have done things differently – but of course this is a rather academic debate and consigned to ancient history. As a consequence there is going to be more pain and more goalpost moving.

Lifetime Allowance cut by £250,000

A significant goalpost move which will have a direct impact on our clients regards pension allowances. The last Government devised “pension simplification” which as I have said before was a complete mess, resulting in ever more complication not less. They established a total lifetime allowance for the value of pension funds of all descriptions. Back in 2006 this was set at a pot worth £1.5m – with excess tax charges for those over this unless they had applied for HMRC protection (on the condition that no further payments to pensions were made – broadly speaking). The allowance crept up to £1.8m and was cut back to £1.5m at the start of this tax year as part of “austerity measures”. Today this has been trimmed even more by £250,000 to £1.25m for the 2014/15 tax year. This makes larger pension pots more likely to be taxed and creates a serious concern for those approaching this figure.

Annual Allowance reduced by 20%

In addition the annual allowance which was £255,000 a year was shrunk to £50,000 is going to be reduced further to £40,000 for the 2014/15 tax year. Ok this is a lot of money to many people, but is doesn’t look like a a system designed to encourage saving for a pension. In fact it looks like exactly the opposite. This sort of Government meddling is very unhelpful to anyone attempting to become financially independent. Restrict one or the other, but not both. I am sorry to say that I find our tax system rather daft. There are so many rules and rates of tax that this promotes an approach of tax minimisation wherever possible. This could be so easily resolved, should any politician have courage (which they don’t) by introducing a single rate of tax on all forms of income and ensuring that UK earnings were taxed in the UK. The solution is worryingly simple – remove the incentive to find the lowest rate of tax by making the tax rate the same for everyone.

Warning for high earners and NHS Consultants

Unfortunately, this latest round of goalpost moving will hit many high earners (such as Consultant Doctors) that are members of a final salary scheme (such as the NHS Pension) who have their annual allowance assessed a little differently (based on the notional rise in the value of their pension). Tax charges may apply and retiring before 2014/15 may now be a way of avoiding a penalty on £250,000 of 55% (£137,500) if you don’t have Fixed or Enhanced Protection. So more need for expert advice…

Autumn StatementDominic2023-12-01T12:23:16+00:00

10 Things The Olympics Teaches Investors – Part 1

1981: Chariots of Fire – Hudson

I’m told that we all like lists, I’m not totally convinced, I suspect that sometimes research can be confused by popularity. Anyway, as it is Olympic season, I wondered if there is anything that investors can learn from the Games.

#1.Planning Is Everything

London 2012 was at least 7 years in the making, but given the preparations for the bid, which was originally won in June 2005, London 2012 did not simply “happen”. Successful investing involves planning for a Specific, Measurable, Achievable, Realistic, Timed (SMART) goal.

#2.Sensible Budgeting

We have all read about the legacy of a badly planned Olympic Games. The event itself becomes bigger than the point behind it. As it is the summer and as a father of two daughters, I am aware that is also the wedding season. The cost of a wedding can be many thousands of pounds. I don’t begrudge the celebration, (I love them) but one has to question the wisdom of spending vast sums of money on the first day of marriage but then failing to invest successfully into it from the second day onwards. All great financial planning makes provision for one off events, but should be based on a long-term perspective and built upon your personal values.

#3.Timing

World records may be smashed in London, the fastest man or woman over 100 metres (which starts on 4th August) is not the same as the one that wins the marathon. Financial planning is more like the marathon (5th and 12th August) than the 100metres. It is about staying the course, endurance, pace and gradually working towards the finish line. Great financial planning has nothing to do with trying to time when you play the game, but is all about how you play the game.

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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10 Things The Olympics Teaches Investors – Part 1Dominic2023-12-01T12:22:28+00:00

Solomons: Morning Brew Extends Life

1931: Cafe Noir – Leslie Hiscott

As clients of ours will know, when creating your financial plan we need to assess how you currently spend your money, often there is a gap between what is stated and what happens. This is what I (and many others) call spending creep and I usually suggest that this is what all those trips to coffee houses actually cost. Unless some fairly tough decisions need to be taken, I rarely suggest that we alter “spending creep” we assume that it is indeed spent money, rather than treat it as identifiable and therefore able to be saved and put into your financial bucket or plan (as some are prone to do). Spending creep is part of life and a budget should be something that allocates money, not counts every bean. Well it turns out that perhaps not terribly helpful to your wealth, all those coffees are perhaps helpful to your health. The LA Times report that drinking coffee might improve your life expectancy. Now I’m not an expert so I couldn’t tell you if this is actually true. I have to admit to holding a great many suspicions about the links between research, business and media particularly in the US. However, if it is an accurate assessment, then perhaps coffee drinking is a new form of investment in your future… but of course living longer may bring other issues – for instance being able to afford to live or have additional need for care, which has a significant price tag.

