Your loss is your gain

Daniel Liddicott
July 2024  •  3 min read

Your loss is your gain

You may recall from my recent piece in Spotlight that capital gains tax exemptions have fallen yet again for the 2024/25 tax year. As a reminder, you can now realise gains of up to £3,000 before having to pay capital gains tax (CGT). This allowance was £6,000 last tax year and £12,500 the tax year before that. The reduced £3,000 capital gains exemption affects those of you with General Investment Accounts (GIAs) in particular, as these are not sheltered from CGT, unlike your ISAs and pensions.

It is now more likely than ever that moving funds from your GIAs into your ISAs and/or pensions may result in the need to pay some CGT, at 10% or 20% dependent upon whether you are a basic, higher or additional rate taxpayer. It is important to understand that you only “realise” a gain if investments in your GIA are sold, which is the case if the funds are being withdrawn or moved into an ISA, for example.

The reason for carrying out this strategy year upon year has been to gradually move funds out of the less tax-efficient GIAs into the tax-efficient ISAs and pensions, which are sheltered from paying tax on any future capital gains.

A key factor that we can use to help you to reduce or, in some cases, completely remove the need for you to pay CGT on gains within your GIAs is to register any losses made in previous tax years. You can actually register losses made in any of the previous four tax years, to be used to offset against any gains that you make in future. And you can carry these valuable losses forward indefinitely until used. Example incoming:

You can now “realise” gains of up to £7,000 without any CGT payable.

Unfortunately, these losses are not automatically registered with HMRC. You can do this either in your tax return for 2024/25 if you usually submit these, or you can write to HMRC instead. We are putting together a guide and letter template that you can use to send to HMRC to register losses to make the process as easy as possible.

We are currently looking back through the previous few tax years to determine who has made losses that can be registered and used moving forwards – if this is you, you should expect to hear from us in the next few months.

Whilst, generally speaking, falling valuations of your investments is a negative experience, we can help you to make the most of these. Your past loss can become your future gain.

Your loss is your gain2025-01-28T10:03:08+00:00

ISAs are being ”Simplified”

Dominic Thomas
April 2024  •  5 min read

ISAs are being ”Simplified”

I don’t like sounding (or being) cynical (there’s a but coming isn’t there!) … but – when a Government or HMRC use the word “simplification” they seem to merely describe their own thought process and nothing else. The intention is usually good, the real-world working, well … not so much.

There are some rule changes, announced by the Chancellor in the Autumn statement, that are designed to simplify the scheme and encourage more people to invest tax-free, allowing for a more ‘balanced’ investment portfolio. There are too many ISAs being used as cash deposit accounts by ‘nervous’ investors. Our clients tend not to fall into this trap, but of course millions of people do. Inflation is best beaten over time by investment into assets that grow (holdings in companies listed on the world stock markets). Cash is simply giving banks your money so that they can invest it for their benefit.

Here are the six reforms from HMRC:

The Government announced a package of ISA reforms and will make these changes to ISAs from 6 April 2024:

  1. Increase the age for opening Cash ISAs from 16 to 18 and over. This is consistent with the age requirement already in place for opening Stocks and Shares, Innovative Finance and Lifetime ISAs.
  2. Allow subscriptions to multiple ISAs of the same type, with the exception of Lifetime ISA, within the tax year, removing the limit on subscribing to one ISA of each type per year. All subscriptions must remain within the overall ISA limit of £20,000.
  3. Remove the requirement for an investor to make a fresh ISA application where an existing ISA account has received no subscription in the previous tax year.
  4. Allow Long-Term Asset Funds to be permitted investments in an Innovative Finance ISA, which does not require access to funds within 30 days.
  5. Allow open-ended property funds with extended notice periods to be permitted investments in an Innovative Finance ISA.
  6. Allow partial transfers of current year ISA subscriptions between ISA managers.

The government also plans to hold discussions with industry on allowing certain fractions of shares to become permitted ISA investments.

Most of this will not impact you, everything we do here at Solomon’s is flexible and one of the benefits of regular reviews is that we can assess and check ongoing suitability of the financial products we have arranged for you and the portfolio being used.

