Monthly Archives: January 2023

DON’T MISS THE ISA DEADLINE

USE YOUR TAX-EFFICIENT ALLOWANCE OR LOSE IT FOREVER!

Time is running out to take advantage of this year’s Individual Savings Account (ISA) allowances. You get one ISA allowance per tax year. So use it or lose it soon, when the tax year ends on 5 April.

Any unused ISA allowance will not be rolled over into the new tax year. On 6 April when the new tax year starts, if you haven’t used all of your or your children’s ISA allowances from the previous tax year, they will be lost forever.

WANT TO KNOW MORE ABOUT INVESTING IN AN ISA? YOUR ISA QUESTIONS ANSWERED

Q: WHAT IS AN INDIVIDUAL SAVINGS ACCOUNT ISA?
A: An ISA is a ‘tax-efficient wrapper’.Types of ISA include a Cash ISA and Stocks & Shares ISA. A Cash ISA is similar to a normal deposit account, except that you pay no tax on the interest you earn. Stock & Shares ISAs allow you to invest in equities, bonds or commercial property without paying personal tax on your proceeds.

Q: CAN I HAVE MORE THAN ONE ISA?
A: You have a total tax-efficient allowance of £20,000 for this tax year. This means that the sum of money you invest across all your ISAs this tax year (Cash ISA, Stocks & Shares ISA, Lifetime ISAs, Innovative Finance ISA, or any combination) cannot exceed £20,000. However, bear in mind that you have the flexibility to split your tax-efficient allowance across as many ISAs and ISA types as you wish. For example, you may invest £10,000 in a Stocks & Shares ISA and the remaining £10,000 in a Cash ISA. This is a useful option for those who want to use their investment for different purposes and over varying periods of time.

Q: WHEN WILL I BE ABLE TO ACCESS THE MONEY I SAVE IN AN ISA?
A: Some ISAs may tie your money up for a period of time. However, others are flexible. If you’re after flexibility, variable rate Cash ISAs don’t tend to have a minimum commitment. This means you can keep your money in one of these ISAs for as long – or as short – a time as you like. This type of ISA also allows you to take some of the money out of the ISA and put it back in without affecting its tax-efficient status.

‘An ISA is a tax-efficient way to invest because your money is shielded from Income Tax, tax on dividends and Capital Gains Tax’

On the other hand, fixed-rate Cash ISAs will typically require you to tie your money up for a set amount of time. If you decide to cut the term short, you usually have to pay a penalty. But ISAs that tie your money up for longer do tend to have higher interest rates.

Stocks & Shares ISAs don’t usually have a minimum commitment, which means you can take your money out at any point. As with all investing, it’s recommended that you invest your money for at least five years or more. Staying invested for longer allows your investment to grow and to better weather any market volatility. With the cost of living in the UK rising at its fastest rate in 41 years, can you really afford to see the purchasing power of your hard-earned savings stagnate in a bank account?

Q: COULD I TAKE ADVANTAGE OF A LIFETIME ISA?
A: You’re able to open a Lifetime ISA if you’re aged between 18 and 39. You can use a Lifetime ISA to buy your first home or save for later life. You can
put in up to £4,000 each year until you’re 50. The government will add a 25% bonus to your savings, up to a maximum of £1,000 per year.

Q: WHAT IS AN INNOVATIVE FINANCE ISA? A: An Innovative Finance ISA allows individuals to use some or all of their annual ISA allowance to lend funds through the Peer to Peer lending market. Peer to Peer lending allows individuals and companies to borrow money directly from lenders. Your capital and interest may be at risk in an Innovative Finance ISA and your investment is not covered under the Financial Services Compensation Scheme.

Q: WHAT IS A JUNIOR ISA?
A:This is a savings and investment vehicle for children up to the age of 18. It is a tax-efficient way to save or invest as it is free from any Income Tax, tax on dividends and Capital Gains Tax on the proceeds. The Junior ISA subscription limit is currently £9,000 for the tax year 2022/23.

Q: IS TAX PAYABLE ON ISA DIVIDEND INCOME?
A: No tax is payable on dividend income. You don’t pay tax on any dividends paid inside your ISA.