For those of you that work and grab a coffee on the way, I wonder if you have thought about how much your spending on coffee typically is each week? I have failed to notice any good hot drink sell for less than £2 and I invariably find myself parting with something closer to £5…. I’m a sucker for the blueberry muffins. Any visitor to Paris, Venice, Florence or Rome will also be aware of the high price of a the black nectar. Well say that’s 5 days a week and something like 46 weeks a year.. around £1,150 a year… which is why I bought a decent coffee machine for the office (which clients like too). Whilst I cannot grab the coffee on a platform (or near one) my pod coffee machine is not even a tenth of the expense. “Look after the pennies and the pounds will look after themselves”. So apart from being a nice pick-me-up, if coffee is also a wake up call to longevity, make sure your financial planning ensures you have enough beans until the end!

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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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Solomons: Morning Brew Extends LifeDominic2017-01-06T14:40:02+00:00

The Day After The Budget

1940: Blondie on a Budget – Strayer

It has been a manic few days. There was the endless speculation in the media about what the Budget would contain, then the Budget itself and today further speculation tempered by some analysis. The reality is that you and I can do nothing about what is in the Budget, all we can do is reflect, understand and where necessary make adjustments to your financial planning.

So what is the big news? well probably the gradual phasing out of the Age Allowance. This is probably welcome by most that understand it, though it would seem that a number of politicians and media journalists do not. The age allowance is currently complex in application – extra personal allowances for those over the age of 65, but these are gradually reduced once income is above £24,000 by 50p for every £1 over £24,000. Good financial planning uses allowances for those caught within this income range so that they don’t lose allowances (another good reason for ISAs) but those with larger incomes frankly tend to have their personal allowances reduced to the standard levels for all. As you will have gathered we are all having the standard personal allowance increased. I say all, but what I really mean is those earning under £100,000.

The tax tier system continues to be smoke and mirrors – pretty much standard diet to all Chancellors that I have known in my lifetime. Yes it is the case that the personal allowance (income you can earn before paying tax) is rising towards £10,000 – but then the amount of income that you pay 40% is increasing. This is a classic moving the goalpost technique. I will put a separate post about this.

The scrapping of Child Benefit has been altered, thankfully some common sense has prevailed and a few more sums have been done. Its a shame that the Chancellor couldn’t simply say that he got it wrong and amended his plan, but there you go.

Corporation tax rates are being reduced – so very good for those running Limited or Plc businesses, such as Ken Livingstone. However for most people this is probably of little interest, for those attempting to do some tax planning, the option of becoming a Ltd company may now be more appealing than self-employed as a partnership or sole trader.

The 50p rate of income tax is being reduced to 45p – but this is hardly news due to all the leaks that pre-empted much of the Budget itself. This is one of those “depend which side you sit on” issues. You will either see this as help to indicate that UKplc is no longer the highest taxed country in Europe and so “open for business” or you will see it as a backhander to the rich. It is of course both.

Pensions were not attacked, but reliefs (excluding those to pensions, VCT and EIS) so mainly capital gains losses and large charitable donations are to be restricted to £50,000 or 25% of income, whichever is the greater. This prevents very large losses deliberately realised in order to pay little or no income tax.

I’m sure you are already bored to death by the annual silly schoolboy behaviour of MPs that we witness each year and the attempt to make a donkey look like a horse. Sadly, little radical reform, much of the Budget is welcome, but the proof of the pudding…

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 Day After The BudgetDominic2017-01-06T14:40:06+00:00

Autumn Statement – deckchairs on the Titanic?

1997: Titanic – James Cameron

Perhaps its me, but my impression of the Autumn Statement today was frankly underwhelming. In fairness, bar a complete change of policy the Chancellor has worked himself into a corner. The growth forecasts are cut, public sector pay has been more or less frozen. The hope is that for UKplc this is not a case of rearranging the deckchairs on the Titanic. The Chancellor seems upbeat, but then he has to. He wasn’t dealt a terribly good hand and he is now stuck playing it as well as he can. The economy and frankly Parliament are short on good ideas to get us out of the recession.

One of the positive announcements was the provision of £40bn to small businesses. Whilst this is a big number, by comparison to the NHS Budget of £106bn it is relatively small. This after all is the Budget to help our ailing nation and where wealth and job creation are supposed to begin (in the private sector). There was as a case of deja vu – with social tennants given the opportunity to buy their homes at a 50% discount on a right-to-buy basis – something that we have certainly seen before with council homes.