If you have any questions at all, please get in touch. If you need a review sooner than normal or feel one may be overdue, please drop us a line.

ISAs are being ”Simplified”2025-01-23T10:50:33+00:00

THE SPRING BUDGET 2023

Dominic Thomas
March 2023  •  10 min read

Pension reforms of sorts…

If you are under 75 and have a pension, today is a better day than yesterday. You may breathe a sigh of relief; the Chancellor has done something to directly benefit you. As with all Chancellors, there is of course some politics at play. Whatever your view of the rabble at the House of Commons, we finally have a Chancellor who seems to both understand maths and has an ability for some long-term thinking as well as valuing the concept of financial independence in his Spring Budget 2023.

As a reminder, it was the Blair Government who introduced the Finance Act 2004 which ushered in new pension rules from April 6th 2006 known as A-Day and termed “Pension Simplification”. The basic premise was to simplify pension funding, enabling anyone to make payments and get tax relief, restricted by a maximum annual contribution allowance and a lifetime allowance for the value of your pensions, be they final salary or investment based. It sounded so simple, something akin to the battery level on your mobile phone.

Next month, “pension simplification” turns 18 years old. Simple is certainly not a term that anyone would consider in the same breath as pension rules. A veritable smorgasbord of metrics are needed to monitor if you fall foul of the rules.

A-DAY TURNS ADULT

Today though, Mr Hunt has abolished the Lifetime Allowance, a welcome and grown up but unexpected move (it had been hinted that it would return to the level at which the Conservative Government inherited it at £1.8m. No, it’s abolished, completely! The Lifetime Allowance, which is something everyone had to assess pension benefits against will be gone from 6th April 2023. Do not retire before then – or more accurately do not crystallise any pension until then.

ANNUAL ALLOWANCE – UP BUT STILL TAPERED

He has not however returned the Annual Allowance to the 2010 level of £255,000 but has increased it from £40,000 to £60,000. In addition, the Tapered Annual Allowance has not been scrapped, but increased from £240,000 to £260,000 from 6 April 2023. The threshold test at income of £200,000 has not been altered. In theory therefore the new standard annual allowance of £60,000 will still reduce by £0.50 for each £1 over £260,000 but stopped at £360,000 when you will get the minimum maximum annual allowance of £10,000.

By way of example, someone with income of £300,000 would be £40,000 over the £260,000 threshold and thus see the annual allowance reduce from £60,000 to £40,000.

Those of you that have taken income from a personal pension (not a defined benefit/final salary pension) will be able to continue towards a pension under the Money Purchase Annual Allowance (MPAA) which is being increased from £4,000 back to £10,000. I understand this will double up as the minimum maximum (if you see what I mean) that anyone with income over £360,000 can also contribute (gross).

NEGATIVE TURNS POSITIVE

Medics (and a few others) that on occasion have a negative pension value for the year will now be able to offset this, something that was not possible previously.

25% TAX FREE CASH IS GOING FOR BIG PENSION POTS

There is a slight “fly in the ointment”. Under pension rules tax free cash is capped at 25% of the fund value, buried in page 100 of the Budget is the statement that advisers understand but most investors do not. “The maximum Pension Commencement Lump Sum for those without protections will be retained at its current level of £268,275 and will be frozen thereafter”. In other words, the tax free cash lump sum (PCLS) link is to be broken. 25% of the current lifetime allowance is £268,275 and this is therefore being retained, meaning that whether your pension fund is more than this, you cannot withdraw more than £268,275 as a tax free lump sum. In plain a pension fund of £2m does not produce tax free cash of £500,000 (25%) but £268,275.

One other “minor” point is that those with Primary, Enhanced, Fixed or even Individual Protection from 2006, 2012 (max £450,000), 2014 (max £375,000) and 2016 (max £312,500). Therefore some people will have a higher tax free cash entitlement than the new limit of £268,275).

ISAs, JISAs, VCTs, EIS, SEIS

All as previously.

INCOME TAX, CORPORATION TAX, CAPITAL GAINS TAX, INHERITANCE TAX

As previously announced for 2023/24.

