HMRC in clampdown on ‘side hustle’ tax dodgers
Brits selling second-hand goods or letting out their property online are being targeted by the taxman as part of a clampdown on those not declaring second incomes.
Under the new measures, online marketplaces such as eBay, Amazon, Etsy, Depop and Vinted will be required to report how much money their users are making and report it to the UK’s tax authority.
The new measures are an attempt to weed out those who are making taxable income on a so-called ‘side hustle’ that they have not declared.
An HMRC spokesperson said: “These new rules will support our work to help online sellers get their tax right first time. They will also help us detect any deliberate non-compliance, ensuring a level playing field for all taxpayers.”
Who is affected?
The crackdown is aimed at those who make a second income of more than £1,000 a year online, such as selling secondhand clothes on sites such as Depop and Vinted, letting out their property on Airbnb or delivering takeaway food for the likes of Deliveroo.
Once sellers pass the £1,000 threshold, they may have to register for self-assessment and pay tax on their earnings.
Does that mean I will have to pay tax on things I sell online?
Not necessarily. It all hinges around whether you are deemed to be a ‘trader’ or not, according to the Low Incomes Tax Reforms Group (LITRG).
For example, if you’re selling unwanted personal items such as old children’s clothes or toys online as a one-off, then you are unlikely to be deemed to be ‘trading’, LITRG says. These types of transactions are ‘generally not taxable’, even if you make a significant amount of money, it adds.
However, you may be liable for tax if this is deemed a regular activity and you’ve crossed the £1,000 threshold.
When does it come into effect?
The new rules came into effect on 1 January, although online marketplaces will not start reporting user data to HMRC until January 2025.
Why has this been introduced?
The market for second-hand goods, particularly fashion items, is booming. Websites such as Depop and Vinted have reported surging sales at a time when many fashion retailers have struggled.
A recent report by US marketplace ThredUP suggested the global market for second-hand apparel alone could more than double to $350bn (£276.3bn) by 2027.
Given that many of those who sell on these marketplaces are individuals and not businesses, it has led to concerns that many are not paying tax when they should.
Is this a new law?
Yes and no. There are technically no new tax obligations on individuals: if you made £1,000 or more selling goods online before now and were deemed to be ‘trading’, you likely already had to pay tax on it.
The major change announced this month is the requirement for online marketplaces such as eBay and Amazon to report their users’ data to HMRC routinely.
Do I need to do anything?
Victoria Todd, Head of LITRG, says: “The new rules have caused a great deal of confusion, but they simply mean that HMRC are receiving more information from online platforms than they were before. If you are following existing rules and declaring your income as required, then you don’t need to worry or do anything differently.”
However, if you are unclear whether you should be paying tax on income from goods you sell online, then it’s worth contacting HMRC as soon as possible.
Tax year end: Strategies to safeguard your finances
As the end of the current tax year draws near, we are about to enter the third year of the six-year freeze on income tax thresholds, a move that has significantly altered the fiscal landscape. The proportion of adults paying higher rates of income tax has risen from 3.5% in 1991-92 to an expected 14% by the 2027–28 fiscal year, according to the Institute for Fiscal Studies.
For those recently finding themselves in the higher tax bracket, as well as for those who have been navigating this territory for some time, here are four key strategies to help manage your finances more effectively and reduce tax liabilities:
1. Maximise pension contributions: Contributing to your pension not only prepares you for a secure future, but also offers immediate tax benefits. For higher-rate taxpayers, there is £40 in government tax relief available for every £100 contributed. It’s important to remember that while pension withdrawals are taxable, up to 25% can be taken as a tax-free lump sum, offering a strategic advantage in tax planning and potentially placing you in a lower tax bracket upon retirement.
2. Utilise pension contributions to preserve Child Benefit: For earners exceeding £50,000, the High Income Child Benefit Charge applies, progressively reducing Child Benefit. By making pension contributions, you can lower your taxable income, potentially mitigating or completely avoiding this charge, thus preserving your Child Benefit.
3. Invest in tax-efficient savings: With forthcoming reductions in capital gains and dividend allowances, ISAs and pensions become even more attractive as tax shelters. These vehicles allow you to fully utilise your annual allowances and protect your gains from tax liabilities.
4. Leverage spousal allowances: Married couples enjoy the benefit of double the allowances for ISAs, capital gains, personal savings, and dividends. Transferring assets between spouses can maximise the use of these combined allowances, offering potential tax savings and enhancing your financial strategy.
Beyond these strategies, keeping abreast of changes in tax regulations is crucial. The tax environment is constantly evolving, highlighting the need for dynamic financial planning and expert consultation.
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Contact us
Whether you’re an existing client or new to our services, we’re equipped to support your tax year-end planning and set you up for the year ahead. Why not arrange a meeting with one of our advisers, providing an opportunity to see how our bespoke advice can meet your financial needs. Book your session today to begin shaping your financial future.
Important: When investing your capital is at risk. The value of pensions and investments may fall as well as rise. Tax treatment varies according to individual circumstances and is subject to change. Tax advice is not regulated by the FCA.
Three things about the advice business I wish I'd known starting out
This article first appeared in Professional Adviser.
Simon Goldthorpe shares his insight into the advice business after 40 years at the coal face…
Having worked in advice for more than 40 years, I’m often asked if I have any wisdom to offer looking back on my career.
Anyone who has spent a decent amount of time around me will know that my first ‘proper’ job was as a management trainee at Halifax Building Society back in the 70s.
Having left for a stint in the estate agency business, I found myself being drawn back into financial services by the ‘Big Bang’ in the 80s and the advent of personal pensions. From there, I went on to launch an asset management firm – Beacon, before becoming one of the founders of Beaufort Group in 2010.
Like most people who’ve been in the industry as long as me, my career has taken its fair share of twists and turns. Now fortunate enough to spend most of my time around ambitious advisers who want to build successful businesses, I often find myself contemplating the things that could have saved me a lot of time, anguish and headaches.
Whether you’ve been in it for years or are just starting out, here are the three key pieces of advice I would offer any financial advice business owner.
1. Always ask the question
I was lucky enough to establish my first business fairly young. This opened some fantastic opportunities and experiences for me, but a key downside was that I’d often find myself sat in board meetings not quite understanding what was being said, and not wanting to question more technical concepts for fear of appearing stupid.
As it turned out, there were a few decisions made in regard to that business which eventually led to real difficulties at the height of the financial crash. At the time, those decisions seemed a little strange to me, but I never spoke up as I assumed others in the room knew better than me.
To this day, I’m a big believer in people asking any questions that spring to mind, regardless of how blindingly obvious they may seem. Questions can always be phrased diplomatically – but if you don’t ask them and something goes wrong, then you may come to regret it.
2. Keep learning
If I think back to when I was starting out, I let the fact I’d been successful early on in my working life allow me to believe I was naturally good at things. I thought certain people were cut out to be successful, and that I was one of them.
As it turns out, I went on to have a few abrupt lessons in why that’s not true. These lessons taught me that, firstly, you should never believe your own press and, secondly, no one is ever past the point of learning.
Even at my ripe old age, I still find that I’m learning all the time, and that things never are quite as I always thought they were. Be it embracing new technology or ways of working, the most successful people are always prepared to adapt how they do things and aren’t afraid to buck convention.
Just because everybody else is doing something – or you’ve always done something a certain way – it doesn’t mean it’s the best thing for you or your business. It’s easy to fall into the trap of believing the majority; listening to all the mouth-pieces in the media without challenging the narrative.
3. If you fail – try again
Let’s be honest, being successful in business requires a huge element of luck.
From Richard Branson to Karren Brady, the most successful entrepreneurs all have one thing in common – at some point they got very lucky (though not all will acknowledge that).
Despite often being praised for his success despite not having a university degree, and being severely dyslexic, Branson himself admits he was lucky to have parents who were able to support him when he dropped out of school. At the same time, Brady has questioned whether she’d be where she is now had she not been accepted onto the Saatchi & Saatchi graduate scheme.
That’s not to say there aren’t certain things that won’t help you make your own luck or create opportunities. However, the crucial point is you must be prepared to go back and have another go if everything doesn’t fall into place the first time around and not everyone is willing to do that. For some the potential anxiety, and strain on family and relationships, simply wouldn’t be worth it.
