danielashby

Low growth predicted for UK house prices during 2018

Experts from Nationwide have predicted that house prices will largely remain flat throughout 2018, rising by a marginal 1-1.5% during the next 12 months.

Trends of 2017

Last year, London saw house prices slow significantly, with the growth rate falling for the first time in nine years.

In other regions, averages varied from month to month. For example, in northern England, Scotland and Wales, house prices are now 5% lower than they were 10 years ago.

Robert Gardner, Chief Economist for the Nationwide Building Society, said: Annual house price growth remained in the 2-4% range throughout 2017, in line with our expectations and broadly consistent with the 3-4% annual rate of increase we expect to prevail over the long term, as this is also our estimate for earnings growth over the long run.

Predictions for 2018

For those hoping house prices will rise in 2018, the outlook for growth is not optimistic. The ever-present squeeze on household budgets is predicted to slow down housing market activity, which will, in turn, affect house price growth.

Robert Gardner, again commented: We continue to expect the UK economy to grow at modest pace, with annual growth of 1% to 1.5% in 2018 and 2019. Subdued economic activity and the ongoing squeeze on household budgets is likely to exert a modest drag on housing market activity and house price growth.

Overall, we expect house prices to be broadly flat in 2018, with perhaps a marginal gain of around 1%. Over the longer term, once the economy regains momentum, we would expect house prices to rise broadly in line with earnings (around 3%-4% per annum), though if the rate of house building fails to keep up with population growth, prices may outpace earnings once again, as they have in recent years.

Factors expected to affect house prices in 2018

There are four key areas which could challenge the growth of house prices over the next 12 months:

Politics: We don't like to bring politics into things, if it can be avoided, but there's little we can do this year to avoid the effects of Brexit. With the deadline for negotiations approaching in early 2019, it is not yet certain how the housing market will be affected by the EU/Britain divorce settlement.

New policies: The 2017 Autumn Budget brought in some big changes for prospective homeowners. With cuts in Stamp Duty for first time buyers purchasing homes under £300,000 and a reduction in the tax for homes costing up to £500,000, new buyers may be able to afford more expensive homes than they planned.

However, there has been speculation surrounding whether those selling properties will view this as an opportunity to simply push the asking price up.

Rate of building: Throughout the first month in 2018, house prices saw a surprise boost due to a lack of available housing. Robert Gardner commented: The flow of properties coming on to estate agents' books has been more of a trickle than a torrent for some time now and the lack of supply is likely to be the key factor providing support to house prices. Though Nationwide do not believe that this will change their prediction of a marginal growth of 1-1.5%. (Source: The Guardian)

Interest rates: In November 2017, the Bank of England (BoE) doubled the base interest rate from 0.25% to 0.5%. This had mixed results, with savers seeing potential growth in their deposits and borrowers facing higher repayments.

The interest rate rise means that most mortgages will now be subject to higher interest rates, so homebuyers taking out a mortgage in 2018 might see higher monthly repayments than those who bought their house before the interest rate rise. That could result in lower buying rates and overall affordability.

What do other experts say?

Halifax predict that house prices will grow during 2018; but only slightly, with some external influences having major effects on the market. Russel Galley, Managing Director of the bank, says: On the flip side UK House Prices in general are likely to be supported, seeing modest growth in 2018, through the combination of a shortage of properties for sale, continued low levels of housebuilding, low unemployment levels and finally good levels of affordability due to the low interest rate environment. Despite the recent rate rise we do not expect this to have an adverse impact on transactions. A further rate rise is not seen as imminent and we may not see one until the latter part of 2018, if at all.

Fionnuala Earley, Hamptons International Residential Research Director has given her take on the 2018 housing market. She predicts house prices will rise by 1%, with rents increasing by double that. She concludes, The 2018 outlook for house prices is fairly benign given the economic conditions. (Source: Zoopla)

We won't try to guess what is going to happen to the housing market during 2018, but we can help you to plan for whatever the next 12 months has in store. So, if you're planning to buy a house soon, get in touch.

by danielashby

Why lattes cost far more than you think

A new outfit, a cup of coffee, pizza on a Friday night. They're small, impulsive purchases, but they soon add up.

Research from Scottish Widows shows that each month, we each spend an average of £124 on things we could do without.

By swapping these 'little luxuries' for the simpler things in life, you could treat yourself to an extra £9,853 annual retirement income in your later years.