On occasion, Budget plans get revised (remember the glove puppet of a PM?) so there is a possibility that after a little more thought, pressure and checking, some of the points in the Budget might need a tweak, but in general this is a rarity.

If you have questions, that I have the realistic possibility of answering (not “where is Cloddach Bridge?” which gets a sum for refurbishment…. which I imagine is one of those times we may remark, “what, a million pounds?” (actually £1.5m) is either a lot or a little, that old price and value thing… much like the criticism that will inevitably be made of the abolition of the lifetime allowance, which is, from my perspective of working with you, a very good thing indeed.

THE SPRING BUDGET 20232025-01-27T17:01:00+00:00

Tax year ending

Dominic Thomas
Feb 2023  •  12 min read

Tax year ending!

There are not many weeks left of the 22/23 tax year, which ends on Wednesday 5th April. As a brief reminder of the key issues, I have done a quick summary … if you are not sure of what you have used or what you can use, please get in touch with us as soon as you can.

PENSIONS

  • Everyone under the age of 75 can contribute £2,880 into a pension and get basic rate tax relief, irrespective of any income. This is as close as it gets to ‘money for nothing’
  • The annual allowance of £40,000 applies to those with incomes of £3,600 – £240,000. You and an employer may contribute up to 100% of your earned income (capped at £40,000) between you
  • Those earning over £240,000 need to be careful; your allowance reduces by £1 for every £2 of income over £240,000 until it reaches £4,000 – which includes any employer payments

ISAs – INDIVIDUAL SAVINGS ACCOUNTS

  • Any adult can invest up to £20,000 over the course of the tax year into an ISA which grows free of income tax and capital gains tax
  • Those aged 18-40 can use a Lifetime ISA allowance of £4,000 if this is for a deposit on a first ever home. The Government will add £1,000

CAPITAL GAINS

  • If you are selling an asset / investment (which would include rebalancing them) this triggers capital gains. The 22/23 allowance is £12,300 of gains before you pay any tax, but this is falling in 23/24 to just £6,000 and then £3,000 the following tax year. So if you are going to do this anyway, I would encourage you to get on with it – perhaps you have some shares that you don’t really want …
  • Trusts also pay capital gains, but only have half of the personal allowance, so even more incentive to take profits and rebalance
  • You can delay payment of capital gains tax using some investments (ask/see below)

INCOME

  • If your income exceeds £100,000, you begin to have your personal allowance of £12,570 reduced by 50p for every £1 above £100,000. The personal allowance is the amount of income taxed at 0%. So it would be prudent to have bonuses paid into pensions for example
  • Dividends – the first £2,000 of dividends is tax-free in 22/23
  • Interest for non or basic rate taxpayers is 0% on the first £1,000 of interest (savings allowance) and £500 for higher rate taxpayers. Additional rate (45%) taxpayers don’t get the allowance. As some deposit accounts now pay 3% or 4%, you may be drawn into this (a higher rate taxpayer only needs £16,666 in savings earning 3% interest of £499. You need to declare all income to HMRC through self assessment
  • If you really must insist on a cash ISA (please only for ‘short-term parking’ of money) then this would ensure the interest is tax-free, but rates on cash ISAs are much lower than savings accounts now
  • If you are not using your full personal allowance and have investments that provide taxable income, this may be a sensible moment to trigger income that uses your allowance
  • If you rent a room in your home, there is a tax-free rent-a-room allowance of £7,500

ANNUAL GIVING

  • You can gift £3,000 to any individual without recourse to tax by the recipient or your estate. If you do any substantial giving please put a scan of a signed note of this on our portal
  • If you are feeling generous, you are also permitted to gift your newlywed children £5,000 or grandchildren £2,500

SPOUSE ALLOWANCES

  • If you have a spouse who does not earn up to the personal allowance of £12,570, you can elect to have 10% of this (£1,257) added to your own allowance
  • Spouses also can benefit from sharing assets and effectively doubling exemptions and allowances

ALTERNATIVES & HIGH-RISK INVESTING

It is generally thought that VCTs, EIS and SEIS are really for more sophisticated investors, about 3% of the population. All are long term in nature – meaning 6-10 years. Unlike your portfolio elsewhere (which – if we are managing it – will be an enormous portfolio of global equities), these are very small by comparison. Do not do these on your own unless you know your Sharpe ratio from your Beta. Unlike the above, the investments below can experience permanent loss:

Venture Capital Trusts

  • Tax-free income from your investment
  • Tax-free capital gains
  • Tax relief of 30% on your initial investment (tax reducer)

Enterprise Investment Schemes

  • 30% tax relief on your investment
  • The ability to defer owed capital gains tax
  • Loss relief
  • Exempt from inheritance tax

Seed Enterprise Investment Schemes

  • 50% tax relief on your investment
  • Reduce your due capital gains tax bill by 50% immediately
  • Exempt from inheritance tax

DON’T FORGET

Income taxes are tiered. Each slice of your income is taxed at a different rate.

Band Taxable income Tax rate
Personal Allowance Up to £12,570 0%
Basic rate £12,571 to £50,270 20%
Higher rate £50,271 to £150,000 40%
Additional rate over £150,000 45%

Please remember that HMRC will apply penalties for late payment and fines for non-payment which can result in the very worst of punitive measures – a custodial sentence.

As ever, be sure of two things – death and taxes. Neither are terribly welcome.

Tax year ending2025-01-21T16:33:56+00:00

TAX YEAR END 2020/21 PLANNING

TODAY’S BLOG

TAX YEAR END 2020/21 PLANNING – OVERVIEW

It probably goes without saying, but the tax year end is something that we are always mindful of. There has already been a lot of coverage in the media about what the Chancellor might do. We get to find out on 3rd March 2021. The reality is that due to the pandemic and enormous spending by the Government (and some very expensive contracts awarded to Conservative party donors), there is a obvious pressure to refill the public purse.

Last year, Autumn arrived without an Autumn Budget. To be fair, the Chancellor, Rishi Sunak, had already presented one 2020 Budget – in March – and the pandemic made forecasting for 2021/22 all but impossible. The result was that, for the second year running, the Budget was deferred to the Spring. Whether Mr Sunak’s reading of the economic runes will prove any easier on 3 March 2021 is a moot point.

It is equally difficult to assess what the Chancellor might do in his second Budget. On the one hand, he will be ending the current financial year with a record-breaking government deficit of around £400bn. On the other hand, he will be wary of trying to fill the large black hole with the near inevitable tax increases until an economic recovery is well under way. It could be one of those Budgets where the bad news is announced but has a deferred start date or is, at least initially, targeted at the more affluent.

Every year there is speculation about tax relief reducing or ending. Every year. Every year I largely ignore the speculation. However this year, to be blunt, the changes to taxes are more likely than any in the last 3 decades. There are some things that we can consider together. In truth as the Budget is 3rd March, time is against us. Whilst normally we expect Budget announcements to forewarn of rules for the following April, George Osborne was one of the few Chancellors to initiate immediate pension changes. You have been warned. As the tax year end is on the Easter Bank Holiday, the reality is that the last week of March is really your deadline. If you make allowance for slow post, many working from home, the normal efficiency of a tax year end is arguably “not as normal”… so the sooner you take action on anything important the better.

GET TUIT TAX YEAR END PLANNING SOLOMONS IFA

PENSIONS

A change in the personal tax relief on pension contributions from marginal income tax rates to a single flat rate is a regular pre-Budget rumour. That could mean a cut from a maximum rate of relief of 45% (46% in Scotland) to perhaps a flat rate of 20%-25%. Higher and additional rate taxpayers would thus lose out.

Depending upon where the Treasury pitched the flat rate, it could save billions while making most pension contributors – basic rate taxpayers – better off or at worst unaffected. Even without the revenue benefit, the result has a clear appeal to a government that regularly talks of ‘levelling up’.

Last year Mr Sunak increased the cost of pension tax relief by adding £90,000 to the two income thresholds that govern the tapering of the annual allowance. That could mean in 2020/21 you have an opportunity to make a higher contribution than in previous tax years. In any case, it is worth checking whether you have scope to take advantage of unused annual allowances from the past three years (back to 2017/18) at current rates of tax relief.