Mine certainly isn’t an aspirational journey you’ll see covered in entrepreneurship books, but I’m a good example of how, if you keep trying and learn the lessons of failure, luck will eventually come at the right time.
Ultimately, every business owner’s journey is going to be very different. However, with an open mind and a willingness to overcome knockbacks, you’ll set yourself up for the most successful outcome possible.
Periods of change: Four ideas to help advisers thrive
This article first appeared in Professional Adviser.
Creating a more manageable environment for advisers.
2023 is shaping up to be a big year for financial advisers.
With the onset of Consumer Duty, tax changes and rising interest rates leaving many clients feeling nervous about their personal finances and wealth, the onus falls on IFA firms to adapt and ensure they can continue delivering optimal outcomes over the long term.
For some, this will call for a careful balancing act as the business adjusts its way of working to meet changing regulatory and client needs while ensuring minimal impact on service standards and profitability.
Set out below are four ideas that may help create a more manageable environment and support advisers to maximise the opportunities that inevitably arise during periods of change.
1. Changing the narrative surrounding Consumer Duty
Consumer Duty has the potential to drive positive change from the top to the bottom of the industry, but only if it’s embraced in the right way.
It’s the responsibility of the Financial Conduct Authority (FCA) to help businesses understand their vision for Consumer Duty and how they can use it in practice as a force for good, but it falls on advisers to – as much as possible – approach the new rules with positivity rather than fear. Moving away from certain EU legislation presents an opportunity for us to be more tailored and specific in how we’re serving clients in the UK.
No one can deny that we’re talking about a momentous piece of legislation which calls for a great deal of commitment from the industry, but I genuinely believe that if advisers take a positive approach and focus on the opportunities, they’ll get good outcomes.
2. A more open dialogue between the regulator and industry
More broadly, and as new investment opportunities continue to gain traction among retail investors, greater dialogue and transparency on all sides will be crucial.
The advice sector already struggles with the over-provision of information, an issue which is in danger of becoming more onerous with the latest changes, but Consumer Duty should be about more clarity, not less.
For the younger generations in particular, there is clear disparity between how easily they can invest in high-risk strategies such as crypto – which come with endorsements from so-called ‘finfluencers’ and a conventional investment such as an ISA. That needs to be addressed to create a better-than-level playing field.
The red tape burden surrounding traditional investment vehicles will only increase the chances of savers being driven towards questionable strategies that could put their wealth at risk. Advisers and the regulator need to work together to resolve these issues.
3. More open and transparent tech
The question of how we make the advice industry more accessible has arguably never been more urgent than right now. But it’s something that can only be solved when the tech we’re using to service clients is more open.
Having a good range of tech providers who are prepared to put their products in the open market really plays into this. The fundamental issue is that if an adviser comes across a product they think could better enrich the client experience, particularly at a time when clients desperately need a clear picture of their finances, implementation can be a major upheaval if integration is an issue.
Having more providers prepared to eliminate these barriers so that systems can talk to each other will make things much better for clients and advisers alike.
4. A heightened focus on data quality
IFAs can often be so focused on getting a new client on their books quickly and with minimal fuss, that only ‘need-to-know’ information is obtained during the initial fact find.
However, the first encounters are not only key in terms of building trust with new clients but also collecting data that will help provide them with the most meaningful service over the long term.
We all know client segmentation is a big theme of consumer duty. Having solid data will allow IFAs to demographically categorise clients, rather than simply focusing on how much wealth they have, in turn helping them build a far more valuable service.
Going back to my previous point, if a firm is consistent with getting the right data inputs from day one, then it also becomes much easier to integrate the different systems you are using. If an adviser has decided an app is needed to enhance their service, it needs to have access to their full breadth of client data in order for it to provide them with useful and accurate information.
As client needs continue to evolve, and as the regulatory landscape changes to accommodate them, advisers need the headspace, support and tools to adapt, so they can keep servicing their clients with confidence.
Thinking ahead: A strategy for attracting younger clients
This article first appeared in Professional Adviser.
Five ideas to consider when thinking about a younger client base.
This blog explores how advisers can develop a strategy for attracting younger clients and outlines five top tips.
Having a younger client base isn’t a top priority for every firm. The reasons for this are wide and varied but range from communication barriers and competition from new forms of advice, to a younger cohort that might not seem lucrative on paper.
However, if building a profitable business equipped to stand the test of time is your goal, then having a strategy for attracting younger generations is key.
With defined contribution (DC) pensions becoming the norm and raising the stakes for long-term wealth building, the need for good financial advice among the next generation is clear.
It’s up to us as an industry to find ways to bridge the generational gap and make our services work for younger people throughout the financial life cycle.
Here are five ideas to consider.
- Have a diverse range of advisers
For all the acronyms and technical language, taking financial advice for the first time can be intimidating.
While there should always be multiple contact points with people in your business, being able to match a younger prospect up with an adviser of a similar age can act as a great ice breaker.
It’s natural for people to find others of their generation more relatable, but there’s also a greater chance of common interests the adviser can use to build the close, long-term relationship that’s so important to successful advice.
In a previous column, I explained how firms can go about recruiting younger talent. Take a look if you don’t think your firm is as age-diverse as it could be.
However, good financial advice also comes from experience. Clients knowing that they – or their adviser – can tap into the knowledge of staff members who have got people through periods such as the Great Financial Crisis can act as a great source of comfort on all sides. Don’t be afraid to play on this.
- Be ‘soft’ in your marketing
What strikes me when speaking to end clients is that people seem to care less about investment returns, and more about expert reassurance during uncertain times.
The challenge for many young adults is that they’re so focused on juggling rent and saving for a house deposit, their long-term financial objectives barely get a look in. When marketing to this audience, the key is to focus on the softer questions and subjects that will get people visualising their financial future and the sorts of challenges that could come their way.
Sharing client success stories or personal case studies can be a great way of doing this. By helping prospects envisage their financial ambitions and how others in their situation have attained them, you pave the way for conversations around the role of financial advice in helping them get there.
- Adapt your business model
Most adviser firms’ business models are geared towards clients in the decumulation phase, but it’s important to consider how your service can be tailored to those in the accumulation phase. In reality, quarterly face-to-face meetings aren’t going to add much value to someone who simply needs help learning how to steer the ship long-term.
This starts with having a service for younger clients centred around education. Think workshops covering topics like the power of compound interest and how to decide whether it makes financial sense to pay off your mortgage or invest in an ISA.
To make serving this demographic as cost-effective as possible on both sides, you could also consider having less experienced advisers helping lower-value clients with less-demanding needs, or offering a subscription-based model to cater for those individuals who want to dip in and out when they need help in a specific area.
- Tap into social media
Conventional marketing channels don’t necessarily work for younger prospects. Different demographics and ages require a multi-channel approach. Getting on the platforms that Millennials and Gen Z are using is key. The top social media platforms among Gen Z are Instagram (71%), TikTok (68%), YouTube (68%) and SnapChat 67%, according to research.
I’m not about to suggest posting clips of your team dancing on TikTok, but creating compelling visual content around everyday financial challenges can be a great way of getting in front of younger audiences.
For example, with many young people worried about their earnings in the current environment, one option to consider is sharing a video on TikTok, YouTube, or Instagram, outlining your top three tips for making a salary work harder in today’s economy. To add further credibility, think about overlaying this with a short clip of an existing client explaining how these have helped them in practice.
Elsewhere, ask clients to leave reviews about their experiences on websites such as Trustpilot or Google. Not only will this ensure younger people looking for money support can find you more easily via search engines, but it may also generate valuable content that can be boosted towards your target demographic on social media, helping others understand the benefits of your proposition.
- Think differently when it comes to networking
For all the noise surrounding robo-advice and social media, younger generations still value human connection. This is why, for our advisers, networking continues to be the number one way of connecting with this audience.
Networking doesn’t necessarily have to mean playing golf or standing around at a drinks reception, but rather finding ways to showcase the value of your services in practice. Think of inviting children of existing clients along to meetings for free so they can see what it’s all about or hosting taster sessions for clients of professional connections.
Getting the younger generations engaged with the value of financial advice is not only key to the survival of IFA businesses, but part of advisers’ moral obligation to society.
Use it or lose it: last financial orders before the end of the tax year 2022/23
The tax year is soon to come to a close, and with it, any allowances that may have gone unused. This year is possibly the most important of recent times as a number of important tax changes are coming into force from 6 April 2023. Time is running out to use allowances and give your wealth the best prospects for the year ahead.
