New start

Dominic Thomas
August 2024 • 2 min read

New start?

Do I dare ‘get political’ and risk offending you? Assuming you have pretty thick skin and are not easily offended … I’m going to proceed. I’m rather glad to see the back of the last Government. I appreciate that many people believe the narrative that Conservative governments are good at managing the national finances and Labour governments are not, however I don’t see any evidence to support this over the last 14 years or so.

In practice we saw a Conservative government launch a half-baked referendum on leaving the EU and ending our working relationship. Sure the EU has its faults, but not a single proponent had any real idea or plan for non-membership other than some rather Victorian notions of empire. I’m not sure that anyone could be worse than the collection of PMs that we have had over the last 14 years, who largely seem to be self-serving and unable to convey any vision.

So we have a new PM and Chancellor, the first female Chancellor in English history. It’s probably fair to say that this Labour leadership are right-leaning centrists and appear eager to reassure the public that they can handle our finances wisely, with economic growth being obviously important. We will see how this shapes up in practice.

Public spending can only really happen with public money, which is of course taxation and loans (Government debt). It is of course divisive political opinion about whether Government debt used to fund public spending creates wealth. On the one hand, better infrastructure and a healthy, educated workforce generate the conditions for growth and therefore more tax collected; on the other hand, debt needs to be repaid and the matter of how much and how quickly is of course the domain of spin doctors to suit your chosen narrative. Practically, we know on a personal level that spending more than you earn and building debt isn’t a great idea, but then this is public money – personal overspending is generally about consumption not investment into the hardwiring of our system (which is quite a different matter).

The truth is that life and politics are nuanced. Rarely is anything simple or either/or. All of us now have a refreshed understanding of inflation and for me, this is probably the more important element of the economics. Every year brings new challenges and we are undoubtedly at a watershed moment in technological advancement, perhaps the degree of change is as it ever was – overestimated in the short term with its impact underestimated in the long term.

We shall see how Mr Starmer handles the pressure compared to his predecessors.

BACK TO ALL BLOGS

New startJemima Thomas2024-08-02T17:28:14+01:00

CHANGES FOR TRUSTEES

TODAY’S BLOG

CHANGES FOR TRUSTEES

A series of government moves over the past few decades have reduced their tax advantages and made trusts much less attractive to wealthy families. They are likely to become less popular still from March, when a new requirement will force thousands more trustees to list on a government register that is partially open to the public, or risk penalties.

Since 2017, certain types of trusts have had to report information to a government online register called the Trusts Registration Service (TRS). This came into being as result of an EU-wide directive to tackle money laundering. Far be it from me to imply or suggest that motivation for Brexit had anything to do with circumventing new EU Anti-money laundering rules!

To comply with the rules, all UK trusts that have to pay a tax liability such as capital gains tax (CGT), income tax, inheritance tax or stamp duty must report information to the register.

Trusts that are outside the UK but trigger UK tax must also do so, as must all trusts that are required to fill out a self-assessment tax return anyway. Currently the register is not publicly available, with access limited to law enforcement authorities. But from March 2020, the next phase of the EU directive (the fifth Anti Money-Laundering Directive) is set to increase the number of trusts that must submit reports.

It will also partially open up the register to the public, including journalists, leading some to worry about an erosion of privacy. Despite the UK’s imminent departure from the EU, the government is committed to implementing the directive and passing it into domestic law. Tax experts warn that hundreds of thousands of trustees and beneficiaries could be affected and need to understand better the possible impact of the changes.

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

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Solomon’s Independent Financial Advisers
The Old Mill Cobham Park Road, COBHAM Surrey, KT11 3NE

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

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

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CHANGES FOR TRUSTEESDominic2025-01-21T16:34:00+00:00

Brexit – Some Thoughts

Solomons-financial-advisor-wimbledon-blogger

Brexit – Some Thoughts

I am conscious that this is a highly sensitive subject. I have to acknowledge that 52% of voters that voted, elected to leave the EU – at least that is what is being claimed. I am rather less inclined to believe this to be a thorough explanation.