So, what are these 'luxuries', and how much do they cost us each week?

• Hobby equipment that never gets used: £2.18
• Using public transport for journeys within walking distance: £3.78
• Unnecessary taxi rides: £4.25
• Hot drinks from coffee shops: £6.95
• Disposable fashion: £7.88
• Ready meals: £10.87
• Shop-bought lunches: £11.78
• Snacks and sweets: £14.81
• Unnecessary takeaways: £16.82
• Nights out: £19.21
• Going out for dinner: £25.74

Each year, that adds up to £1,491.28.

(Source: Scottish Widows report)

Of course, we're not suggesting that you forgo everything that makes you happy, but even cutting down on a few 'luxuries' could give you extra money to boost your retirement savings.

Most intend to save more

32% of people say that they are already saving as much as possible, but with 12% admitting that they never keep track of their incidental spending habits, it is estimated that many of us underestimate how much we spend on 'little luxuries' by approximately £74 each month.

62% of people plan to set themselves a financial goal for 2018, of those:

• 28% want to spend less
• 45% want to save more

Overall, 33% of us cut back on spending in January, with each person holding back £109.03 over the month. Just one quarter put this money into savings, whilst a third (30%) use it to pay debts.

If you are one of those who have promised to curb your spending habits over the next 12 months, why not consider some of the other ways you can use that £124, each week?

Better uses of your money

Auto-enrolment into workplace pensions has meant that over nine million people are now paying into a pension fund, with additional contributions made by their employer. (Source: DWP )

Currently, the minimum contributions made by both employees and their employers is 1% each. However, these will rise to:

• 2% employer and 3% employee contributions in April 2018
• 3% employer and 5% employee contributions in April 2019

Last September, Royal London reported fears that up to 30% of people could choose to opt out of their workplace pension once the minimum contributions rise. Updated research shows that it has fallen to 17%, which is positive. However, that still equates to around 160,000 people who will not have a pension fund.

With an ever-increasing State Pension Age that always seems to be just out of reach, workplace pension schemes are increasingly important. In addition to that, your employer is legally obliged to pay in their minimum contributions and you will also receive tax relief; so why pass up what is effectively free money toward your retirement?

Balancing luxuries and planning for the future

The biggest concern here, is that, rather than giving up the occasional takeaway or night out, people will choose to opt-out of their workplace pension to continue to enjoy those small luxuries. Of course, no-one can force you to use your money one way or the other. But, it might be worth considering just how important the coffee and ready meal you buy today, will feel in 30 or 40 years' time.

Taking advice is always recommended. Research from Unbiased has shown that, those who seek independent financial advice could benefit from additional savings of £39 each week, which could lead to an extra £3,654 in annual retirement income in later life.

To discuss how you can boost your pension funds and prepare for your future lifestyle, contact us.

Please note:

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.

by danielashby

Time to act if you have a 'Pensioner Bond'

For those who invested in 65+ Guaranteed Growth Bonds in 2014 and 2015, it is time to think about what to do with the returns.

What are 65+ Guaranteed Growth Bonds?

In 2014, NS&I (National Savings and Investments) released a series of bonds for those aged 65 and over. Known as 'pensioner bonds' they offered 4% taxable interest per year, for three years (Source: NS&I). As this was much higher than the market average, they were very popular, and 1.1 million people invested a total of £13.7 billion (Source: NS&I)

The first bonds, launched in January 2015, are now due to mature.

Those who invested the maximum of £10,000 will have a total of £11,300 to reinvest once their bonds mature.

That means that, if you were one of the thousands who invested in these bonds in 2014/15, you have an important decision to make; and you may not have long to act.

So, what are the options?

1. Do nothing

You may wish to leave your money invested in NS&I bonds. However, once the current bonds mature, it will automatically be reinvested into Guaranteed Growth Bonds. These offer a much lower return of 2.2% per year. But, once transferred, your savings are locked in for three years; early access incurs a penalty of 90 days' interest. (Source: NS&I)

This might seem like a suitable option. Your savings are secure and appear to continue growing. However, with inflation hovering around 3%, interest of 2.2% means that your money will lose value over the three years it is invested.

On the other hand, the 2.2% growth is guaranteed, so it may be a viable option if you are more risk-averse and just want to keep your money safe, rather than inflation-proofed.