Here are the key changes you should be aware of, and where to maximise your allowances before they’re gone forever.
Dividend allowances
The dividend allowance is being slashed in half from 6 April to just £1,000. This will then be halved again from April 2024 to just £500. Above this allowance you pay dividend tax on any earnings. Dividend tax is calculated at 8.75% for basic rate payers, 33.75% for higher rate and 39.35% for additional rate payers, potentially taking a big chunk out of any income that isn’t protected by a tax wrapper.
Where possible to bring forward the taking of a dividend, for example out of a profitable business you have a share in, it is essential to max out this allowance or else face paying tax on those earnings from April.
Capital Gains Tax allowance
The Capital Gains Tax (CGT) allowance is currently set at £12,300 but this is being more than halved to just £6,000 from 6 April. From April 2024 this is going to be slashed even further to just £3,000. Maximising the CGT allowance this year is therefore crucial. You pay CGT when you dispose of an asset that has grown in value, including stocks and bonds, property (that isn’t your primary residence) or even personal possessions such as jewellery, paintings or antiques.
This means if you have any assets that you were considering selling to cash in on the growth gains, then the allowance should be used now before it is effectively gone. This is relevant for assets held outside of a tax efficient ISA or pension as those assets inside these accounts won’t be liable for CGT.
Inheritance and income
Both inheritance tax (IHT) and income tax aren’t having any changes to their allowances or thresholds per se, but the thresholds have been frozen. This means if you receive a pay rise, or assets inside your estate rise in value, then you’ll see less benefit from those increases in earnings or value.
In order to mitigate the worst effects of the threshold increases, then for IHT it can be a good idea to bring forward some gifting where possible as you get £3,000 a year to gift without IHT liability. You can carry forward this allowance but only for one tax year – so if you haven’t given a gift in either 2021/2022 or 2022/2023 then you could potentially gift away up to £6,000 before 6 April. If you are married, then combined this could be as high as £12,000 over two tax years.
Use your ISA allowance
The ISA is one of the least complicated investment vehicles for our long-term wealth and one of the most generous is tax-exemption terms. The allowance is £20,000 a year, it can’t be carried forward, and anything inside the ISA is protected from any form of tax including the aforementioned CGT and dividend allowances. This makes the ISA allowance extremely valuable in wealth planning terms and should be taken advantage of where possible.
If you’re looking to mitigate CGT, for example, you can use a method called ‘bed and ISA’. This is where you own assets such as stocks or bonds outside the ISA wrapper – you sell those assets then use the cash to rebuy inside the ISA, effectively inoculating your money from tax liabilities.
Investors are prohibited from buying back assets within 30 days of selling them under CGT rules (in order to prevent gaming of the system), but there is an exemption if you sell them outside an ISA then reacquire them within one. If you have assets outside an ISA, and unused CGT and ISA allowance, then it’s a no-brainer to do this to save on hefty tax liabilities. If you have children under 18 and you’re considering strategies for passing some of your wealth on to them, a Junior ISA (JISA) can be a great product to kick-start this too. Unlike a regular ISA, the JISA has an annual contribution limit of £9,000.
Take advantage of pensions allowance
Pensions allowances are also very generous, with up to £40,000 per year available (assuming you haven’t triggered the money purchase annual allowance), plus tax relief on anything you put in. The tax relief is perhaps the most attractive aspect of a pension as it means you have more money to start with than an ISA as you’re bypassing income taxes using the relief.
However, pensions have more tax implications when it comes to withdrawal which are worth discussing with an adviser where possible.
Now is the time to take advantage of left-over tax allowances that you have yet to use. We are here to advise you, so please get in touch.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 21st February 2023.
Bank of England hikes rates again – where does it go next?
The Bank of England chose to hike rates again on 2 February 2023 by 0.5%, bringing the headline base rate to 4%.
The hike brings the base rate to its highest level since November 2008 – and marks ten consecutive hikes since January 2022. The bank has hiked rates to a 14-year high thanks to rocketing inflation which has taken hold of the UK and the global economy in the past 18 months.
Inflation has soared thanks to a mixture of factors including the reopening of the economy after more than a year of COVID-19 related lockdowns, which caused global supply chain issues. Unlocking the economy also unleashed pent-up cash held by people who were unable to spend on things like eating out, holidays and other out-of-home items. Inflationary pressures were then severely exacerbated by Russia’s invasion of Ukraine, which triggered an energy crisis across Europe which filtered out into the rest of the world.
Why has the Bank of England hiked again?
The latest inflation data from the ONS suggests that we might have reached a peak for accelerating price rises. October 2022 saw CPI inflation hit 11.1%, but this has waned slightly, down to 10.7% in November and 10.5% in December.
While these falls are small, they do give a small amount of hope to the economy that pressure might be beginning to ease. However, the Bank of England has maintained its policy of hiking rates despite this easing. There are a few reasons for this. Firstly, the jobs market remains really robust, with little signs of rising unemployment. This sustains demand and can help to keep prices rising more strongly than otherwise. Secondly, wage rises are still relatively strong. Although on average workers are not getting pay rises that beat inflation – currently 6.4% for regular pay – this is still relatively high in historic terms. Like employment this means that inflation overall could prove to be ‘stickier’ than otherwise as people’s pay packets are boosted.
Finally, core inflation – which measures less volatile segments of price rises – remains relatively high. This measure excludes volatile prices such as food, energy, alcohol and tobacco. Both core and services inflation rose in December, despite the headline fall. This tells the Bank of England that important parts of the economy are still experiencing rising demand and a shortage of provision for that demand – the basic cause of inflation. The Monetary Policy Committee (MPC) will have looked at these factors to decide where it should go with its base rate, and this is why it has chosen to continue hiking.
Where next for rate hikes?
The Bank of England has kept its cards fairly close to its chest on what it will do in subsequent months this year in the face of inflation. Much depends on changing economic conditions. For its forecast, it sees the UK economy entering a shallower recession than previously estimated, which would suggest it expects rates will have to stay higher for longer to tame price rises. Ultimately, the Bank of England has a mandate to bring inflation to a level of 2%. As long as inflation persists at higher levels, it could be drawn to more hikes to temper the economy.
However, looking at important factors in the current inflationary mix suggests that price rises could soon fall quickly. Energy prices have come way down from their wholesale peak in June 2022. While it takes time for this to feed through into the wider economy and ultimately our bills, energy has a big influence on prices as almost all businesses need to use energy to provide the goods and services they offer, while households are reliant on it to run their own homes.
What does this mean for your finances?
Higher interest rates have a number of effects on personal finances and wealth. The most obvious is higher debt costs. As the Bank of England hikes rates, financial firms are obliged to raise the interest they charge for borrowing. This includes everything from mortgages to loans and credit cards.
Mortgages are the most obvious place where rates visibly rise. However, most households are on fixed rates. Those households that are facing coming off their fixed rates this year are likely to see their monthly payments soar if rates continue to persist higher. After the disastrous mini-budget of October last year, some of the so-called ‘moron premium’ added to average rates has come down slightly. However, rates are still higher than they might have been.
Another important area that is affected is savings and investments. Savings accounts are offering better rates than previously, but largely still well below inflation. This means that while a savings account might provide a much better headline rate than in the past, it still isn’t preserving the value of that money.
Investments had a tough year in 2022 as they adjusted to the new conditions. However, higher rates offer opportunities in new areas such as the bond market which now has attractive valuation levels. Equities have also had a stronger start to 2023 as markets have priced in some of the worst effects of rate hikes.
If you would like to discuss this or anything else not mentioned in this article, don’t hesitate to get in touch.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 13th February 2023.
Why making a will matters
Making a will might not be at the front of your mind. Nevertheless, if making sure your finances are properly managed, then ensuring you have one in place is a crucial aspect of good financial health.
Wills can be a tricky subject matter. They force us to confront one of the most difficult issues in life – what to do with your worldly possessions when you’re gone. However, it is an essential matter to take care of, especially to give your loved ones peace of mind should the worst happen. It will also ultimately provide your family with clarity over inheritance and your wishes. A will can prevent messy issues and even disputes over what happens to your estate.
If you die intestate, there are rules that govern how an estate can be allocated, which can lead to suboptimal outcomes depending on what you want to happen. This particularly matters for couples that are unmarried, as the partner could conceivably be left in the cold without a will to provide for them. There are also potential tax implications if an estate is not managed properly after death.