Q: IS CAPITAL GAINS TAX CGT PAYABLE ON MY ISA INVESTMENT GAINS?
A:You don’t have to pay any CGT on profits.

Q: I ALREADY HAVE ISAS WITH SEVERAL DIFFERENT PROVIDERS. CAN I CONSOLIDATE THEM?
A: Yes you can, and you won’t lose the tax-efficient ‘wrapper’ status. Many previously attractive savings accounts may cease to have a good rate of interest, and naturally some Stocks & Shares ISAs don’t perform as well as investors would have hoped. Consolidating your ISAs may also substantially reduce your paperwork. We’ll be happy to talk you through your options.

Q: CAN I TRANSFER MY EXISTING ISA? A:Yes, you can transfer an existing ISA from one provider to another at any time as long as the product terms and conditions allow it. If you want to transfer money you’ve invested in an ISA during the current tax year, you must transfer all of it. For money you invested in previous years, you can choose to transfer all or part of your savings.

Q: WHAT HAPPENS TO MY ISA IF I DIE PREMATURELY?
A: The rules on ISA death benefits allow for an extra ISA allowance to the deceased’s spouse or registered civil partner.

TIME TO TAKE YOUR ISA TO THE MAX?
ISAs are one of the most straightforward ways to achieve tax-efficient gains. Remember you can currently invest up to £20,000 this tax year in an ISA, so a couple can put £40,000 out of the reach of the taxman. And don’t forget your children or grandchildren. Parents and guardians can invest up to £9,000 in a Junior ISA. To find out more or discuss your requirements, please contact us.

CHANCELLOR RETAINS STATE PENSION TRIPLE LOCK

STATE PENSION IS SET FOR A RECORD-BREAKING INCREASE FROM APRIL 2023

If you’re currently receiving or have been looking into the State Pension, then you’ve probably heard of the ‘triple lock’. But what is it?

The triple lock was introduced in 2010. Its purpose is to make sure that the State Pension doesn’t lose value over time. The triple lock aims to protect pensioners against the impact of inflation. If the State Pension didn’t change but the price of goods and services continued to increase over time, then you wouldn’t be able to buy as much with it. Meaning you’d be losing money in real terms.

In the 2022 Autumn Statement, the Chancellor confirmed that the triple lock will be reinstated from 6 April 2023. This means the State Pension will rise in line with last September’s inflation rate – 10.1% – in the 2023/24 tax year. Anyone receiving the State Pension will benefit from the triple lock.

To make the guarantee even more secure, it included three separate measures of inflation, hence ‘triple lock’. The three-way guarantee was that each year, the State Pension would increase by the greatest of the following three measures: average earnings; prices, as measured by the Consumer Prices Index (CPI) and 2.5%.

The government usually compares the three rates in September, before implementing the correct rise the following April.

The State Pension triple lock has proved to be a burden for successive governments, as it has proven costly for the taxpayer. Because of people earning much less during the lockdowns of 2020, there was a big leap in average earnings of 8% come 2021 as people returned to work. The government announced that the triple lock would be suspended for the 2022/23 tax year.

WHAT WILL YOUR RETIREMENT LOOK LIKE?
It’s never too early to be planning ahead. We can help you create a robust and flexible retirement plan. A plan that will consider your future expenditure and the impact of inflation, as well as making the best use of tax allowances. To find out more, please get in touch.

MILLENNIALS WILLING TO FORGO INHERITANCE

HARDER TO SUPPORT BIGGER FINANCIAL COMMITMENTS OF OLDER GENERATION PARENTS

Many people want to do what they can to ensure they maximise the amount they leave to their family and minimise Inheritance Tax, but working out how much you can afford to give away during your lifetime isn’t easy.

With finances being stretched in all directions, it can be incredibly stressful if you want to support your children in the short term, while making sure you don’t find yourself struggling further down the line. New research has shown that the oldest of the millennial generation would prefer their parents to use their cash to fund their own, comfortable retirement, rather than receive it as an inheritance.

COST OF LIVING

The research of 40-year-old millennials and their parents reveals disparities when it comes to financially planning. Nearly all parents surveyed (99%) intend to pass an inheritance on to their children or grandchildren, with almost two in five (37%) anticipating gifting more money to help their children with the rising cost of living.