2. Put your returns into a savings account

Of course, your money needs to be held somewhere, but with most guaranteed interest rates sitting below 2%, the returns on your savings currently won't beat inflation and you will lose value in real terms.

Why is this?

Put simply:

• Inflation is the rate at which the cost of goods and services increases year-on-year.
• Interest is the rate at which your money grows year-on-year.

If your money is growing at a slower rate than the cost of items you want to buy, your buying power is reduced.

3. Invest the cash

You can take the cash out of the bond once it has matured and invest it as you wish. Of course, all investments carry risk and there is a possibility that you could end up with less than you put in to begin with.

But, if you want the higher growth and returns, it may be a favourable option. Especially if you have other capital in savings and a stable income which supports your lifestyle. If you have money which has been tied up for three years already, which you have not needed to access, you may be more willing to take the increased risk.

What to do if you have 65+ Guaranteed Growth Bonds

Whilst we cannot tell you here how to manage the returns you will get from your matured 65+ Guaranteed Bonds, we can tell you that acting soon is a must. NS&I are sending letters to those people who invested in the bonds when they were available, to ensure that they are aware of the upcoming maturities.

However, if you have moved to a new house or have a loved one who purchased bonds but has since passed away, you will need to contact NS&I to access the returns.

You can get in touch with NS&I here.

The importance of advice

Talking to an independent financial adviser should be your first port of call when making any financial decision. However, if you haven't thought about talking to a professional before, this is an ideal reason to start.

A financial adviser will be able to analyse your circumstances. They will then take your aspirations and objectives into account when offering advice and products which will help you to continue to grow your assets.

Whether you're hoping to increase your income, supplement a loved one's living costs or leave a legacy when you die, a financial adviser will help you to make decisions to work towards those goals. This means that you can be comfortable and confident in your financial decisions and stability.

So, why not give us a call?

Please note:

The Financial Conduct Authority does not regulate NS&I products.

by danielashby

Re-assessing your finances in the New Year

The festive period can bring with it a great deal of financial stress; more so than at any other time of the year. So, when opening your bank or credit card statement in January, it may be the case that you are nearing or have exceeded your credit limit.

This often sparks an overall assessment of your financial position for the New Year ahead. It usually makes sense to clear existing expensive credit card and other unsecured loan debt. At the same time, you may also be considering raising additional finance for home improvements, a car purchase or (especially during these cold, grey days) a holiday.

Consolidation of existing debt, even with raising additional monies at the same time, can considerably reduce your monthly outgoings if the right solution is found.

Your first port of call is normally your existing bank or high street lender for a further advance, but your request will be declined if you do not meet the present underwriting requirements.

Your attention may then turn to re-mortgaging away from your current lender. This can of course be done, but in some instances a re-mortgage is not a viable option because of the following circumstances:

• The existing mortgage is a low Base Rate Tracker on an Interest Only basis, and to re-mortgage would ultimately be more expensive on a monthly basis.
• The existing mortgage is on a Fixed Rate and has punitive redemption penalties.
• Since taking out the existing mortgage there has been some impaired credit registered against you.
• You have a low credit score and will subsequently not pass a new lenders' affordability criteria.

Taking into account the above, a 'second charge' mortgage may be a option. Second charge mortgages have secondary priority behind your main (or first charge) mortgage. They are a secured loan, which means they use the borrower's home as security. This may be a viable option because:

• Second charges are not as expensive as you may think, with rates available from as low as 4% and with the vast majority having no early redemption penalties.
• A second charge can convert a re-mortgage decline into an accept because of differing underwriting criteria.
• Second charge loans are available for people with an impaired credit history.
• A second charge term can exceed the existing mortgage term and hence pass affordability criteria.
• Speed is normally of the essence when raising additional finance - second charge loans can be completed in weeks.

Whilst the circumstances that lead to a request for financial assistance may be quite daunting , in most cases there are options available to help resolve your monetary situation.

For more information on how our sister company Beaufort Capital Solutions can help you, please contact Clive Willson on 07966 074195 or email: cwillson@beaufortcapitalsolutions.co.uk

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage. There will be a fee for mortgage advice, the precise amount will depend upon your circumstances.

by danielashby

Seven changes you need to know about in 2018

As we head into 2018, with a new financial year a few months away, the government is preparing to introduce several changes. These will come into effect in April, and it is likely that you will be affected by at least one of them. Being prepared is the key to making the most of the changes and deadlines that are approaching.