If you don’t draft a will, your spouse or civil partner (if you have one) will inherit your personal possessions and the first £250,000 of your estate, plus half of whatever is left after that. If you have children, they will then be entitled to the rest. If you don’t have a spouse but do have children, the estate will be divided equally among them. If you don’t have children, whoever are your nearest relations will inherit instead.
How to make a will
A will is a legal document, so ultimately writing what you want down on a piece of paper and signing it won’t be enough. However, making a list of your wishes is a good place to start. It isn’t an obligation to use a solicitor to draw up a will. To do so can be as simple as writing your wishes up and having two people witness you sign it. This must be done voluntarily and without pressure from a third party.
You can also use professional will writing services, charities such as Will Aid or your bank (although not all offer such a service). The costs of this will vary depending on the service offered. Beneficiaries, including partners or children, should not act as witnesses as this can lead to disputes down the line. You will also need to nominate executors to carry out your wishes. This can be a spouse, child or children or another trusted friend or relation.
It is a good idea to keep your will up to date as well. This should be done every five years, or any time there is a significant change in your financial or lifestyle circumstances. Alterations should not be made to the original document. You can add supplements, called a ‘codicil’ for minor changes which should be signed and witnessed in the same manner as the original will. Big changes however, such as divorce or remarriage, generally require a new will to be drafted in toto.
Once your will is drafted it is important to keep it somewhere safe, and ensure that the executors of the will know where it is located and how to access it (if it is in a place such as a secure lock box or safe).
How a financial adviser can help
A DIY will might seem simple, but depending on the complexities of your wealth and possessions, it is advisable to consult with a professional, be they a solicitor or a financial adviser. A financial adviser can help you to make a list of the wealth that sits within your estate, what should or should not be included in the will and how it should be apportioned. This is particularly relevant when considering the implications of inheritance tax. An adviser can help to assess the best way to share your estate that reduces IHT liabilities. They can also advise you on important exemptions such as gifting throughout your lifetime or giving money away to charity, plus the rules around ‘potentially exempt transfers.’
A financial adviser can also help you to structure your wealth in a way that minimises IHT liabilities and will be able to advise you on limits relating to property wealth and other allowances. Tax wrappers such as pensions can help to mitigate some of the liability, but come with rules that need to be carefully followed.
The complexities of getting a will right make it a potentially crucial document in your financial planning. For this reason, it is essential to consult a financial adviser to ensure your will is drawn up with the most careful consideration possible.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 13th February 2023.
Government to accelerate State Pension age uplift - could you be affected?
The Government is looking to bring forward the date at which the State Pension age increases, according to a report from Money Week.
Under current plans the State Pension age is set to rise from 66 to 67 by 2028. The next increase is currently set for 2046, when the limit will rise to 68. However, under plans being considered by the Government, the next increase could be brought forward by over a decade to as early as 2035. This means anyone aged under 55 now could face waiting longer to receive their State Pension, depending on what year the Government brings forward the age uplift to. Those born after April 1971 will already have to wait till age 68 under current rules.
Why is the State Pension age under review again?
The State Pension is one of the largest single costs the Government faces in its annual budgets. This is why in recent years it has pushed up the State Pension age to save on costs, particularly as life expectancy has soared for men and women in the years since it was introduced. Birth rates have also fallen, leaving less people to pay the taxes to fund an ageing population.
Conversely, critics of the Government’s new plans have highlighted that life expectancy levels have in fact reversed in the past few years, meaning the projected future costs are lower than anticipated. The Government has a life expectancy calculator you can check here.
With recent economic events the Government is finding it hard to plug shortfalls in its budget, with a combination of low growth and high debt costs squeezing its spending power. While politically difficult, increasing the State Pension age is one way for it to save money. The Government is now set to publish its State Pension age review in May.
What should I do?
While many people see the State Pension as a right they accrue through a lifetime of work and paying taxes, there is no ‘pot’ of money being saved into. The Government pays for the State Pension with taxes it rakes in each year from those in work. This is why it doesn’t have the funds to meet commitments it previously made, and why it is backtracking on those historic pledges.
The message here is that you should not rely on receiving a good State Pension income in retirement. While it can help, there are things you can do now to plan to build your wealth so as not to be dependent on the benefit in old age. This includes saving into pensions, ISAs and other tools for building long-term wealth.
If you would like to discuss your options, don’t hesitate to get in touch.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 13th February 2023.
Four new year's resolutions that every adviser should consider
This article first appeared in Professional Adviser.
Help is here to get your business off to a flying start in 2023.
January might be coming to an end but that doesn’t mean it’s too late to set some new year’s resolutions.
From cutting down on chocolate to taking up a new hobby, the start of a new year can be a great time for us to step back and look at what we want to achieve in the year ahead.
But it’s not just our personal lives we should be thinking about. For IFA business owners, this can be the perfect time to evaluate where you want your company – and clients – to get to over the next 12 months.
With this in mind, here are some new year’s resolutions I believe every financial adviser should consider making for 2023.
1. Prioritise protection
Professionals like mortgage brokers are known for being proactive when it comes to selling protection, but this isn’t always the case with IFAs.
This is often because advisers don’t want to seem like they’re pushing products, but there has arguably never been a better time to reassess clients’ protection needs. Or at the very least, look at re-broking existing products.
After all, rates have generally improved and we’re all looking to save money and safeguard ourselves against any future challenges that may lie ahead.
That client who’d never considered life cover may welcome your help in navigating the market now they’ve had their first child, for instance. At the same time, one of your older clients may be very glad to save £ per annum on an existing policy amidst the current cost-of-living issues.
2. Benchmark your business
As well as reviewing client needs, now is an ideal time to undertake an assessment of the business itself. Particularly with the FCA sharpening its focus on Consumer Duty, it’s well worth getting on the front foot with an honest review of your firm; in some ways a peer comparison.
There are many ways of doing this, from comparing assets under management year on year to the number of clients being serviced per adviser. Another option is to look at how your firm stacks up in different areas outlined in industry benchmarking reports, such as those published by the PFS.
A benchmarking exercise will no doubt throw up some potential red flags that must be sorted, but also opportunities to drive operational efficiencies and enhance client service.
3. Bring external speakers into your events
With the cost-of-living crisis, and resultant mental health issues, continuing to dominate the headlines, building some features designed to support clients’ broader wellbeing into your service could prove to be very valuable.
During the pandemic, some of our advisers began inviting those who could talk sensibly about mindfulness in relation to money (and more broadly) along to their workshops and seminars, with success. Why not try this for your own events this year?
At a time when clients are inundated with doom and gloom in the news, initiatives like this can equip clients with practical tools to help them gain some perspective over their financial plans. Aside from this, the ability to understand our own behavioural triggers can add value to all of our lives.
4. Track trends in referrals
It’s very typical for advisers to see their business as a success because they only need to rely on referrals. But in taking this approach, you never know where new business really comes from – and what you might be missing out on.
Even if your business doesn’t have great MI, you can build a step into your onboarding process whereby new clients tick a box to say how they found out about your business.
With this one simple step you could build some valuable data. You might find, for example, that most referrals aren’t coming from existing clients like you’d thought, but through professional connections.
With the cost-of-living crisis affecting everyone, including advisers, it often occurs that the first thing to be cut in times like this is the marketing and business development spend. By tracking referrals, you can ensure any resource you do have is being directed towards your ‘sweet spots’.
At the very least, you’ll know who gets the good champagne come Christmas time!
If you want to get your business off to a flying start in 2023, then be sure to get on the front foot in these four areas. Being prepared is crucial to avoid missing out on some solid business development opportunities.
Four issues facing advisers in 2023
The past year has been testing for those looking to build wealth.
Soaring inflation and interest rate hikes have dominated a significant proportion of IFAs’ conversations – with even well-off clients becoming uneasy about their financial future in some cases.
But what can we expect in the coming 12 months? Speaking with our own advisers, there are four key issues on their radar.
Car finance rates rising: what’s the best way to pay for your next car?
Prospective car owners are finding that buying their next vehicle isn’t as straightforward as it once was, thanks to rising interest rates.