However, a third (32%) of adult children would rather their parents kept it all to themselves, to support a comfortable retirement. The desire from each generation to financially support the other comes against the backdrop of financial challenges on two fronts: continued market volatility impacting pension pots and property prices on the one hand and rising living costs on the other.

FINANCIAL PRIORITIES

This makes it harder to support bigger financial commitments – of those older generation parents that are worried about funding their whole retirement, over a third (36%) are specifically concerned about funding the cost of care.

Juggling financial priorities makes communication and forward planning even more vital, but this does not always happen. Two in five (38%) of parents admit to not speaking to their children about their inheritance plans, and one in four have not developed a plan to protect their child’s inheritance should their child go through a difficult divorce.

IMPORTANT TO PLAN

With cash required to go further than ever before, almost a third (31%) of the parents of millennials are worried about supporting their own immediate living costs, and one in five (19%) are considering downsizing.

Even though most children would be very grateful if their parents are able to pass on some inheritance while they’re still alive, they wouldn’t want them to have money worries in the future as a result. This is why it’s not only important to plan, but also to include your family in any conversations – it can make such a difference and help remove some of the pressure many parents feel when thinking about how and when they’ll pass on their wealth.

SPEAK TO US ABOUT YOUR FAMILY’S FINANCIAL PLANNING NEEDS

We understand the impact your wealth has today and for generations to come. That’s why we work with you to help your investments create the future you want. We listen to you and build our service around your vision. To find out more, please contact us.

INCREASING FINANCIAL SUPPORT FOR MILLENNIALS

COST OF LIVING CRISIS DRIVES EARLY INHERITANCE GIFTING

The rising cost of living is cutting into even the most resilient saving pots and salaries, forcing many to re-consider their financial priorities, whatever their generation or income.

Those millennials now turning 40 are facing very different challenges to when their parents were the same age; however, there is equal pressure on parents to step in and support where they can without eating into their own retirement funds.

HELP WITH LIVING COSTS

New research shows the impact of rising living costs on inheritance and retirement planning. Over a third of parents to 40-year-old millennials think they will need to give inheritance support to their children this year to help with immediate living costs.

After previously spending inheritance on property and starting a business, nearly all (94%) 40-year-old millennials would use any inheritance received now to help with living costs. As the eldest millennials turn 40 years old, the research shows parents are considering gifting them their inheritance early to increase support for living costs this year.

FURTHER RISING INFLATION

With the Bank of England’s warning of further rising inflation, over a third (37%) of parents of 40-year-old millennials now anticipate gifting their inheritance this year to help their children more with immediate living costs, as opposed to bigger purchases like property.

The research also highlighted that almost two in five (38%) parents also expect to be more flexible in their support across the rest of this year, giving money early when needed rather than planning ahead.

SAVINGS AND INVESTMENTS

More than three in four (76%) 40-year-olds have already received some form of inheritance from their parents, with the majority putting this to use in savings and investments (30%), setting up their own business (20%) or buying their first property (18%).

However, if they were to receive that same inheritance this year, nearly all (94%) said they would use more of it on living costs – including bills, daily travel, food, clothing and healthcare. Of these, nine in ten (92%) earn £55,000 and over.

INCREASING FINANCIAL SUPPORT

For those 40-year-olds who are set to receive an inheritance in the future, using the funds on living expenses (18%) comes second only to putting this into savings and investments (31%), showing the impact of the cost of living on financial priorities.

This research on parents of 40-year-old millennials showed that despite the cost of living and rising inflation, the majority (85%) are confident they will have enough to support their whole retirement.

However, over half of parents (57%) are worried Inheritance Tax will have a significant impact on their final estate due to increasing financial support for their children.

WANT TO DISCUSS PLANNING FOR YOUR FINANCIAL FUTURE WITH CONFIDENCE?
It has always been important that families talk about financial planning with each other and their financial adviser, yet the impact of rising inflation makes having these conversations early even more crucial. If you would like expert advice on everything from Inheritance Tax to investments, we are here to discuss your options.