To ensure that you are informed about the upcoming changes to allowances, savings and pensions, here are the seven biggest things you need to know about.

1. Higher Lifetime Allowance

As inflation hit 3% in the second half of 2017, Philip Hammond announced in the Autumn Budget that the Lifetime Allowance would rise accordingly, from £1 million to £1.03 million.

The Lifetime Allowance dictates how much you can hold in your pension before tax charges are potentially applied. For example;

• 25% lifetime allowance charge applies to funds in excess of the Lifetime Allowance if they are placed in drawdown or used for annuity purchase
• 55% Lifetime Allowance charge applies to excess funds if they are withdrawn as lump sums

2. Increased Personal Allowance

The Personal Allowance is the income you can receive each year before starting to pay Income Tax. It's currently £11,500 but will be increasing to £11,850 in April. That means that, during the financial year 2018/19, you can benefit from an extra £350 tax-free income.

The government has previously announced that they are aiming to raise personal allowance to £12,500 by 2020.

3. Dividend Allowance decrease

Although the change was announced in early 2017, the dividend tax-free allowance will fall from £5,000 to £2,000 at the beginning of the next tax year. This means that business owners and contractors who work for a limited company structure will pay tax on annual dividends of more than £2,000.

4. Auto-enrolment contributions increase

Automatic enrolment for all eligible employees into workplace pensions reaches its final stages for existing employers this year. In addition, the minimum contributions made by both employees and employers will rise.

Currently, both parties are required to contribute 1% of qualified earnings. However, from April, this will increase to a minimum of 2% from the employer and 3% from the employee. And will rise once again in April 2019 to 3% for employers and 8% in total.

5. Help to Buy ISA / Lifetime ISA transfer deadline

Any deposits made into a Help to Buy ISA before April 2017 can be transferred into a Lifetime ISA (LISA), without impacting the annual Lifetime ISA allowance until 5^th April 2018. This could give you a double bonus. You can put twice as much into your LISA this year, and still receive the 25% bonus when you buy a house or retire.

6. Basic State Pension increase

Each year, the Basic State Pension increases in line with whichever is higher out of:

• The rate of Inflation
• Average Earnings growth
• 5%

This is known as the triple lock system.

In October 2017, inflation reached 3% and set the bar for the State Pension's 2018 rise.

If you already receive a State Pension, this is good news. Those people entitled to a full basic State Pension will now receive an extra £4.80 per week.

7. Higher Income Tax rates in Scotland.

In the 2017/18 tax year, Scottish Income Tax rates for earned income are:

• Up to £11,500: Tax-free Personal Allowance
• £11,501 to £43,000: 20%
• £43,001 to £150,000: 40%
• over £150,000: 45%

However, from April 2018, proposals have been made to change them to:

• Up to £11,850: Tax-free Personal Allowance
• £11,850-£13,850: 19%
• £13,850-£24,000: 20%
• £24,000-£44,273: 21%
• £44,273-£150,000: 41%
• Above £150,000: 46%

This is quite a difference which will affect Scottish taxpayers at all income levels.

Making the most of the 2018/19 financial year

A lot of changes are happening at the beginning of the new financial year. So, make sure that you are informed and able to maintain your financial security when they come into effect. The three main ways to stay on top of your finances are:

1. Staying informed
2. Knowing how the changes affect you
3. Seeking advice

For more information about how the new financial year could affect you, contact us.

by danielashby

2018: A big year for auto-enrolment

2018 marks 10 years since auto-enrolment was first debated in 2008. As the new financial year approaches, we look at what April 2018 has in store for workplace pensions.

What is auto-enrolment?

Introduced into law in 2011, auto-enrolment will be in its final roll-out phase this year. This means that, from April, eligible employees from all sizes of business should be included in a workplace pension (unless they have chosen to opt out).

Eligible workers are those who:

• Are aged between 22 and the current State Pension Age (which you can check here)
• Meet or exceed the earnings limit. This is currently £10,000 or more each year/£833 per month/£192 per week, but this is reviewed yearly and may to change
• Have a contract of employment (i.e. subcontractors and non-contracted partners will not count)

Employees who do not fit these criteria can ask to join the workplace pension on an individual basis.

