Labour changes could mean more tax!

The Labour party is proposing further changes to Inheritance Tax (IHT) laws that could mean families across the UK will pay even more tax if they are elected to power.

The new regime would include:
– Adjusting the tax-free allowance so that it is based on the recipient and not on the person who dies
– Reducing the tax-free allowance from £325,000 (current), to £125,000
– Taxing anything above the allowance via income tax (which potentially could be more than 40%, which is the current IHT tax rate)

We are sure there will be many more proposals to come but, luckily, there are some actions you can take now to plan for Corbyn’s potential rule changes and protect your family’s future wealth:

1. Give your money away – make gifts to your children or other beneficiaries in your lifetime if you can. And if you do, we always recommend you do so through a trust arrangement for Protection and future IHT purposes.

2. Make sure your Will is up to date – Wills should have been reviewed post-2015 when the Residential Nil Rate Band (RNRB) was introduced, to make sure that the full RNRB can be claimed even if your estate exceeds £2m. (If you are a client, we have reviewed your Will since that date.)

3. Set up a Probate Trust – put money into a trust to pay probate fees, which are planned to increase by 2000%.

4. Spend, spend, spend – the best way to avoid tax. Been thinking of taking a big trip? Do it!

If you think you need more advice on how to structure your estate for your family’s benefit, get in touch with us so we can help on 02920 450 143. We will be running a Wealth Protection Briefing later on in the year and dates will be announced soon.

Recent phone scam

Please be aware that over the last few weeks we have received reports of a phone call scam targeting clients. This scam involves an automated phone call in which the receiver is prompted to
“press 1 if you did not authorise the claimed transaction”. The transaction has been consistently reported as a withdrawal of £600.

We believe this could be linked to the recent Visa fraud scam, where an automated phone call, claiming to be from the client’s bank or service provider, states that there has been a suspicious transaction from their account. Upon acting, the receiver is transferred to an “agent”, a fraudster, who tries to obtain personal data and account information. There are also reports of consumers being transferred to a premium phone line and being charged extremely high rates for the call.

Please be aware that your provider will not contact clients through any automated phone call system. I t is important if you receive unsolicited calls like this, or any other questionable calls, to always check with your bank or service provider first instead of following instructions.

Safety first – are you insured?

Protection is one of the foundations of Financial Planning, but it is often overlooked as one of the least exciting elements, with Pensions and Investments at the forefront of many people’s minds. But what good is building the pillars and the roof if the foundations aren’t in place yet?

If you take a moment to consider how much you are worth over your lifetime, you are most likely to be the most expensive asset that you own!

For example, if you started earning £30,000 at age 20 and this rose with inflation each year (approx. 2.5%), by the time you retire, say at 65, you would have earned £2.5m! If you owned something worth £2.5m would you get it insured? You are darn right you would!

Insurance can be a bitter pill to swallow for many, because so many types of insurance rely on something bad happening. For example, with insurance for Critical Illness cover you will pay a monthly premium, but you will only get a payout if you have a Critical Illness. Now, no matter how high the premium per month, nobody will be praying they get that payout. But having the reassurance of insurance such as critical illness cover, and the knowledge that you and your family won’t have to worry so much about paying the bills, could certainly put you in a better frame of mind for your recovery.

Assurance, on the other hand, is something that will pay. For example, whole-of-life assurance that pays out on death will pay out – newsflash: we will all die at some point; sorry to burst the bubble of the eternal optimists. This form of insurance may be more comfortable for people – knowing that they will get some of their premiums back at some point, at least for the family they leave behind.

What type of insurance you need will depend entirely on your situation: those with young families will have different priorities, affordability, and needs than those whose children have left home and who may be retired, or even those who have no children. Whether it be Family Protection, Income Protection, Critical Illness Cover, Life Cover for Inheritance Tax, Life Cover to pay the mortgage … it is worth considering what type of insurance you may need when looking at your Financial situation as a whole. Make sure your foundations are solid and can withstand the storm that life throws at you before you build your life on top of it. 

To find out what insurance you might need you can email us at info@penguinwealth.com

Avoid the inheritance battle …

In a recent case, two stepsisters disputed which of their parents died first. Both parents, who were married, died together and it could not be determined who died first. In such a case, usually the eldest of the couple are deemed to have died first, leaving everything to the younger spouse, therefore meaning that the estate will pass according to the younger spouse’s Will.

In a situation where two families have been brought together by marriage, where there are children from previous relationships, as in this case, the result can be that whole sides of families are cut out, causing hostility after the death of the parents. In this particular instance, the father did not have a Will and the mother’s Will did not leave any assets to her stepdaughter. As the mother was deemed to have died last, her stepdaughter received no inheritance and, in addition, was ordered to pay most of the other stepdaughter’s legal bills as well as her own.

There were many issues that attributed to this very difficult situation, including how their joint property was held, the fact that one of the parties did not have a Will and the existing Will neither accounted for this situation nor included all of the correct clauses required to prevent this from happening.

The importance of having a professional and well-written Will in place is only heightened when these types of situations arise. This is further intensified when families are combined from previous relationships or are made up of more complex dynamics than would be considered “the norm”. The urge to get a DIY Will or not to have a Will at all may be strong when you think that you may not be around to see if it works, but when we consider those we leave behind and how it may affect them, it really is worth paying the cost of drawing up a Will to make their lives easier. Please contact us if you need help.

Notes on Brexit

With the deadline of 31st October fast approaching, sentiment and headlines are changing daily and in some cases even hourly, so things may well have moved on significantly by the time you read this!

Despite the hour-by-hour updates we’re getting on Mr Johnson’s approach to the Brexit negotiations, the bottom line is that there is still no agreement in place for how we will manage our relationship with the EU after we exit from it, things will just … stop.

However a breakthrough seems to have appeared, with the glimmer of a suggestion that the EU might be willing to reopen the Withdrawal Agreement if a solution to the Irish Backstop issue can be presented AND that Boris is willing to accept the rest of the agreement, £39billion settlement and all, if they can be flexible on the backstop. The backstop itself is only designed to be used in a worse-case scenario where the UK and EU cannot negotiate an alternative trade deal by December 2022; if that is the case then the UK will stay in a single customs territory with the EU until a satisfactory resolution can be reached. The problem parliament has with this is that this “union” cannot be dissolved unless both the UK and the EU agree an alternative that will work to keep the border “borderless”.

BEST SAVINGS SELECTION

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 September 2019 Edition

 Image by Biljana Jovanovic from Pixabay