I will declare that I voted to remain, not because I think the EU is perfect, but to use a metaphor, if I’m not entirely happy about what happens in my street, leaving it solves my experience but not the problem and should I want to discuss access to the road again, I don’t really expect much of a welcome, in fact they are likely to make it a toll road and my choice will forever be yes or no, but never “what if we did it this way…”

As we all know, there was and continues to be a lot of heated exchange. It is certainly possible that the UK can exist outside of the EU and trade as “normal”. However many seem to have forgotten that the UK, (if indeed it can still be called that within a few months) has a population problem, but not the one being discussed. The problem is longevity.

Thankfully due to our rather excellent health service, most of us are living longer. This is a good thing, reflecting our progress as a society. Of course this also means that more people are alive to draw a State pension and are alive longer to draw on support from family and State. The demographics of the nation by all calculations mean that there is more pressure on the State to find the money for this ongoing “support”. Unfortunately, the ratio of people in retirement to those not yet retired is shifting, considerably. The bulk of pensioners do not have high incomes and the State pension is effectively tax free due to the personal allowance.

Its not enough…

In practice those pensions are paid for by current taxation, not historic taxation, which was merely the “membership fee”. The bulk of tax is paid from income tax raised each year. We need more people to earn money to pay tax to provide for the “system”. Indeed HMRC collected £533bn in taxes of all types for 2015/16. The highest amount ever, yet still not enough. For the record about 54% is from income tax, 19% from VAT (that nasty European idea) and 11% from corporation. In short 84% from direct taxes. If you wish to see the latest HMRC report spanning back to 1980 click here.

Not enough being born

The UK birth rate is in decline. It has fallen from 2.93 per woman in 1963 to about 1.90. This is historically how we have sustained the nation. Tracking this forwards, combined with people living longer merely confirms what I have stated. There are fewer people of working age to provide for those that are not. (click here for evidence).

Not enough jobs, yet low unemployment…

Those wanting jobs now have to compete in an increasingly global economy, unless of course it is something very bespoke or crafted locally. The technological revolution has barely started, more service and manufacturing jobs are being “automated”… whether it’s the booking of flights, paying for your groceries, renewing your tax disc, banking or calling to complain. Certainly there are new jobs and roles, but in a world where tax rates and regimes vary, we clearly value convenience and low prices over jobs and “fair” (please let’s just call it “appropriate”) taxes – I’m thinking Amazon. Ironically, the UK has just recorded its lowest level of unemployment for some time at 5.1%, the lowest since the credit crunch, which in turn was the lowest since about 1977. Click here for evidence.

All creatures great and small…

On Thursday the UK voted to end its relationship with its main and nearest trading partner. The equivalent of all those market towns that used to have an exchange, now amalgamated in London. The world is a big place, but just as we like the convenience of Amazon, so do nations like the certainty of trade agreements and low prices. The advantage of the EU is that trade prices are thought of collectively, negotiating as a block for a better deal, not the cheapest deal.

You may disagree with me, you may find many faults with the EU (who doesn’t) but what is clear is that few people really voted from a position of knowledge, but rather prejudice (anti- big brother) or simply feeling disconnected with the establishment, on the wrong end of every “good deal” and clearly do not believe that we are all in it together. I understand this to be more of a protest vote against cuts and austerity, which I fear politicians will continue to ignore the cries of people that have become so desperate that they voted for the equivalent of selling your home, buying another without first reading the contract or having a survey done – let alone agreeing the mortgage. Buyer’s remorse is inevitable.

A problem aired is a problem shared?

Yes we could simply “get on with it” but as yet nobody wishes to be remembered as the person that took the action that is likely to result in not simply the severance from the EU but also the end of the United Kingdom. There is another alternative – that of acknowledging that both sides are actually “right” or at least make some fair points. So perhaps, there is an opportunity to get all these frustrations (not just British ones) out on the table, to properly reform, thoughtfully and respectfully. I admit this is a more unlikely scenario as I attempt to find a silver-lining and a ray of hopefulness.