The end of the five-year phase-in period

Since auto-enrolment came into effect, nine million people have been enrolled; one million of whom joined during 2017. (Source: Department for Work and Pensions (DWP)) During the first few months of 2018, small businesses will be joining the ranks as part of the final stage of auto-enrolment's introduction.

February 1^st is the final phase-in deadline. After which, all employers will be under immediate duty to enrol new staff members who are eligible.

Contribution changes

Perhaps the biggest change we'll see, is the change to the minimum contribution levels. Currently they are:

• 1% employer contribution
• 2% total contribution (meaning at least 1% employee contributions if the employer pays 1%)

From April, the minimum contribution levels will rise to:

• 2% employer contribution
• 5% total contribution (meaning at least 3% staff contribution if the employer pays 2%)

12 months later, in April 2019, these minimum contributions will increase once again to:

• 3% employer contribution
• 8% total contribution (meaning at least 5% employee contribution if the employer pays 3%)

Many companies and experts have expressed concern that raising the minimum contribution amounts will encourage employees to opt out of their workplace pension.

Currently 10% of people opt out, but experts have warned that the number could rise to 21.7% in 2018 and 27.5% in 2019 (source: Your Money).

However, it appears that those worries may be unfounded, as just 4% of people have made up their mind to leave their workplace pension when the increase comes into effect. Fortunately, half of employees are committed to their scheme:

• 50% will definitely stay in their workplace pension
• 34% are unsure what path they will take
• 12% will consider leaving their scheme
• 4% will definitely opt out

(Source: Aviva)

What's almost certain, though, is that those who opt out will face a financially difficult retirement.

Other potential changes

In late 2017, the Government indicated that they would extend auto-enrolment to those aged 18 and over. However, this won't happen until the mid-2020s. Currently, employees who are under the age of 22 must request to join their employer's workplace pension. While those under the age of 18 will not usually be eligible for employer contributions to their scheme.

It is estimated that lowering the minimum age threshold will mean that 900,000 more people will be automatically enrolled into a workplace pension.

If you are a business owner, employer or employee, to discuss how the pension changes might affect you, feel free to get in touch.

by danielashby

Pension Freedoms: Ignorance isn't bliss

Real knowledge is to know the extent of one's ignorance.

Attributed to Chinese philosopher Confucius, this timeless phrase has never been more apt than when applied to the topic of Pension Freedoms.

A new report, from Old Mutual Wealth has revealed that many 50-60-year olds are uninformed about Pension Freedoms, with:

• 45% not knowing about Pension Freedoms at all, or not knowing how the new rules affect them
• 37% not knowing how or when they should access Pension Freedoms

Why is knowledge important?

Pension Freedoms are perhaps the biggest revolution to take place in the retirement arena in the past 20 years. Used well, the reform means that you can retire early, in a way which is more flexible and suits your lifestyle.

That freedom has given many people more control over their finances. It means that you can take lump sums from your pension pot for big purchases, or to help loved ones financially, as well as planning ahead to leave larger legacies to your loved ones.

However, the new-found freedoms come with potential dangers and pitfalls. For example, withdrawing too much, too soon could leave you facing financial difficulties later in life.

Current concerns

Research from AJ Bell has shown that some pensioners may run out of money within 12 years, due to three factors:

• Withdrawing too much each year
• Underestimating how long they will live
• Spending money frivolously

44% of over-50s choose to withdraw over 10%, a figure usually considered to be unsustainable, of their pension savings annually. Worryingly, the biggest group of people doing so (57%) are aged 55 to 59. As well as over-withdrawing, more people are taking money without planning for the future, as:

• 47% take ad-hoc lump sums
• 35% rely on an income of regular withdrawals

In addition, the same age group (55-59) severely underestimate how long their pension will need to last, with:

• 51% estimating that their pension will need to last for 20 years or less
• 24% believing that they will need to make their pension last for less than 10 years

The combination of large withdrawals and a lack of planning for the future means that many people are at risk of running out of money part way through their retirement. According to the Office for National Statistics (ONS), the life expectancy for someone who is currently 55 is:

• 81 for men
• 85 for women

That means that pensions may need to last for more than 25 years for both sexes.

Another concern is the reasons behind the withdrawals. Whilst Pension Freedoms means that you can access the whole pension fund for any reason; it doesn't necessarily mean that you should.

AJ Bell's research shows that 40% of 55-59-year olds make withdrawals for day-to-day living costs (a pension's intended purpose). Meanwhile, a quarter (25%) have used Pension Freedoms to make luxury purchases, including holidays and cars.