The economy has benefitted from over a decade of low rates, making car financing affordable for many. But those rates are now rising considerably, with the indication that the Bank of England isn’t going to stop hiking yet. With that in mind, buying a car with finance isn’t as good value as it used to be. But there are still some good options for prospective owners.
Here are some key ideas to consider when deciding on your next car.
PCPs
Personal contract purchases or PCPs have become a ubiquitous way to buy a new car in the past few years.
Typically, these kinds of deals mean that you pay lower monthly instalments than hire purchase or via personal loan, making it more affordable for families.
But the upshot of this is you never really own the car. At the end of the deal (typically around three years) you either:
- Pay the ‘balloon’ payment – a lump sum – and take full ownership of the car
- Return the car to the dealership and get a new PCP deal with a new car
- Return the car and walk away.
The trouble with option three is that, typically, the dealer will become a lot more officious about any scratches, dents, or mileage overuse and is likely to charge you fees. It’s in their interest to see you roll into a new finance deal.
As interest rates rise, credit on PCP deals is getting more expensive. This means opting for longer four-year contracts or facing higher monthly repayments. According to data from motoring group What Car, PCP costs have risen around 40% since 2019, reflecting a tight car market and rising interest rates.
Recent stats from automotive IT firm NTT Data UK&I suggest that the majority of people who have PCP contracts currently are now likely to try and refinance their current cars when their deal comes up rather than opt for a new PCP loan with a new car.
Hire purchase
Hire purchase is the more traditional route for anyone looking to buy a car and comes with less caveats. Once you’ve paid off the HP loan, the car is yours and there is nothing further to worry about.
But this means that monthly payments will generally be higher than for PCP. HP loans are also impacted by the rising bank rate, which means these deals are getting more expensive too.
Leasing
Leasing a car is different from PCP or HP because you never actually have the opportunity to own the vehicle. In effect, you are paying a monthly rental fee for a fixed period, after which you give back the car and walk away.
The benefit of leasing deals is that there is no credit calculation made on the car, so these kinds of deals aren’t directly affected by rising interest rates, according to Leasing.com.
That being said, the car market has experienced very unusual circumstances in the past 18 months thanks to supply chain shortages. This means new and used car prices have gone up, which in turn has made leasing more expensive.
Unsecured personal loan
An unsecured personal loan can be a good option when looking to buy a car, especially for those of us who don’t trust dealers to offer the best deal. Getting an unsecured personal loan will require you to shop around for the best deal available and make an application.
Once you’ve been successful and the loan has been given to you, you’re free to use that cash to buy a car. But like the other forms of credit, this market has also seen interest rates go up in the past few months.
There’s another caveat here that your credit rating needs to be in good shape in order to secure a good deal. MoneySavingExpert has a great loan calculator that can help you see which deals you might be eligible for.
It’s also important to remember with these kinds of deals that the APR you see for the loan after a soft check might not be the one you actually get after making an official application. This is because loan companies only need to offer that rate to 51% of their customers in order to be able to advertise it.
If you do go down this route and find the APR you’re offered wasn’t what you expected, you’re under no obligation to accept it – just make sure you tell the provider you’re not interested in moving forward with the application. However, the hard search made on your credit report will appear, so making more applications could harm your credit score.
Buy outright/buy cheaper
Buying outright is perhaps the best way to go if you have the cash funds available, as it eliminates a lot of the variables mentioned above.
That being said, buying a new car is one of the worst ways to use your money in investment terms. According to The AA, new cars lose around 60% of their value (assuming an average mileage of around 10,000 miles a year) in the first three years out of the showroom, meaning the cash you’ve put into that vehicle is essentially gone forever.
There are however variables to this including condition, make and model, fuel type and other factors that will affect the price over time, with some holding up better than others.
With that in mind, lowering your expectations and going for a used car could be the soundest financial decision of all. Older cars that have some mileage on them tend to depreciate in value much more slowly, and in many cases these days you’ll find 4–5-year-old vehicles will have many of the bells and whistles you might expect in a brand new one.
It is also important to remember with cars that the cost isn’t just in the price of the vehicle. Running costs of fuel, insurance, maintenance and repairs all factor in to the ownership of a vehicle, so finding the right one that doesn’t keep you reaching for your wallet is key.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 13th December 2022.
Autumn Statement 2022: everything you need to know for your money
After a controversial mini budget in September, new Chancellor Jeremy Hunt announced a series of measures in his Autumn Statement on 17 November.
The update contained a raft of measures that will affect households – some quickly and directly and others obliquely, affecting your wallet over time.
Here is a breakdown of everything you need to know that is changing.
Income tax – the thresholds at which we pay income tax have been frozen for longer. This means the personal allowance will stay at £12,571 and the higher rate of 40% which kicks in at £50,271 will remain until 2028 at least. The 45% additional rate has been lowered from £150,000 to £125,140. This will take effect in the new tax year on 6 April 2023.
Dividend allowance – the dividend allowance will be slashed by 50% – from £2,000 to £1,000 from the new 2023/24 tax year. It will then be cut even further to just £500 in April 2024.
Capital gains annual exemption – the capital gains tax (CGT) annual exemption is being more than halved from £12,300 to £6,000 from the new tax year. This will be halved again in April 2024 to just £3,000.
National Insurance – the current thresholds, like income tax, will stay at the same level until 2028.
Inheritance tax – the thresholds for inheritance tax (IHT) will stay the same until April 2028. The nil-rate band for IHT is £325,000 with an additional residence nil-rate of £175,000. The taper for the residence nil-rate band kicks in at £2 million.
Stamp Duty – Stamp Duty Land Tax (SDLT), which was cut in the mini budget in September, will retain the new nil-rate threshold of £250,000 for normal buyers and £425,000 for first-time buyers. But this will only remain in place until March 2025 at which point the thresholds will revert to their previous levels of £125,000 and £300,000 respectively.
How will the changes affect your wealth?
As mentioned above the changes to financial rules by the Government will have some quick effects on your money, while others will take more time to be felt.
For instance – the dividend allowance and CGT exemption cuts will be felt quickly, and measures will need to be considered to mitigate the impact. With little time left to benefit from the higher allowances, anyone with tax-free allowances in pensions or ISAs should consider using those up if possible.
The changes to income tax – or lack of changes – have a more oblique impact on your earnings. While there are no changes to the thresholds, this will mean that whenever you receive a pay or income increase you won’t feel as much benefit as you might have previously.
This is especially pernicious in a high-inflation environment as pay rises tend to be pushed higher to meet living costs. This just serves to send more money towards the Treasury, especially as people are tipped into higher tax bands.
Other moves – such as the sunsetting of the Stamp Duty Land Tax (SDLT) nil-rate band levels – have been criticised by experts who warn that setting an end-date for such measures in the future sets a target time for sellers and buyers which could cause chaos in the market.
What’s clear from these measures is that managing money and wealth isn’t getting easier, making financial advice more relevant than ever. Don’t hesitate to get in touch if you want to discuss your options.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 13th December 2022.
Year ahead for personal finance: what will happen to your wealth in 2023?
The past 12 months have been a particularly turbulent time for our finances. Soaring inflation and consequent rising interest rates have been the theme of 2022. But is this set to continue?
Inflation has affected nearly every aspect of our lives. From how much we pay for groceries, to heating our homes and our investment portfolios – nothing is left untouched in financial terms.
But what can we expect in the next 12 months? No two years are ever alike so the challenges ahead will be different from those we have had to face in 2022.
Here are some of the major themes to be aware of.
Prices
Inflation was the watchword of 2022, and this doesn’t look like it is going to get much better very quickly.
In global terms the outlook is beginning to vary, with signs that price rises are beginning to slow in regions such as the US. But in Europe it is unlikely to get much better quickly.
This is because the inflation crisis in Europe and the UK is much more closely associated with energy prices, than in the US where inflation is predominantly a hangover from the COVID-19 pandemic.
Because of the war in Ukraine, energy prices are going to stay higher for longer thanks to limitations on the supply from Russia, on which many European countries had become all too reliant upon in the past few years.
High energy prices are pernicious for the economy because they impact just about everything else in our lives – from powering and heating our homes to the input costs of making and transporting the food we eat, or just about anything else – it all requires energy. If that energy costs more, so will everything that relies on it.
In terms of practical forecasts, the Bank of England sees the consumer price index (CPI) inflation beginning to fall slowly from early next year – but that it will take around two more years to reach its target level of 2%.