Many of us will be receiving a State Pension later (if there is any money left by then) and the £1m limit of Venture Capital Trusts will be removed. This has little real benefit to the vast majority of the population directly and I have my reservations about the genuine long-term business plans of VCTs.

Most of us probably would have expected this sort of Statement. There isn’t money around and there’s not a lot of festive joy to be gained, save altering an petrol price increase, which has not even happened yet. So whilst I attempt to digest the 98 page statement, I don’t think there’s an awful lot to write home about, but I will keep you posted. I assume that the strikes by Public Sector workers will proceed tomorrow.

DT

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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Autumn Statement – deckchairs on the Titanic?Dominic2023-12-01T12:48:33+00:00

Obama Thwarted Again – US Require Economic Viagra Equivalent

Solomons-financial-advisor-wimbledon-blogger

Obama Thwarted Again – US Require Economic Viagra Equivalent?

Republican senators have produced yet another blow to the US President by preventing his $447bn job creation bill (The American Jobs Act) a significant set back. The bill brought before the American political system in September won the smallest majority a vote of 50-49 where a vote in favour required 60.

Sadly this is bad news for us all. The American system is obsessed with short-term political career manipulation, frankly its a wonder that there isn’t a new American revolution as their politicians are struggling to make important decisions about their collective future. Creating jobs and decreasing national debt is not a theoretical game that politicians should be point scoring, but a vital requirement to re-establish the basic requirements of a growing economy and flourishing society. Whilst some US politicians carp at the stagnation amongst the European Union partners, there is a significant degree of pot calling the kettle black.

It is now high time that either politicians did what they are meant to do – lead nations, making decisions that work for the wellbeing of their respective populations, rather than simply attempting to secure their own futures. Obama may have been the great hope for America, but he certainly has not been given much opportunity to implement his policies to actually save the day.

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

Obama Thwarted Again – US Require Economic Viagra EquivalentDominic2023-12-01T12:48:59+00:00

Higher Taxes Start At Midnight

Today is the last day of the 2010/11 tax year, adjustments to employee taxes need to be made and paid by 31st January 2012 and of course the self-employed have until the same date to submit and pay their returns. Today also sees the final execution of the A-Day Pension Rules from 2006.

Regrettably, remembering that “we’re all in it together”..the new tax year which begins tomorrow is more complicated and for the majority of people, will mean that more tax is paid across to HMRC.

The most significant issue is that pension contributions are reducing from a possible £255,000 to £50,000 as a maximum for 2011/12. You also need to be warned that the way that this works in practice is not straight-forward. Contributions are based upon input periods, not necessarily payments made in the actual tax year. There is also now the option of using Carry Forward Allowance of unused relief from the previous 3 tax years. In addition the lifetime allowance is in its final year of £1.8m – this time next year it will be dropping to £1.5m unless Treasury plans are reversed.

The basic personal allowance rises by £1,000 to £7,475 before any tax is paid, which is good news for nil and basic rate taxpayers. Everyone else will actually start paying a 40% tax rate earlier as the banded earnings has reduced from £37,400 to £35,000. In other words in 2010/11 you had to earn £43,875 before paying tax at 40%, for 2011/12 this has reduced to £42,475. For those earning over £100,000 the personal allowance is removed entirely from £114,950 (in 2010/11 this was the case at £113,490). The £150,000 income earners retain a 50% tax rate on income above £150,000. National Insurance contributions will also rise.

So as we look forward to the new tax year, there are lots of changes. My role is to help clients use their allowances legitimately and perhaps more than ever before, financial planning advice is vital for anyone with an income over £42,475 and of particular importance to anyone with a six figure income.

The new ISA allowance is raise to an investment of £10,680 and the tax free benefits of ISAs are becoming ever more valuable with each passing tax year. So if you can, fill your boots with ISA and pension allowances where appropriate.

Don’t forget that Self-Assessment means that YOU are responsible for correctly reporting and paying your taxes to HMRC. So, if you don’t already, make sure you keep a tax year file…. yes include all those silly dividend slips from shares that your granny gave you. The old Hector character from HMRC used to regularly remind us to keep documentation, now that they use former BBC newsreaders, the sentiment seems to have been dropped from the script, but not from the practice.

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
Call us today or visit our website for more information and to arrange a meeting

Higher Taxes Start At MidnightDominic2023-12-01T12:51:37+00:00

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
Call us today or visit our website for more information and to arrange a meeting

Junior ISA – a nicer ISA?Dominic2023-12-01T12:51:39+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
Call us today or visit our website for more information and to arrange a meeting

Budget 2011 SummaryDominic2023-12-01T12:51:42+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
Call us today or visit our website for more information and to arrange a meeting

A Question of U Turn Economics?Dominic2023-12-01T12:51:43+00:00