Using your pension wisely

Pension Freedoms are in place to give you more control over the way you use your pension savings. However, it has never been more important to plan ahead and make sure that you are using them in a way which benefits you both now and in the future.

It might be tempting to withdraw large amounts and go on a spending spree; but that could potentially leave you exposed to financial danger for the rest of your life.

So, how can you use the Pension Freedoms reform to meet your needs?

There are four key points to remember:

• Have an open mind: Old Mutual's research revealed concerns that consumers may be choosing the "path of least resistance" by accepting the drawdown option offered by their pension provider without shopping around. It can be all too easy to stick to what you know and reject any new options out of comfort. But a little research could go a long way toward making the most of your pension savings.
• Avoid the threats: Unfortunately, the new rules have inspired a range of new scams and fraud attempts. Stay vigilant and never accept an unsolicited offer. Always verify companies through the Financial Conduct Authority (FCA). Secondly, remember that your pension pot may have to last for 20, 30 or 40 years. Spending too much, too soon could cause you financial difficulty in the future.
• Take advantage of the opportunities: taking advantage of pension freedoms could help you retire early, or more flexibly, in a way which suits your preferred lifestyle. It can also help you leave a legacy to younger generations.
• Seek advice: Research from Unbiased has shown that people who take financial advice save an average of £98 more each month, which leads to an additional £3,654 in annual retirement income.

For more information on Pension Freedoms and how your retirement could be affected, feel free to contact us.

by danielashby

The effects of inflation - and how to combat the latest rise

November 2017 saw inflation hit 3.1%; the highest it has been since 2012, as reported through the Consumer Price Index (CPI).

As 2018 gets underway, thousands of households will be feeling the squeeze and looking for ways to combat the shrinking value of their income or capital.

What is inflation?

According to the Office of National Statistics (ONS), inflation is The rate at which the cost of goods and services rises year on year.

Over time, goods and services increase in price, if income and capital fails to grow at the same rate, household budgets can feel tighter as a result.

Inflation cannot be avoided, it is a necessary factor in any successful economy. The resulting increase in demand for products and services drives production and manufacturing, which ensures that there are enough jobs and that people can afford to live.

As individuals, we can't impact the rate of inflation. However, it is necessary to monitor the rate at which it is increasing, as this is what will affect our living standards.

The Consumer Price Index (CPI) measures and reports the rate of inflation. It does so through fluctuations in the price of everyday products. It does not show the effects on individual markets, but it does offer a great overview of the cost of living for an average person or household.

Consider everything you buy throughout the year; from food staples, to clothing, holidays and hobbies. The CPI works by comparing the total cost of the products and services year-on-year.

The effects of inflation

As inflation rises:

• The cost of living increases
• Interest rates could potentially rise
• Capital is de-valued; and so is your income
• It becomes more difficult to make big purchases
• The value of your savings is eroded

When inflation rates are high, almost everyone is affected in some way. However, different groups see different outcomes, for example:

• Savers: If the interest rate is lower than the rate of inflation, the real value of savings will decrease. Therefore, savers, who are more risk averse by definition, could very well experience the one thing they are trying to avoid; a loss of capital value.
• Annuity holders: An Annuity provides a guaranteed income for the rest of your life, and potentially, your spouse or partner's. When bought, the consumer is able to choose between a level or Index-linked product. Level Annuities are the most commonly purchased. As the cost of living rises, a pensioner receiving a flat pension income may find it harder to meet their financial needs over time.
• Employees: If your pay rises are not in line with inflation, the buying power of your income is diminished. This, combined with the rise in interest rates, designed to offset the effects of inflation, can put a squeeze on household budgets.

Offsetting the effects

Combatting the effects of inflation is an ongoing battle. However, with careful planning and by staying informed, you can remain financially stable. Nine things you can do to help yourself are:

1. Shopping around for the best savings account: putting in the effort now could save you a lot in the long term, as well as helping you to maintain the value of your capital.
2. Hold savings tax efficiently: utilising products which allow you to collect the returns tax free, will mean that you see more of your returns than if you had to pass some of the interest on to the taxman. Cash ISAs are the best example of these. Use your Personal Savings Allowance (Up to £1,000 of interest tax free for basic-rate taxpayers and £500 for higher rate).
3. Consider investing rather than saving: Over a longer term, investing has the potential to produce higher returns than saving. Of course, this comes with a risk to your capital and the value can fluctuate over time. However, currently saving accounts are almost guaranteed a real-term loss of value for your money. So, now might be the time to consider becoming an investor.
4. Retiring: Fewer people are buying an Annuity when they retire, due to Pension Freedoms. However, if you do decide to purchase an Annuity, think long and hard about the effects of inflation.
5. Budgeting: While inflation may not be having an immediate effect on your budget, if the gap between price rises continues for a long period, you will notice it. Therefore, preparing now will pay off in the long term. The price of living may be going up, but the best way to stay financially secure is to plan your finances in advance.
6. Increase your income: Put yourself in as good a position as possible for pay rises, bonuses and other financial incentives which may be available from work.
7. Build a safety net: Most experts advise having an emergency fund which could cover three months to one year's living expenses. Having this in place gives you an added layer of financial security which will be extremely useful in the event of an emergency, illness or unexpected rise in the cost of living.
8. Mortgage: Mortgage rates should be monitored constantly to ensure that you have the most competitive rate available. Interest rate rises are common when inflation is high, and that means a rise in monthly payments for tracker and variable rate products. Make sure that you can afford repayments if interest rates rise and your budget is squeezed further.
9. Seeking advice: An Independent Financial Adviser will help you to make the most of your income. By getting to know you and your circumstances, they can point you toward the best products, methods, and budgets for you and your family.

For more information about inflation, or to discuss ways to protect your finances, contact us.

by danielashby

Families to pay an extra £900m Inheritance Tax by 2022

The Office for Budget Responsibility (OBR) has revealed figures which show that the estimated Inheritance Tax (IHT) payable on estates over the next five years is due to rise by almost £1 billion; from £32.4 billion to £33.3 billion.

This rise is due, in part, to a larger population; more people are dying, therefore more IHT is being paid.

However, other research shows that an improved understanding of IHT regulations could result in many people paying less IHT. Currently, the figures show that, due to a lack of knowledge, IHT is being taken from estates which could have otherwise been avoided.

More information needed

A worrying number of people do not know how the assets that they leave behind will be affected by IHT, according to research from WAY Investments. In fact, almost half (48%) described their understanding of IHT as 'not very good' or 'terrible'. Meanwhile:

• 25% did not know whether their assets would incur IHT when they die
• 48% did not know that IHT can be as high as 40%
• 22% did not know that ISAs can be subject to IHT

As well as lacking information and understanding surrounding IHT, many people showed that they are very disorganised where their assets and estate are concerned. When asked if they had made and updated their will:

• 35% admitted that they do not have a will
• 47% of people who do have a will, have not updated it within the past five years

What difference does it make?

The advantages of knowing how IHT will affect your assets should be obvious. If you know how your estate will be taxed, it is easier to make tax-efficient arrangements. That way, you can leave more for your loved ones and lose less to the taxman in IHT.

Similarly, ensuring that you have a will and keep it updated and valid ensures that your estate is distributed according to your wishes. Without a valid will, your assets will be distributed according to complex intestacy laws, which will lead to two things:

1. Your assets will not necessarily be given to the people you would choose to benefit from them
2. Your assets may be divided in a way which is not the most tax-efficient. This will mean that your loved ones will lose more than is necessary in tax and will benefit less from the savings and property that you leave behind

Avoiding unnecessary IHT

Making sure that you have IHT-efficient plans in place for your estate is better done sooner rather than later. Unfortunately, none of us has a crystal ball, and whilst we would all like to believe that we will live forever, we do not know what is around the corner.

Seeking professional financial advice is the first step toward mitigating as much IHT as possible. We can help you to explore the ways in which IHT will affect you, and find solutions which ensure that your loved ones see the benefits of your legacy.

For more information, please take a look at our free resources on our 'Focus On' page of this website. Alternatively, feel free to get in touch.

Please note:

The Financial Conduct Authority (FCA) does not regulate Tax Planning and Estate Planning.

by danielashby

Autumn Budget 2017: Were you a winner or a loser?

Every Budget has winners and losers; with some people faring better than others.

So, how did you fare? Read on as we reveal whether you are a winner or a loser after Philip Hammond's second Budget of 2017.