So, expect pressure to begin easing, but to persist for some time to come.
Interest rates
This forecast will have direct implications for the level at which the Bank of England sets the base rate. The Bank has hiked the rate hard in the past few months to try and get inflation under control.
However, now it sees inflation beginning to slow its progress, it’s likely that its rate hiking path will also start to ease, as it waits to see the effect on the economy. The Bank has warned that it thinks investment markets are pricing in too many hikes, but those expectations have yet to come down.
The current expectation is that the Bank of England will reach its ‘terminal rate,’ i.e. the high point of interest rates in the cycle of rises, at around 4.25% – it is currently 3%. So, expect more rises to come, with more expensive credit, mortgages, and better savings rates.
Economy
Interest rates and inflation have a major impact on the health of the economy. The Bank of England has already predicted that the UK economy is in a recession, but at the time of writing this is unconfirmed.
An official definition of recession is two consecutive quarters of negative economic growth. The UK did contract by 0.2% between July and September, according to the Office for National Statistics.
If the economy does continue to contract, inflation could come down more quickly than expected as people stop spending to protect their core assets. Unemployment could also begin to rise, something we’ve yet to see much sign of despite tough economic conditions already prevailing.
The Bank of England ultimately predicts that we’ll go through one of the longest economic recessions on record. But the good news is that it expects this recession to be relatively shallow compared to others, with GDP ultimately not falling more than 2.5% in its projections. By contrast the Great Financial Crisis saw the UK economy fall by around 6%.
Taxation
The health of the economy has a direct impact on how the Government plans and organises its economic plans and taxation measures.
As we’ve written elsewhere this month, the Government has hiked taxes and cut allowances already to help it balance its budget.
But if economic conditions worsen then the Government might feel compelled to tighten tax rules further in March to bring in more money.
There has been much debate about whether or not raising taxes as the economy contracts is a good idea, but the reality is that the Government has to pay its bills or else cut services. With its debts getting more expensive thanks to rising rates, it faces little else in the way of choices.
Housing
The property market is one of the most high-profile casualties of rising rates, and has been further impacted by the financial and bond market implications for mortgages caused by the disastrous mini budget in September.
According to Halifax Bank, house prices fell 2.3% in November, the biggest monthly drop since the financial crisis in 2008.
Unfortunately for homeowners looking to sell in the next year, this situation is unlikely to improve significantly. That being said, mortgage rates have improved somewhat since the worst effects of the mini budget eased, making it slightly easier for prospective homebuyers.
But the overall economic issues, inflation and interest rate rises combined could depress prices for the foreseeable future, after many years of explosive growth.
Investing
It has certainly been a tough year for investments, from equities to bonds – nothing has gone unaffected by rising rates.
While it is impossible to predict where investment markets will go, what is consistently true is that there will always be good opportunities available, especially for those that use carefully planned wealth management to achieve their long-term goals.
It’s important to remember that building wealth through investing is a long-term pursuit, so the short-term impacts of market movements have to be managed with a bigger-picture perspective in mind.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 13th December 2022.
Christmas budgeting: 12 tips to save money during the holidays
Christmas is just days away, but there are still ways to save ahead of the holidays. It’s also a great time to think about next year too.
There’s no doubt that Christmas is an expensive time of year. From turkeys to crackers – gifts and travel, we spend a lot to be with our families and friends at this time of year and that puts pressure on everyone’s budgets.
With inflation rampant and energy bills getting higher as the weather gets colder, it pays to keep saving money at the front of our minds as we go through the holidays.
But it’s not just this year you should be preparing for – the best time to think about how to make Christmas 2023 more affordable is now!
Here are some ideas to help your money go a bit further.
Christmas 2022
- Set expectations
There is understandably a lot of pressure at Christmas to buy lots of gifts, get your loved ones the latest gadgets and generally to spend a lot of money. It has become a highly commercialised holiday.
But this year, more than ever, it’s important to set the right expectations. If you feel like buying lots of gifts for all your friends and loved ones is going to stretch you too far, it’s important to talk to them so they understand why you might want to go more low-key.
Good alternative solutions include Secret Santas, setting price limits for gifts and opting for ‘free’ gifts such as giving each other time together instead.
- Use cashback and vouchers
Cashback is an easily forgotten trick to save money when making purchases. Using websites such as Quidco and Topcashback can save you valuable pounds when buying big ticket items at a variety of high street retailers. It can also save money on the Christmas food shop.
There are no catches either, as the retailers are paying the cashback firms to bring them your business.
- Don’t overspend your salary
It’s quite common for salaried employees to get their pay early before Christmas. Employers do this as a perceived act of kindness to help people through the holidays.
But this act of kindness can come with a sting in the tail because it accidently lengthens the time in which you have to stretch one month’s pay to the end of January (depending on when you normally get paid).
If you do get your salary early this month, make sure you’re planning for those days in January long after Christmas is over.
- Make sure you’re getting a good deal
It’s easy to get sucked into the hype when retailers push big ‘sales’ to shift products. This becomes all the more true the closer Christmas comes and the more products they have unsold.
But these discounts aren’t always as they seem. Make sure you shop around for the best price on the product and use services such as Camelcamelcamel – which can tell you if products on major sites such as Amazon really are a good price.
- Look for second hand
With the cost-of-living crisis, the second-hand market for all sorts of products is looking pretty rosy. People are looking to raise a bit of extra cash for their stuff, and there are many great services to match sellers and buyers.
Services such as eBay and Facebook Marketplace are the go-to, but other upstart apps such as Depop and Vinted are soaring in popularity. Be prepared to haggle though, and don’t send any money without being 100% certain you’ll get the item. This is especially true on Facebook Marketplace, where there’s little buyer protection in place.
- Don’t overbuy
It’s easy to think you need reams and reams of food, drink, and other consumables over the holidays. Afterall, what is Christmas for but a bit of indulgence? It’s also easy to think that shops will be closed, so you need to stock up as much as possible.
But the truth is that most retailers are open again by Boxing Day, so not overbuying could save you some money overall. A quick trip to the supermarket to top up on the food and drink after Christmas could also yield some big discounts, as shops look to shift unsold items too.
- Buy at the right time
Similar to the above – buying in advance can be a counterproductive strategy. As we get closer to the holiday days, shops will put more items on discount as they look to clear shelves.
Just be careful though as this can be risky if things go out of stock completely. This is especially true this year with a turkey shortage on the cards. But, if you have a good selection of supermarkets in your local area, trawling through them can really do the trick.
- Do online comparisons
Another supermarket trick people often forget is to do a comparison on the prices of essential Christmas goods. As above, you can trawl around local shops looking for the best prices, but it’s possible to do all that from the comfort of your own living room.
Sites such as Mysupermarketcompare do a great job of showing what items are most keenly priced and where, so do your research and save!
- Have a potluck
Christmas dinner can be an onerous task if you’re the host. It costs time and money and burning the pigs in blankets will not help anyone’s stress levels!
Potlucks are a potential alternative idea for Christmas dinner. Popular in the US, especially around Thanksgiving, it involves all the guests at your big dinner doing one dish themselves. This relieves some of the cost (and stress!) of hosting.
Christmas 2023
- Christmas in January
Christmas in January?! It’s the best time to start preparing. With the holiday season, crackers that cost £30 could cost £3 as supermarkets offload everything that didn’t shift.
The same goes for things like decorations, toys, electronics and pretty much anything else. Save your money by buying in advance and you’ll be set for the next one before you know it.
- Fund your gifts with clutter
It’s a little late to be paying for gifts with things you sell this year, but this is a great strategy to cover costs for 2023. Having a clear-out of items you don’t use or want any more is a great way to raise some extra cash in any event, but that money can be put towards the next Christmas pot to alleviate the costs.
- Save a year in advance
One of the best long-term strategies for paying for the costs associated with Christmas is to start early. With interest rates at more than decade highs, savings rates haven’t looked so good in a while.
There are a number of ways to go about saving money for next year. If you have a lump sum, a 12-month savings account can generate a return of around 4.35% at the moment. If you want to save small amounts regularly, an interest-paying current account could be a great option too.
Christmas savings clubs are an option too but come with some risk attached to them – sometimes providers go bust, leaving families without money as these schemes are generally not protected in the same way as normal savings. They can also put limits on where you spend the money, making it quite inflexible.