ISAs – INDIVIDUAL SAVINGS ACCOUNTS

Plans to put a cap on ISAs were reportedly considered by the Treasury in 2013, an idea that was recently revised by the Resolution Foundation in a paper examining ways to repair public finances. As with reforming pension contribution relief, the main impact would be on those who pay tax at more than the basic rate. For most basic rate taxpayers, the combined effect of the personal savings allowance, dividend allowance and CGT annual exemption is to render ISAs of little relevance.

If you pay tax at more than the basic rate, all types of ISA offer a quartet of tax benefits:

  • Interest earned on cash or fixed interest securities is free of UK income tax.
  • Dividends are also free of UK income tax.
  • Capital gains are free of UK capital gains tax (CGT).
  • ISA income and gains do not have to be reported on your tax return.

In addition, if you are eligible, the Lifetime ISA (which the Resolution Foundation said should be scrapped) gives a 25% government top-up on contributions.  The overall total contribution limit for ISAs has been frozen since April 2017 at £20,000 (of which the Lifetime ISA ceiling is £4,000). However, the limit for Junior ISAs was more than doubled to £9,000 in last year’s Budget.

CAPITAL GAINS TAX

In July 2020,Rishi Sunak asked the Office of Tax Simplification (OTS) to review Capital Gains Tax (CGT). The request came out of the blue but arrived at a time when increasing the CGT tax take was being discussed by several think tanks. It had also been proposed in the 2019 Election manifestos of both Labour and the Liberal Democrats. Mr Sunak would not be the first Chancellor to ‘borrow’ money-raising ideas from the Opposition.

The OTS published the first of what will be two reports on CGT reform in November. Its suggestions included:

  • ‘More closely aligning Capital Gains Tax rates with Income Tax rates’, which could mean more than a doubling of the current tax rates in some instances.
  • Reducing the level of the annual exemption from the current £12,300 to an ‘administrative de minimis’ of between £2,000 and £4,000.
  • Removing the rule which gives a capital gains tax uplift on death. As a result, if you inherited an asset its base value for CGT purposes would be that of the deceased, not the value at the date of death.

That trio of measures, which could be introduced with immediate effect on 3 March, is a good reason to review the unrealised gains in your investments as soon as possible. Although it is no longer possible to sell holdings one day and buy them back the next to crystallise capital gains, there are options which can achieve a similar effect, such as making the reinvestment via an ISA or a pension.

INHERITANCE TAX

A report on CGT is not the only OTS document on capital taxes occupying the Chancellor’s in tray. On taking over the job last February, he inherited a pair of reports on Inheritance Tax (IHT) which had been commissioned by Philip Hammond. These had been expected to feed through into last year’s Spring Budget. They may still do so in the forthcoming Budget, possibly alongside – and complimentary to – CGT reforms. The consequence could be a radical restructuring of capital taxation.

Ahead you should consider using the three main IHT annual exemptions:

1.    The 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.

2.    The 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.

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

a.     you make it regularly;

b.    it is made out of income (including ISA income); and

c.    it does not reduce your standard of living.

If you have the surplus capital available, you should also think about making large lifetime gifts. This could include gifting investments, thereby also using your CGT annual exemption. One of the OTS reform suggestions was the abolition of the normal expenditure rule and the introduction of an annual limit of IHT-free lifetime gifts.

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 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?

GET IN TOUCH

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?

TAX YEAR END 2020/21 PLANNING2025-01-21T16:33:58+00:00

HOW TO PROTECT YOUR TAX ALLOWANCES

TODAY’S BLOG

HOW TO PROTECT YOUR TAX ALLOWANCES

The government has committed to an awful lot of new spending. But the money has to come from somewhere. The unwritten rule of electioneering is to announce the spending increases during campaigning, and wait for the first post-election Budget to reveal the bad news about tax. Over the past few weeks we’ve seen suggestions of everything from some form of ‘mansion tax’ on more expensive homes, to changes in capital gains tax and tweaks in pension tax relief.

Sajid Javid’s resignation as chancellor – the person in charge of the Budget – might have derailed some of the plans in progress, but commentators are divided on what’s likely to happen next. Some think fiscal (tax) rules will be relaxed, so there’s less pressure to balance the books and spending can rise alongside tax cuts.