Winners

First-time buyers

Those buying a home for the first time will now benefit from the abolishment of Stamp Duty on homes up to the value of £300,000. To ensure that this can help first-time buyers in high value areas, such as London, the first £300,000 will be exempt from Stamp Duty on homes above this value to a maximum of £500,000.

The Chancellor said that this would mean: A Stamp Duty cut for 95% of all first-time buyers who pay Stamp Duty.

Under 30s who travel by train

The 16-25 railcard will now be available to people aged up to 30. The so-called 'Millennial Railcard' will be available next year, and will offer savings of up to a third off non-peak fares.

Whilst the railcard won't provide savings for regular commuters travelling in peak times, it will benefit people travelling at less busy periods.

People claiming Universal Credit

Measures will be put in place to support those claiming Universal Credit, such as the removal of the seven-day waiting period for benefit claims. This means that benefits will be paid on the day of the claim, giving families access to money for rent payments. Advances will also be able to be applied for online, and the repayment period for advances will increase from six to 12 months.

Any new claimant in the receipt of housing benefits will continue to receive them for two weeks, meaning that benefits aren't lost in the crossover period.

People earning the National Living Wage

The National Living Wage will be increased by 4.4%, rising from £7.50 per hour to £7.83 per hour. This will take effect from April 2018.

Taxpayers

From April 2018, the tax-free Personal Allowance will be increased from £11,500 to £11,850.

The higher rate threshold will be increased from £45,000 to £46,350.

People saving into pensions

For once we had a Budget where no changes were announced to pension tax-relief or allowances.

Drinkers

The duty on ciders (except white cider), wines, spirits and beer will be frozen, meaning those buying alcoholic drinks will see no price increase next year.

Air passengers

From April 2019, short-haul Air Passenger Duty rates and long-haul Air Passenger Duty rates will be frozen. This will be paid for by an increase on Premium class tickets and private jets.

Drivers

The scheduled fuel duty rise for both petrol and diesel vehicles in April 2018 has been cancelled. This is expected to save a typical driver £160 per year.

Small businesses

The VAT threshold for small businesses has been maintained for the next two years at £85,000.

A planned business rate switch from RPI to CPI has been brought forward by two years, to April 2018. This is expected to reduce the burden of business rates by an extra £2.3 billion.

Pubs

A £1,000 business rate discount will be made available to pubs with a rateable value of less than £100,000 for one more year, to March 2019.

Homeless people in the West Midlands, Liverpool and Manchester

A £28 million pilot scheme will aim to tackle the problem of people sleeping rough in the West Midlands, Manchester and Liverpool.

House builders

Over the next five years, £44 billion in capital funding, loans and guarantees will be allocated to deliver 300,000 new homes per year. This includes £1.5 billion to help smaller firms build more houses.

GCSE computer science students

The number of trained computer science teachers will be tripled to 12,000, with the aim to place a fully qualified GCSE computer science teacher in every secondary school.

Anybody charging their electric car at work

A new £540 million charging infrastructure fund will support the growth of electric cars. This will provide more charging points, especially at places of business.

New tech businesses

£20 billion of new investment has been unlocked for UK-based businesses in the technology sector. This consists of a new fund of £2.5 billion that has been allocated for emerging UK businesses, designed to replace European investment funds post Brexit.

Losers

Economy

The Chancellor started his speech by revealing a series of forecasts showing growth in the economy is expected to be significantly lower than predicted earlier in the year.

Diesel car drivers/ businesses

Drivers of diesel cars, which do not meet the latest pollution standards, will see their Vehicle Excise Duty (VED) rise by one band in April 2018.

The existing diesel supplement in company car tax will rise by 1%, the proceeds from which will be used to create a new £220 million Clean Air Fund.

Premium and private air travellers

Increase in prices for premium and private air travel to compensate for a freeze on duties for short-haul air passengers and long-haul economy air passengers.

Employers

The National Living Wage for those aged 25 and over will rise by 4.4% to £7.83 per hour from April 2018.

Smokers

The duty on tobacco, hand-rolled tobacco and the minimum excise duty on cigarettes, which is due to be introduced in March, is set to rise by 2% above the Retail Price Index (RPI) inflation.

People selling their business

Freeze for indexation allowance on Capital Gains Tax. Companies will receive relief until January 2018.

Empty property owners / investors

Local authorities will be given the power to charge a 100% council tax premium on empty properties.

Here to help

If you have any questions about today's Budget please call us on the usual number; we are here to help.

by danielashby