Generally, then, it is better to go DIY and put the money into a saver that will give you a nice little return for something extra next year.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 13th December 2022.
NS&I hikes rates again – are they a good deal?
National Savings & Investments (NS&I) has upped the rates on its savings products again in the wake of the Bank of England hiking the bank rate on consecutive occasions.
NS&I now offer a Direct Saver with a return of 1.8%, up from 1.2% and 1.75% on its Direct ISA. Income bonds now also offer 1.8% returns – the highest level since 2012. Earlier in October it also increased the prize fund rate from 1.4% to 2.2% in premium bonds.
This is not a guaranteed level, but the average rate it says savers can now get based on prize wins in its premium bonds. That means you could win the top £1 million prize – or nothing at all. In practice the 2.2% rate is the average of what most savers will see as a return on their cash each year.
So, with these rates now at a decade-long high, is it time to put our cash back in the national savings bank?
Better rates elsewhere
NS&I holds a special place in the public’s imagination. Premium Bonds in particular are popular because of the prize-draw element of the savings product.
But in reality, the firm’s rates are inferior to other savings providers by some margin.
For example, at the time of writing, the best easy access account rate comes from Marcus By Goldman Sachs, with a 2.5% rate of interest on its savings account and its cash ISA, and no notice necessary to withdraw your money.
If you save for one year, you can get 4.6% from RCI Bank. For a five-year fix this rises to 4.95% from the same firm. If you want to shelter cash in an ISA, you can get a one-year bond from Aldermore for 3.65% or a five-year cash ISA from Leeds Building Society paying 4.31%.
It goes without saying then that NS&I is definitely not the most competitive. But it is also true that it will pay you a better rate than most high street banks, where you might hold your current account.
The interest rate outlook
The issue with these rates is while they look much better than in recent years, they still sit way behind inflation, which currently stands at around 10%. If you plump for the top-rate one-year bond, you’re still seeing your savings devalue by around 5.5% in a year.
On 3 November, the Bank of England staged the largest single rate hike since September 1989, hiking 0.75% and taking the base rate to 3%. This will no doubt push savings rates up even further.
But if we look into the detail of what its Monetary Policy Committee (MPC) said about the trajectory of interest rates, it believes financial markets are now overpricing its interest rate path, thanks to softening economic data.
What does this mean in practice?
Despite the big fresh hike, many firms that price their products on interest rate expectations, such as savings and mortgage providers, may now be overestimating how high the ‘terminal’ bank rate will go.
This terminal rate is essentially the high-water mark for the actual bank rate. If the economy is now largely overestimating this high-water mark, interest rates, counterintuitively, could now fall -or at least moderate – somewhat.
In short, this means that interest rates on financial products could already be near their high point and will at least remain well-short of inflation until price rises come back to normal levels, something the MPC only sees happening in 2024.
In the short term, having some cash set aside can be a good tool for anyone building wealth. See our article here on that. But in practice, investing still offers the best route for anyone thinking about long-term wealth growth.
Although investment performance is not guaranteed, it has generally been a better tool for wealth growth over a long-time frame.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 9th November 2022.
How to protect your wealth in tough economic times
We’re not yet at the end of 2022 and it’s clear it has been a tough year for investors.
A toxic cocktail of inflation, rate hikes, quantitative tightening and Government instability leading to tax hikes has combined to create one of the toughest climates in decades for anyone looking to build their wealth.
But while it has been a difficult climate for many to deal with, there are some key measures anyone can take to protect and improve their wealth in such times.
The key to this is effective and active financial management and getting the right advice at the right time. Here are some ideas.
Hold some cash
This is a very basic idea, but it needs to be reaffirmed. Have a cash buffer. If you’re younger, have a family with dependents to look after, bills and a mortgage to pay it is essential to have a rainy-day fund to protect you in the event of a job loss or other problem that could leave you without an income or needing to pay a big bill.
If you’re in work, a rule of thumb is to look at your overall monthly outgoings and consider saving in cash up to a level of three to six months cover. You might want more or less, but consider how quickly you think you’d be able to get a new job and have that regular income coming back in.
If you’re in work, it’s also essential to have income protection plans in place and life insurance were the worst to happen. The younger and healthier you are, the cheaper the policy will be for you.
If you’re retired or not reliant on a wage for your living costs, then a cash buffer is really important in volatile markets. This is because if you’re using your wealth to pay for your cost of living, having to sell out of an asset when valuations are down will bake in losses permanently. Having cash to draw on is important for this in the short term.
Of course, holding cash is always at risk of devaluation thanks to inflation. This is an acceptable risk though with short-term framing for the use of this cash. To mitigate it, spread the money into savings accounts that pay decent rates. Put some in an instant access account and others in longer-time releases to benefit from better rates.
Savings rates in cash accounts are still well behind inflation but are better than they were even just a few months ago.
Beyond that if you’ve already got that cash buffer in place, top it up to an equivalent level to match your rising costs each year – or by the level of inflation if that’s easier to figure out.
Pay off debts
Debt in the current environment can be particularly toxic, but it falls into a couple of different camps.
In the past decade the economy has been largely fuelled by cheap debt. We’re used to seeing lurid stories of companies like Deliveroo taking payment by credit instalments for a pizza.
In short, it has been really easy to take on new debt. This era is coming to an end with rising interest rates. Rising rates – by design – make debt more expensive to manage. But there’s a couple of different kinds of debt to worry about here.
The most painful and urgent to fix is credit card and other unsecured debts which see rates move freely. If you have these kinds of debts paying them off should be prioritised over saving because the cost is simply going to get harder to manage.
Rising rates don’t just affect credit card APRs – they also reduce the availability and quality of deals such as balance transfer cards. In short, it’s time to kick the debt habit.
Fixed debt such as mortgages and loans function slightly differently though. Loans will often have a fixed rate which makes it more manageable to pay while mortgages come with fixed terms too and should be manageable as long as you’ve got time left on your deal.
Regular contributions
Once your cash position and debt levels are in a good place – think about the state of the market. While performance is never guaranteed, as global economic growth has progressed in the last century, so have investments in the markets that represent it.
If your investment values are down, this is ok. Generally, as markets recover so do investments.
But making continued regular contributions or even increasing your contributions can be a good strategy in this environment as it takes advantage of cheaper valuations and smooths out volatility in your portfolio through pound-cost averaging.
With that logic in mind, when asset prices are depressed, it can present a considerable buying opportunity with a well-thought-out strategy in mind.
Tax sheltering
We’re in very specific economic circumstances at the moment. With high Government debt levels and little in the way of leeway for it to borrow on international markets to fund its agenda, tax rises are coming.
That makes careful tax planning extremely important. Using up allowances for ISAs, pensions and other useful schemes are a great way to soften the blow any taxes rises might bring. But the rules are potentially changing quickly as a result of Government instability, making considered planning tricky.
Tax planning can be a complex process, so unless you’re well-versed in tax laws and financial planning, it’s probably best to get advice to ensure your wealth is working as hard as it can be within the rules.
If you would like to discuss this or any of the other themes expressed in this article, don’t hesitate to get in touch.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 9th November 2022.
Energy shortages: can you get paid to use less electricity this winter?
The energy crisis has put extraordinary pressure on household budgets as the price of gas has soared this year on the back of the war in Ukraine.
As a result, the Government has been moved to take steps to soften this blow for families who might otherwise face difficult spending choices.
Among help already in place is the Energy Price Guarantee which is designed to keep average household bills around £2,500 per year this winter, with a cap on the unit costs of the energy each home uses.
Plus, families will also be receiving a £400 rebate through their direct debits, paid monthly. There is also more targeted help for pensioners and those on benefits.
But another scheme is being launched that could pay households to use less energy still.
National Grid Electricity System Operator (ESO) is launching a scheme which would pay households with a smart meter to use less energy, by for example shutting off appliances such as tumble dryers and washing machines, at peak hours.
The National Grid ESO is one of the operators of the energy network infrastructure in the UK. It works with suppliers such as British Gas, which administer the process of providing energy into homes.
Why is this happening?
The issue the UK is facing is worse than just high prices at the moment. Worst-case scenario planning has the UK potentially facing blackouts in January and February because the energy network simply doesn’t have enough fuel to power everyone’s homes and businesses.
Plans are in place to implement a system of rolling timed blackouts, affecting different homes around the country at certain times.