Of course the EU isn’t perfect – neither is Westminster

I’m sure there are lots of examples of bad EU laws, but I am not informed enough to know them all – are you? I, like many others did sign up for and support Hugh’s Fish Fight. I do know there are plenty of sensible ones. I do know that simply counting laws is no fair or sensible way to assess them. The House of Commons Library attempted to do so and found that between 1993 and 2014 about 13% of laws relate to EU obligations or implementation of them. Again, unclear about whether they are good or “bad”.

I can’t see you….. really?

Yet here we are. A nation now blaming each other and looking terribly unfriendly to anyone that isn’t white “or from these parts”. Yes I know not all Brexit voters are racist, I doubt many are, (not all are white either) but whether you like it or not, we need “new blood” to help our economy by running services, building businesses, creating jobs and paying taxes. Sadly, no, alarmingly the result of this vote has emboldened those with racist views, which we must now all face down in person, not merely in words. The degree of tension is palpable and this is not the Britain that any of us wanted. I hope.

Lasting security is not a high wire fence

However, all these problems are not exclusive to the UK. Indeed most of the EU has precisely the same problems of longevity and poor levels of saving with high dependence on the State. Arguably they have worse problems and likely to merely exaggerate problems. However the way to reduce envy and create greater security is to help your neighbour prosper, not collapse.

Of course, Mr Shakespeare would have seen this as very good material….. oh he did.

Dominic Thomas
Solomons IFA

Brexit – Some ThoughtsDominic2025-01-21T15:33:08+00:00

Don’t Panic! Captain Mainwaring… don’t panic!

Don’t Panic Captain Mainwaring

I find it increasingly difficult to resist the temptation to comment on the world stock markets. The media is constantly moving from positions of fear or greed, buy or sell. This serves their purpose of having something to say and of course becomes something that they then have to continue to say for fear of not providing “the news”. Of course panic is contagious and whenever I see it, I tend to think of Corporal Jones from Dad’s Army – don’t panic Captain Mainwaring.

So what is happening? The price of oil has fallen dramatically. The Chinese economy is not growing as quickly as it was. There is nervousness about the UK leaving the EU, the possibility of a thug winning the US presidential election, perhaps forcing a showdown with anyone with different opinion. Europe has little idea about what to do with thousands fleeing war in Syria or their own ravaged economies offering few prospects of employment. Our own austerity is causing our public services significant stress and of course there is the recurring fears about viruses, war, the environment and terrorism which all play into the narrative of “its bleak”.

Fear and Greed

Shares are part, ownership of businesses. The value of which is based in part on its actual physical assets (premises, stock etc.) and part on future revenue streams (forward orders, based on data from historic orders). There is also the matter of market share, industry sector and general perception of the company. The price of shares is therefore in part objective maths, part subjective opinion.

The problem with sudden shifts in price are invariably linked to a herd mentality – playing inevitably into two camps – fear or greed.

We know this when we invest. It is not new news, but it is certainly hard to live with, particularly when the noise is very loud and the doom-sayers are everywhere.

Any real changes?

If you have genuinely altered your long-term goals and do not wish to invest ever again, you probably should rethink your entire strategy, perhaps investing is not for you. I am being serious.

However if your long term goals remain roughly the same, then the key question is has anything really changed?

Diversification

Your portfolio is split across a variety of asset classes, shares, bonds, cash and commodities. There is a global spread. You have a diversified portfolio. We have established tried and tested evidence based analysis to check that you have the right “mix” of holdings to suit your attitude to risk. To date, whilst the markets have been “disappointing” (understatement) since April 2015, the degree of “shock” is within your tolerance, but it is of course deeply unnerving, very unsatisfying and frustrating.

Time in the market not timing the market

However we are holding to the long-term principles of disciplined investing, which have been proven successful over time. This is simply part of the investment experience, albeit “painful”.

It is very tempting to think that getting out of the market now (or 12 months ago) would provide some solidity. However this is based on the notion of being able to time the market and determine opportune points to get in and out of the market (and which market). This is really therefore a double decision, when to sell and then when to buy again.

Historically, investors (professional and private) get this very wrong. Invariably they panic and sell towards or at the bottom of a market, and then decide to invest again once they are confident in the recovery (which has already happened by the time they get back “in”). This leads to further frustration and doing the exact opposite of what we all know investing is about – sell at the top, buy at the bottom. Selling holdings is the only actual way to make a loss real.

