Wealth Management Update – March 2020
Use it or lose it …
With the end of the tax year a mere month away here is a reminder of the allowances you should not miss out on.
- Personal Allowance – if you aren’t earning enough to fulfil your Personal Allowance (currently £12,500) then you could release some money from your investments to use up this allowance and potentially not pay tax on that money.
- CGT Allowance – an opportunity to take investment profits of up to
- £12,000 (2019/2020) “tax-free” each year – worth £2,400 a year for a higher rate taxpayer.
- ISA Allowance – if you don’t use it, you lose it. A total of £20,000 across all of your ISA accounts that could be earning money in a tax-efficient environment.
- Pension Annual Allowance – whilst this can be carried forward for a number of years, you must have the relevant earnings for the contribution in the tax year in which you contribute, so if you have the allowance and the earnings this year it might be best to use it up.
- Gifting – there are a number of gifting allowances that may be beneficial for Inheritance Tax purposes. Have a look on the HMRC website for more info: https://www.gov.uk/inheritance-tax/gifts. The £3,000 annual gift is a massive one and lots of our clients put this one in Trust to build it up for future gifting.
You should seek advice to see if using any of these allowances is suitable in your situation so, if in doubt, get in touch.
Chancellor resigns weeks before budget
We touched briefly on the Budget last month in regard to the tax break for high earners in the NHS. However, what the Budget will look like has been thrown into question following the resignation of Sajid Javid just a few weeks ago.
Javid resigned because of a conflict over a request for him to fire his existing team of advisers in order to remain in his role. Unable to accept these conditions, he was replaced by Rishi Sunak who only seven months ago held the role of Junior Housing Minister.
Despite this turmoil, the Budget is still set to go ahead on 11th March and is expected to bring much reform. The large Conservative majority means that the Chancellor has practically free rein to bring about whatever change he sees fit.
Changes to tax, pensions, housing and social care are all likely to feature, as well as increased spending in the north of England as the Conservatives tip their hats to the voters who helped the party come to power. We will need to wait to see exactly what changes will be implemented and whether the recent Chancellor-swapping has any effect.
How we do the right thing for you
Recently you may have heard worrying reports about how much “commission” is being generated from client fees by some of the financial firms across the country on Pensions and Investments. Investigations into these claims have rightly caused concern. Would you be happy if you found out that the company managing your money was giving their staff awards and publishing league tables to track how much money they generate through client fees each year? While on the surface this may seem a generous way to reward staff for their hard work, it causes concern about whether the advice being given to clients is what the client actually needs or if it is the result of the pressure advisers are under to increase company profits.
After investigating these concerns the FCA has advised: “Firms need to look after the interests of their customers and treat them fairly. This includes ensuring that they do not remunerate staff in a way that conflicts with their responsibilities to act in the best interests of their clients.”
Despite the great potential to dramatically increase revenue, at Penguin we are, and always have been, focused on putting you (our client) first. You can rest assured that our advisers are not incentivised based on revenue but also on customer satisfaction, compliant advice and our Core Values.
Some financial firms have clearly lost sight of the purpose of being a Financial Adviser, which is to keep our clients at the heart of what we do and to make a real difference in their lives.
Trust registration service delays – Our planned briefings
You may have heard that HMRC plans to implement the amended Trust registration service this year. The effect of this will be that almost all express Trusts will have to be registered, rather than only those that have tax liabilities. This is a large administration task and the registration process involves collecting and providing details of the people affected by all Trusts, e.g. Settlors, Trustees and Beneficiaries, as well as the Trust assets.
The initial consultations indicated that this change would come into place at the start of 2020. Over 200 responses were received to the consultation and these responses need to be properly considered. Therefore, the proposed deadline of March 2020 for implementing the changes to trust registration has been put on hold hence us putting our briefings on hold.
The technical consultation on this matter closed on 21st February 2020 and we are currently waiting for the outcome to be announced. This will hopefully provide more clarity on when the Trust administration service changes will come into force and we will be in touch to let you know how this might affect you.
Premium Bonds on balance
NS&I Premium Bonds are the UK’s biggest and most popular savings product, with around 22 million people saving more than £85 billion. In a nutshell, Premium Bonds are a savings account where a monthly prize draw determines any interest (prizes!) that is paid. The prizes, which range from £25 to £1 million, are paid tax free and you can access your money whenever you want to.
However, since the launch of the Personal Savings Allowance (PSA) in 2016 this tax-free incentive for savings is no longer seen as such a bonus. However, for those who would pay tax, Premium Bonds still have something to offer as prizes do not count towards the PSA. With Premium Bonds there is also no risk to capital as NS&I is backed by the Treasury and this safety net is often seen as a real advantage.
Some not-so-good news for Premium Bond holders is that from May 2020 the annual prize rate is dropping to 1.3% (from 1.4%), meaning the chance of a £1 bond winning any prize will be lowered to 1 in 26,000, from 1 in 24,500. This is only an ‘average’ benchmark of the potential returns however, as there is obviously no guarantee you will win anything at all – and of course it’s still the case that the more bonds you have the more likely you are to win.
Overall, Premium Bonds can still have a place for “on deposit” savings if they complement your other savings and investments. They are likely to be most advantageous if you are particularly lucky, or if you are a higher or additional rate taxpayer who has used up their Personal Savings Allowance and ISA allocation. Of course, you may have better than average luck, but don’t bank too hard on winning the jackpot …
New £20 for 2020!
Following the success of the new polymer £5 and £10 notes, the Bank of England fittingly launched the new £20 note on 20th February. Equipped with new security considerations, the plastic cash is harder to replicate, making it difficult to counterfeit. A hologram image with the words “Twenty” and “Pounds” along with see-through windows with metallic pictures in blue and gold foil make forging more difficult for fraudsters. There is currently no set date for the withdrawal of the old paper £20 notes so you can continue to spend your paper notes as usual and six months’ notice will be given once the final withdrawal date is agreed. For collectors out there, keep an eye out for any low or sequential serial numbers such as 123456 or 333333 on the new notes.
BEST SAVINGS SELECTION
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Please check with the terms and conditions before opening any account. If in doubt consult with your Financial Adviser directly as the above are for information only.
Source: Moneyfacts Magazine March 2020 Edition
Image Source: TaxRebate.org.uk