Wealth Management Update – October 2017

Save Tax – Are you missing out on the ‘marriage tax allowance’?

If you are married, you could be entitled to a tax allowance worth £230 per year. We have been surprised by the number of new and existing clients who have not taken advantage of this allowance.

Whilst not a considerable sum, it is more useful in your hands than it is in those of HMRC, so if you meet the conditions then we urge you to get claiming. The conditions are:
• You must be married or in a civil partnership.
• At least one partner must be working and paying tax at basic rate (20%) – earning less than £45,000.
• One partner must be a non-taxpayer.

If these conditions are met, the non-tax-paying partner can transfer up to 10% of their tax allowance to the other, thereby making a saving of £230.

Click here to check if you are eligible

We are a generation of early retirees … long may it continue

We are a generation of early retirees … long may it continue

Apparently we are retiring earlier now than we did in 1950! In 1950 men retired, on average, at age 67; today it is more like age 65. Women are more consistent, retiring on average at age 63 throughout.

We are being told that this trend will not continue and that people should expect to start retiring later and later as the state pension age creeps ever upwards. But why should you wait until later in life to retire, slow down or just start enjoying a bit more freedom, if you have the means to retire earlier?
Yes, you will wait a little longer for your state pension, and potentially also your work-related pension schemes, but as long as you have the provision in personal pensions, ISAs or similar, you could retire whenever you want to. It is all about the money you make, but also about how that money is managed for you.

Retirement is hugely personal and should be dictated by how much effort you put into preparing for it; it should not be based on when the government tell you it should be.
The point is, make sure you manage your pensions and investments well, as well as making suitable provisions for the retirement you want.

This is a valuable lesson to pass onto your children and grandchildren – they are never too young to start preparing for the future, and they will thank you for it when the time comes.

Autumn Budget

The Autumn Budget will be held on 22nd November. The reason for changing the date of the budget from the spring to the autumn was to move to just one budget and avoid major changes twice in a year. But will this mean that the changes each autumn will be even more major to make up for it?

Judging by speculation about the upcoming announcement it would seem that Philip Hammond is on a mission to shake things up.

Reports are that the first focus will be on stamp duty. Stamp duty revenue is at an all-time high but sales are not following suit. This could be a major deterrent to home movers and so Hammond intends to address this issue and find a strategy to motivate the older generation to downsize and make way for new homeowners to get onto, or further up, the property ladder.
There is even talk of moving stamp duty from those buying to those selling. This will make properties more affordable for first-time buyers, but it will not entice those who already own homes to sell them as desired. It will be interesting to see what is decided when the announcement is made.

Another area of focus is pensions, and in particular the tax relief associated with them. With the government being forced to maintain the triple lock, it would seem they are trying to recoup some of that loss of revenue by changing tax relief to a flat rate of 33%; beneficial for low and middle rate tax payers perhaps, but not so much for higher rate tax payers.

We can only speculate now as to what will be changed. But let’s hope, with so much uncertainty around already, that Hammond considers the stability we all need as well.

Interest Rates – Carney makes rate announcement

Speculation about rate rises, inflation and effects linked to these has been rife. Is the hubbub all about nothing? Quite possibly.

Carney has announced that rate rises will be ‘gradual and limited’, so we won’t be seeing a jump of 2%, 3% or 4% over the coming months. For those of you worried about going back to the days of 15% interest rates, it just won’t happen – so don’t panic.

We live in a generation of low interest rates and so, even with the first potential rise for a decade on the horizon, it is unlikely to be a shock. Carney has confirmed that inflation hit 2.9% in August and rates will likely stay above 3% for the next three years, but we already knew that.

So, will interest rates be raised to counteract that, or has the mere suggestion of an interest rate rise done the job by boosting the pound, which climbed more than 1% against the dollar after the announcement?

We will wait to see if an actual rate rise materialises or if the hints will just keep reappearing.

Ryanair share price crashes

Cancelling 18,000 flights is a sure-fire way to make an airline’s share price fall through the floor, and that is exactly what has happened over the past few weeks to Ryanair, as we see blunder after blunder make the news.

Just when we thought they may be recovering from the first cancellation announcement, a second round of flight cancellations and the accusation by the Civil Aviation Authority (CAA) that they misled passengers about their rights caused the share price to crash by a further 3%.

It was announced that flight disruptions will last until March 2018, but with the CAA threatening to take them to court over their handling of the situation it may be that the upheaval will last much longer than that.

It is certain that it will take a great deal of time for the public’s perception of the airline to improve and for their trust in the company to return. It is likely that this will be reflected in Ryanair’s place in the markets until such time that they recover, if they do.

Notes on Brexit

September saw a lot of Brexit-related activity, including Mrs May’s speech in Florence, a reportedly unproductive round of negotiations, Boris’s revisiting of the infamous £350m per day savings and, not least, a surprisingly strong outcome for the far-right party in the German elections. Mrs Merkel is still to form the new coalition government, so we cannot imagine what impact this might have on the Brexit negotiations themselves, but we can take a look at what has happened during the negotiations so far.

Round Three of negotiations ran to 31st August and the associated Parliamentary briefing covers the outcomes. While some progress was made in aspects of citizens’ rights and technical aspects of other separation issues, little was made on the financial settlement, with the EU continuing to press the government for a “clear position” on the UK’s recognition of its “legal and moral” commitments to a settlement. It is likely that the lack of progress on the financial settlement is what spurred Michel Barnier, the EU’s chief negotiator, to say there had been no progress on major issues and to suggest there might not be enough time to negotiate an orderly UK withdrawal from the EU, as well as Theresa May to include of an offer of €20bn towards the EU budget as part of her speech in Florence.

Progress was also made on agreeing the principles behind the Common Travel Area and the North–South and East–West cooperation set out in the Good Friday Agreement. However, detailed technical discussion is still needed, particularly on the issue of the movement of goods across the border. The government has proposed that the next round of talks be extended “on a rolling week-by-week basis until a breakthrough is reached on the contentious issue of Britain’s ‘exit bill’”, but it is not clear if the EU will agree to this, as it has stated that Brexit is not its priority and that it has other, more important, matters to address.

As the negotiations proceed seemingly without progress, I remind myself that the EU always takes negotiations to the final hour, often not reaching any agreement until the proverbial two minutes to midnight, and we can only assume that this will be the case for Brexit as well.

Book of the month

This month’s book is a challenge. It is a challenge to read and it is a challenge to agree with. But then we can’t just read the easy stuff! Homo Deus: A Brief History of Tomorrow by Yuval Noah Harari is a follow up to his best seller, Sapiens, which was the book of the month in July.
The book explores where we are going and how we are getting there. Effectively a collection of essays, the book draws sensible conclusions based on the direction in which society is headed. Not all of these we agree with, but it has certainly made us think.

If you really want to give your mind and opinions a workout, then spend a few days in the company of this book.