But much of the jeopardy comes because people tend to use energy in their homes at similar times, particularly in winter. Think – coming home from work in January, putting on the heating and washing your clothes. We all tend to do similar activities at the same time.
Energy payment scheme explained
The National Grid ESO trialled the scheme with customers of energy firm Octopus who had a smart meter earlier this year. This trial is now being rolled out nationally between November and March.
The scheme operates through whoever your energy provider is at home, but not all suppliers will necessarily sign up. If yours does, and you have a smart meter, they will contact you with the details. You’ll get notice 24 hours ahead that if you reduce usage between peak hours, you’ll get a rebate on your energy bills.
The plan would be for any household with a smart meter that avoids using energy-intensive appliances at peak times (between around 4pm and 9pm) will get paid around £3 for every kilowatt hour (kWh) they don’t use compared to an average.
Reports estimate that some households could earn as much as £10 a day for avoiding peak times. There are currently just 12 test days planned between now and March for the scheme, which means participating households could get up to £120 back.
Customers of some providers already get discounts on bills if they use electricity late at night instead of peak times, such as Octopus’s Economy 7 tariff.
Other providers such as Ovo already have a trial scheme in place to ask customers to cut their consumption. Those that manage to lower their usage to the firm’s threshold will get up to £100 for their efforts.
National Grid has launched a campaign to raise awareness of the scheme but it’s up to energy suppliers to administer, so keep an eye out for further details from yours.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 9th November 2022.
Cost-of-living crisis scams: what to watch out for
Cost-of-living crisis themed scams are on the rise and the public are being warned to watch out for fraudsters looking to take advantage.
Banking industry trade body UK Finance has warned the public that the cost-of-living crisis has made people more receptive to unprompted and potentially fraudulent approaches offering too-good-to-be-true investments in particular.
One in six (16%) of Brits say the rising cost of living has made them more receptive to such approaches according to the trade body, while more than half (56%) of adults are likely to look for income-boosting opportunities as inflation and interest rates bite.
Young people in particular are more at risk as their financial situation tends to be more precarious. One in three (34%) 18- to 34-year-olds said they were more likely to respond to an unsolicited approach about an investment or loan opportunity.
Three in five (60%) people are worried about falling victim to a scam, highlighting an awareness of the prevalence of financial scams among the public after years of rising losses suffered by individuals.
In the first half of 2022 some £610 million was lost to financial fraud according to UK Finance figures.
Katy Worobec, managing director of economic crime at UK Finance, comments: “The rise in the cost of living can be worrying and stressful and for many keeping on top of finances might be a struggle. It’s important for everyone to be conscious of criminals taking advantage of people’s anxieties around finances by staying alert for fraud.
“We encourage everyone to follow the advice of the Take Five campaign – always be cautious of any messages or calls you receive and stop and think before sharing your personal or financial information. Avoid clicking on links in unsolicited emails or text messages”.
What scams should you watch out for?
UK Finance lists some typical scams that everyone should be aware of and has three key messages to help people protect themselves.
Those scams are:
1. Purchase scams. This is where someone looking for a cheap deal online finds a product for a too-good-to-be-true price. Often through search engines, fraudulent websites offer items such as expensive electronics at unbelievable prices. But if the website looks odd, has few reviews or the payment method is through an unusual format such as bank transfer, it is likely a scam.
2. Impersonation fraud. This is where criminals convince victims to pay for something while pretending to be from a trusted organisation. There are rising reports of fraudsters hacking service provider accounts – such as the emails of a solicitor, broker or other high-value professional service. The scammer then convinces the client to make a money transfer payment out of the blue using the hacked account. Anyone asked out of the blue in such a way should make efforts to speak to the known party either face-to-face or over the phone to confirm if the request is legitimate.
3. Payment in advance fraud. This is where a scammer offers a product, loan or other offering which seems too good to be true, with the fraudster requesting a payment in advance of receiving the product or service. The product paid for then never materialises or the fraudster vanishes and becomes impossible to contact.
4. Investment fraud. With the cost-of-living crisis worsening, UK Finance found 14% of people are more likely to search out new ways to earn money through investments. But this leaves many at risk from investment frauds – where unrealistically high interest rates, yields or other returns are promised in exchange for large cash investments. Like other scams this then typically either vanishes, becomes impossible to remove the cash from the scheme or a company will go ‘bust’ with the scammer absconding with the investor cash.
The three key messages from UK Finance’s Take Five to Stop Fraud campaign to keep people’s money safe are:
- STOP: Taking a moment to stop and think before parting with your money or information could keep you safe.
- CHALLENGE: Could it be fake? It’s ok to reject, refuse or ignore any requests. Only criminals will try to rush or panic you.
- PROTECT: Contact your bank immediately if you think you’ve fallen for a scam and report it to Action Fraud.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 9th November 2022.
Four easy ways to take control of your firm's online presence
This article first appeared in Professional Adviser.
When managed well, online presence can be a powerful tool for your business. Here are four simple ways to take control of your firm’s digital presence.
Whether it’s through social media, shopping or engaging with the news, we all leave an online footprint. And while this footprint typically holds little influence over our daily lives, for IFA business owners, it can have a major impact on brand awareness and the ability to reach potential new clients.
Since few financial advisers double as expert marketers, the process of reviewing and managing a company’s online presence can often seem so unwieldy it falls by the wayside. However, as our lives and means of doing business increasingly digitalise, being able to take control is essential.
Here is a checklist of the key things to look out for, plus some easy wins to help your company get more out of what’s happening online.
1. Find out what’s out there
First things first, make sure you have Google Alerts set up for you and your business. Requesting for notifications to be delivered either ‘at most once a day’ or ‘as-it-happens’ can be a great way of staying on top of what’s being said about your company.
There are two sides to this coin. The first is ensuring you can be on the front foot in addressing any potential issues – has an employee shared something online that may reflect poorly on your business for example?
On the flip side, you might uncover some positive news worth sharing via your own channels. Has a client tweeted about how much they enjoy working with your firm, for instance? Maybe the local newspaper has written an article about a charitable initiative being undertaken by your team.
Google Alerts don’t pick up everything, so be sure to do manual searches every couple of weeks to ensure you’re not missing anything. And if this will be your first time, then it’s worth undergoing a more in-depth search – you’ll probably uncover a whole host of information you didn’t know was out there!
2. Ensure search engine listings are up to date
Search engine listings are a common blind spot but can have a big influence over whether a prospective client gets in touch or not.
Ultimately, you want to make it as easy as possible for someone searching your company to see what you do and how they can make contact. Check the following:
- Does the business description accurately reflect what we do?
- Is an email address and phone number listed? And is an appropriate person monitoring these?
- Is the website link up to date and working?
Your search engine listing will often be the first touchpoint for a potential customer – the last thing you want to do is put them off by displaying missing or outdated information.
3. Conduct regular website reviews
It might sound cliché, but your website should be considered your shop window. If what you display is professional and helps visitors easily understand the areas in which you can support, then the chances of them getting in touch increases.
Equally, if your ‘About Us’ section is too long and wordy, or visitors are faced with lots of typos and broken links, then they’ll probably end up looking elsewhere.
The best IFA websites I’ve seen keep it simple and feature a clear, relevant ‘elevator pitch’ that sums up the proposition in as few words as possible. They also don’t ‘set and forget’- have someone audit the site on a regular basis (quarterly is a good place to start) to check all pages function correctly and contain up-to date information.
Importantly, during an audit you want to ensure messaging is consistent across all of the channels you are using. If content appears inconsistent or disjointed to an employee, then it certainly will to a client!
4. Stay on top of online reviews
You may already be in a position to ask clients to leave reviews about their experiences on websites such as Trustpilot or Google, in which case you may already have a selection of positive reviews to help others understand the benefits of your proposition. If this is the case, then don’t be afraid to ask clients if you can share these across your website and social media channels.
Wondering what to do if you uncover a bad review? The value of client feedback – good and bad – should never be underestimated, so don’t go on the offensive, but rather politely acknowledge the feedback and encourage the author to get in touch directly to discuss further.
You have a one-time opportunity to try and understand why that person left the review they did – and how you can do better in the future.
Aside from this, more emotional responses are unlikely to help you come to a resolution and could also draw undue attention such as comments being shared across social media channels.
When managed well, your online presence can be a powerful tool for your business. Following these four steps will help you stay on the front foot and keep you connected with new and existing clients.