TAX ALLOWANCES

Let us not forget the small matter of an election manifesto pledge to get rid of ‘arbitrary tax advantages’ for the wealthy. Unfortunately we don’t have a working crystal ball to know what tax changes if any will come to fruition. We think the best way to shelter yourself from any potential tax changes is to take as much advantage as you can with the appropriate current breaks, while they still last:

  • Take advantage of ISAs (£20,000)
  • Consider a Lifetime ISA (£4,000)
  • Don’t forget Junior ISAs (£4,368)
  • Top up your pension (£40,000 and the abilty to use up unused allowances from the 3 previous tax years)
  • Consider salary sacrifice (employer pays your reduced NI and tax into your pension)
  • Take advantage of your spousal exemptions (share capital gains etc)
  • Claim the marriage allowance (transfer £1,250 to your spouse)
  • Consider your annual gifting allowance of £3,000
  • Use your 2019/20 Capital Gains Tax Allowance of £12,000
  • VCT, EIS, SEIS investment options for those that are more adventurous

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 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?

GET IN TOUCH

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?

HOW TO PROTECT YOUR TAX ALLOWANCES2025-01-21T16:33:58+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 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?

GET IN TOUCH

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?

TAX YEAR END PLANNING PART 32025-01-27T17:01:21+00:00

YOUR PORTFOLIO

TODAY’S BLOG

YOUR PORTFOLIO

I suspect that you have heard the expression “look after the pennies and the pounds look after themselves”. Well, a small win this week in that your investment costs will have reduced for clients using our portfolios. One of the fund management groups that we use (Vanguard) decided to reduce their annual management charges. Its not a massive reduction when taken in the context of a larger portfolio of funds, but every little helps. The reduced charges have been applied already.

We have also been reviewing our ESG portfolios. I was challenged the other day by suggesting that clients be opted into ESG portfolios with the option of opting out rather than being asked if they would like to opt in. I can see some merit in this, but it seems somewhat problematic when you consider that ESG portfolios are generally a little more expensive.

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 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?

GET IN TOUCH

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

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YOUR PORTFOLIO2023-12-01T12:17:09+00:00

Conference Season

Conference Season

It is conference season and I my diary is suitably full of my selection of those that I believe merit attention. I’m not attending any of the political conferences and have recently returned from what might be best described as the Premier League of Financial Planners Conference – the annual CISI conference at Celtic Manor.

Yes Minister

Whilst being a non-political conference, clearly insight from the occasional politician or a former one can be valuable. Step forward Steve Webb, who was a LibDem MP and the Minister for Pensions in the Coalition Government, back in the day when politics offered some semblance of common sense.

The Autumn Budget – 22 November 2017

Whilst understandably providing various caveats to his talk, Mr Webb made clear that given the Queen’s Speech, the current Government have essentially given themselves a 2-year timeframe.

 

Not Enough Hours in the Day

He explained that due to the workings of Parliament, this means about 40 weeks in the year that is given over to Parliamentary work. However, 1 day a week is set aside for the Opposition to make their case and another is for MPs to actually work with their own constituents. Given the amount of time that Brexit will consume, there is precious little likelihood that anything significant will change, unless it is populist, garnering all-party support within the available 120 days a year.

Why Tax Rules Are Daft

Aas tax legislation does not have to go via the House of Lords, unlike other acts (for approval or sense check) much can be altered quickly, even with a tiny majority. He made the point that it is precisely because tax legislation bypasses the House of Lords, that so much of it is so complex and poorly thought through. So that in mind, what could the Government possibly muck around with?

What you can pay in

The Annual Allowance – could be reduced further from the current £40,000, despite acknowledging the complexity of the Tapered Annual Allowance, he thought it more likely that this would be extended rather than abolished, perhaps bringing it in for those earning £100,000 rather than £150,000.

What you can get out

Whilst the Lifetime Allowance has already been thrashed to £1m and is meant to now be linked to inflationary increases, he said that cutting it further is an option as “it passes the Daily Mail test – where people think a £1m pension fund is a lot”. He made the point that the Treasury appears to hate pensions (see all recent changes over the last 15 years) but love ISAs, for which they attempt to invent a new one almost each year now.