Reserve Levels

Any discussion about your financial plan has involved thinking about an appropriate amount of cash to hold on deposit – your emergency fund. You may have used some of this, you may not. It is there as a buffer, and is designed to mean that you don’t have to take money from investments when they are suffering. Perhaps some adjustments may be prudent, but this is your choice, money should serve you, not the other way around.

I am not pretending that the market turmoil is not scary. This is a normal, understandable reaction to headline news. I know of nobody that likes to lose money. Everyone wants high rewards for low risk. However, unless your circumstances have really changed, if you are at the end of your tether with the concept of “investing”, then stick to the course, taking the life-long perspective.

Pain is part of growth, falls are part of average annual returns, finance is not magic and doesn’t provide any real account of who or what you are.

We remain vigilant, we continue to work in your interests but yes, your funds have reduced in value, but we have no good reason to believe that this will be a permanent status. We do not have a crystal ball and cannot predict the future with certainty, nobody can (despite inferences by others). We are doing our best in an imperfect world. Thankfully, this is 2016 and we are not on rations or at war with the world and whilst not dismissing our troubles (which are very real) perhaps some old school laughter might help.

Dominic Thomas
Solomons IFA

Don’t Panic! Captain Mainwaring… don’t panic!Dominic2023-12-01T12:19:27+00:00

Overseas Pensions

Overseas Pensions?

I wonder if you have been persuaded to invest in an overseas pension? The new flexible pension rules that permit earlier access to a pension fund have caused more than the odd ripple in the global pensions world. We are highly connected to other jurisdictions and particularly those within the Commonwealth.

82% culling

HMRC recently reviewed its list of pensions that it “recognises” (which isnt the same as endorses or approves) but clearly suggests a connection. Earlier in June there were 3,811 overseas pensions on the HMRC ROP list, this has now been culled to just 663 – a reduction of about 82%. See the list here: HMRC site

It may well be that there are some “reinstatement” in time, but essentially the vast majority of overseas pensions failed to respond to the HMRC, who wanted the schemes to confirm that investors could not access their pension before the age of 55 unless, and only if, the member of the pension scheme is in ill-health – for which read – seriously unwell.

Australians in Wimbledon

A lack of response meant cut from the list. Those with Australian pensions this is a particular blow and today there is only one recognised Australian pension. Not so great for all you Australians living in Wimbledon and parts of south-west London. This will impact anyone in the process of moving their pension to an overseas pension and could result in hefty punitive “unauthorised payment charges”…. which can be 55%.

Not Just the Aussies

Obviously it isn’t just Australians that this impacts, London has many people from all over the world that are here for perhaps a short working period in their lives or much longer. This also impacts British domiciled people who wish to emigrate.

Loopholes – a pension is meant to be a pension

The motivation for this is that pensions are meant for retirement. Tax relief is provided on contributions here in the UK, but ultimately income would be taxed. Historically it has been possible in some circumstances to transfer a pension abroad – largely if you are emigrating or returning home. However, as with many things offshore, some loopholes are exploited where terms are more favourable – largely because tax relief in those jurisdictions wasn’t provided in the first place.

Overseas pensions requires specialist advice and not something that should be entered into lightly.

Dominic Thomas
Solomons IFA

Overseas PensionsDominic2023-12-01T12:40:13+00:00

Investing and the unfolding Greek tragedy

It is undeniable that the Greeks are facing an enormous decision of whether to stick or twist. The size of the Greek economy is not terribly significant on a global scale, but it is certainly signficant to those working within it – and of course it is smaller this week than it was last week, however the markets are reacting, arguably over-reacting in typical fashion when uncertainty is rife. The real concern is not really Greece, but other EU States that may be minded to opt for a similar take it or leave it approach to their economic obligations.

I think it has been well documented that the Greek tax system has been painfully inadequate over the years and the recent austerity measures have been punitive. There is a degree to which we might say that bad planning has resulted in bad results, or more colloquially – the free ride is over. However, before we get too sanctimonious, the UK also spends more than it earns and of course this isn’t sustainable in the longer-term.

Financial Planning building block – a budget

To budget seems to be a term last used as a verb rather than an idea “post-war”. The Government here has some difficult decisions and of course they are contentious, earn more (raise taxes) or spend less (cut services) seems to be the only thought processes that politicians are capable of. I am left to wonder if this binary approach to life that is taken by most Governments is really the only viable option. At its heart, people get forgotten. On the one hand more money (lower taxes) is very much like a Trojan horse – at least until we can afford to have tax cuts, equally a State that spends without apparent regard for the future, can lull us into feeling that everything is “ok”…. but ultimately the merry-go-round comes to a stop. I know this isn’t easy, who likes paying more tax?

Paying the Price…or the ferryman

I’m reminded of a Volkswagen advert that is currently around – “You Pay For What You Get”. Perhaps you know it – the guy that buys a cheaper parachute, or climbing rope, or shark cage holiday experience. Some decisions have possible life threatening consequences. We all need to make good decisions, the best we can with what we can afford. It’s unfortunate that this is invariably true in life, even love has a cost. Paris and the Trojans ultimately paid for kidnapping Helen, princess of Sparta (life lesson – don’t mess with the Spartans).

I looked back on a piece I wrote nearly 3 years ago (17 August 2012) called summer holidays come to an end. In which I warned of the problems of continued funding of nations that cannot afford the debt. We need to find alternatives.

Don’t kill the messenger (Tigranes)

Sadly, your investment will be worth less this week than it was last, due to the market valuations at present. Whilst these are unusual times, market uncertainty is decidedly usual (normal) and the key thing to remember is that investments are established for a life-long approach not the next week. Yes there is bad news (when isn’t there?) but recovery will occur…. it’s just a case of when, which is of course no small matter and something that I am keeping under review. I feel very sorry for the Greeks who are experiencing a pain that we would do well to avoid.

Here’s a VW advert that I hadn’t seen.

Dominic Thomas
Solomons IFA

Investing and the unfolding Greek tragedyDominic2025-01-21T15:33:47+00:00

The European Tax Question

OK, some controversy. Nobody likes to have more of their income taken away by Government. The recent extra tax charge that the EU are demanding from Britain has caused something of a stir. Most of us probably got “fed up with this insolence”….some probably still are. David Cameron is talking tough and threatening not to pay and of course this plays into the debate about the EU and our notions about it being a bureaucratic monster. Nobody wants to pay more tax, and certainly not more than their fair share, particularly if it appears that the recipient doesn’t use it wisely.

So, without wishing to alienate anyone, I wonder if this situation is really so very different from being self-employed. Those that are self-employed pay income tax twice a year with deadlines on 31 January and 31 July. The problem with the system is that there is a high degree of uncertainty surrounding the level of income for the self-employed – unlike an employee who may receive a fixed salary each month. The self-employed have no such guarantee, with income dependent upon how “successful” their year has been – financially. They have to submit accounts, paying the tax in two instalments with a catch up payment each January. This is because the tax payment in July is half of the previous year’s total tax bill and therefore an estimate of future earnings. As the income is likely to change, more (or less) tax may be required. So someone that has had a better year than expected will have to pay more tax.

So I wonder, how different this really is from the UK paying its owed tax to the EU? (leaving aside the argument of whether the EU serves its purpose from a UK perspective). Imagine if the self-employed decided that, despite having a good year, (which means making more profit) they simply refused to pay the extra tax demanded. I would imagine that HMRC would take a similar line to the EU… those are the rules, set down by your elected representatives, which you have the right to vote in or out of power on a regular basis, being a democracy. I know that this is politically sensitive, but it’s just a thought. Not liking paying is not sufficient reason not to pay. As for the argument that a demand is accompanied by a few weeks to pay is “not the done thing”… welcome to the world of financial advisers, who get 4 weeks to pay random levies from the regulator, created by others that malpractice… the sums aren’t as big, but to a small firm they certainly feel as big and rather unfair.

Dominic Thomas

The European Tax QuestionDominic2023-12-01T12:39:36+00:00