Employer’s beware

Whilst he thought it unlikely, he also proposed that the Government could apply employers National Insurance contributions to their pension contributions, which would effectively end salary sacrifice arrangements. He also felt it improbable that the tax-free cash lump sum from pensions would end or be reduced, due to the complexity it would create for those that have had, are having or due to have it and rules are difficult to apply retrospectively.

No F-Bombs

Without a single interruption from anyone handing in a P45 or the stage falling apart, the room of delegates was impressed with his delivery and rationale, but sanguine about the prospect of further pension meddling. Everyone I spoke with conceded that ISAs certainly seem to be the favoured investment vehicle for the Treasury as they only give up future tax revenue, rather than current tax revenues. However, reliance on any future Government to maintain promises about ISAs seems probably unwise.

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

Conference Season2025-01-27T17:01:45+00:00

The Future of Pensions

The Future of Pensions

I am currently at my annual conference in Wales – the Chartered Institute for Securities and Investments (CISI) with whom the IFP – Institute of Financial Planning merged last year. Yesterday we covered a number of valuable topics, but the talk that resonated most with me was from former Pensions Minister MP Steve Webb, who talked about the future of pensions – amongst other things.

I had to admit that my BS radar is usually on hyperdrive when listening to any politician these days, which is probably a sad reflection on me, however I was very impressed by what he had to say, albeit he did not paint a terribly pleasant picture of the future. Of course, only time will tell if his predictions come about and in fairness, he was quick to remind us of the problems with predicting the future, particularly in a climate where since the last general election all of the major political parties have changed their leaders and the country has voted to leave the EU.

Book cover of Yes Minister - A Very Courageous Decision

Play it again Sam…(or Phil)

Webb was clear that changing pensions is pretty difficult and appears to be a low priority to either the Government of Civil Service. He gave an insight into the slow turning wheels of Whitehall, sounding much like an episode from Yes Minister. Given all the change that we have had (State Pension, Auto Enrolment, Pension Freedoms, Annual Allowance Taper, Lifetime Allowance…) he suspects and urges a period of quiet inaction from the Chancellor, Philip Hammond. This is particularly pertinent to those concerned about the loss or reductions of tax relief on pension contributions or changes to the tax free cash entitlement. He made the case that the public and financial planners could not plan ahead in confidence if the rules are changed every year, yet warned at Chancellors are easily tempted by ideas to collect more tax, however short-sighted.

Whilst on the subject of tax he made it clear that the Treasury are naturally inclined to taxing now rather than in the years ahead, so there is a very real pressure to take the view that tax relief reductions in the short-term outweigh the advantages of taxed incomes in the future, so by inference, a system of loss of tax relief and no taxation of pension income is a genuine prospect. He argued that this was evidenced by the Treasury’s love for ISAs and obvious contempt for pensions with the Lifetime Allowance reductions (and associated tax penalties) and the new tapered annual allowance. Personally he would scrap the LTA but retain a cap on annual pension contributions (which I certainly agree with). He did point out that of course putting trust in future Chancellors to honour a commitment not to tax pension income in the future required a high degree of faith, which  deliberately provoked some mirth from the audience.

Turning to Brexit, he simply outlined his view that interest rates are likely to be very low for a long time, which would place pressure on people to look for better returns than the puny sums they achieve from their savings. He argued that this would likely lead to yet more scams as people fall for yet more illusory promises of high returns. He also warned of the impact on final salary pension schemes which, because of the assets that they hold and the way calculations are performed, would have larger deficits in their pensions (due to low interest rates) probably leading to some, or perhaps a majority of companies trimming their dividend payments.. which in turn makes the task of achieving investment income harder still.

He seemed to have little regard for our regulator of whom he said was “not fit for purpose” and thought the new LISA was perhaps the most badly constructed investment idea for years. If you follow me on social media, you will know my thoughts on this already.

So, whilst Steve Webb found a receptive audience, I was left with the sinking feeling that there was little hope for common sense to return to the Treasury… but who knows… we all get to find out in a few weeks time for the Autumn Statement.

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

The Future of Pensions2025-01-21T15:03:17+00:00
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