Should you trust finfluencers?
Financial influencers or ‘finfluencers’ are a major social media trend at the moment.
With millions of followers across platforms such as Instagram, TikTok, YouTube and elsewhere, these people purport to offer anything from small-time money tips to investing advice and financial ‘hacks.’ However the UK’s financial regulator, the Financial Conduct Authority (FCA), alongside the Advertising Standards Agency (ASA), has warned against finfluencers pushing financial products they have no authority on.
Far from helping you or your children with money, these finfluencers often recommend highly risky financial strategies and ideas that range from unregulated cryptocurrencies to straight up scams. Sarah Pritchard, executive director, Markets at the FCA comments: “We’ve seen more cases of influencers touting products that they shouldn’t be. “They are often doing this without knowledge of the rules and without understanding of the harm they could cause their followers. “We want to work with influencers so they keep on the right side of the law, as this will also help protect people from being shown scams or investments that are too risky.”
Can you trust finfluencers?
Finfluencers have become something of a global phenomenon in recent years, with millions of followers and a global reach. However, it is precisely this global reach that creates the first issues for anyone listening to what they have to say.
Top finfluencers such as Humphrey Yang, Tori Dunlap or Taylor Price have combined followings of nearly 100 million people. The first issue with these three is all are US-based. So, any information they pass on is likely not useful for anyone in the UK anyway. Also looking at their CVs, while Humphrey Yang says he’s an “ex financial adviser”, neither Dunlap nor Price appear to have any particular financial qualifications.
This phenomenon doesn’t stop with dedicated finfluencers however. Regular ‘influencers’ who routinely talk about areas such as beauty, food, travel and leisure are often paid by companies to promote products. Sometimes these can be innocuous things like face creams or clothing, but frequently people can be seen promoting financial products or investments that are wholly inappropriate. This is the nub of the campaign from the FCA which is warning against such activity.
The FCA partnered with well-known influencer Sharon Gaffka, famous for her stint on Love Island, in the campaign, who added: “When you leave a show like Love Island, you are bombarded with opportunities to promote products and work with brands, if like me, you’re new to this kind of work, it can be a little bit overwhelming. “This campaign with the FCA and ASA will hopefully make sure other influencers stay on the right side of the law and prevent them from unknowingly introducing their followers to scams or high-risk investments.”
Why financial advice matters
The allure of finfluencers is that they are easy to access and create content that is engaging – designed to capture your attention and make big claims based on spurious ideas. The reality of good financial management and long-term wealth growth is clear and concise planning and advice over many years, that takes into account different products, investment and strategies to achieve the strongest growth, income and tax efficient outcomes.
It’s essential that you speak to a financial adviser to ensure the best outcomes for your money. Conversely, if you have children who are achieving life goals such as home ownership and even saving for the future, it is important to bring them along on the journey too. This way they will have the best understanding of your plans, and how they factor in, and could benefit too.
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 16th May 2023.
Energy market update: what’s happening to household bills
Households have come through Winter and things could be looking up for energy bills. The threat of power cuts failed to materialise, but many households would have felt the pinch as monthly direct debits soared to cover rising prices.
Now as we look towards Summer, the energy market and the Government’s response to the crisis is taking on a new dimension.
Ofgem price cap
The main measure to manage price stability for household energy bills has been in place for several years already – a price cap set by the energy market regulator Ofgem. It currently stands at £3,280, having taken effect from 1 April. This is down from the previous cap of £4,279. It is important to note however that bills will vary and these figures are an average used by Ofgem, and the cap actually applies to the kilowatt hours (kWh) used by a home, plus standing charges.
While it is good news that the price cap has been lowered, in practice it is still much higher than previous cap levels – thanks to high energy costs caused by excess post-pandemic demand and the conflict in Ukraine.
Energy Price Guarantee
Although it’s important to be aware of the price cap level, it is currently moot thanks to the Government’s additional Energy Price Guarantee (EPG), which was created to protect households from soaring costs last Winter.
Initially, the Government set the EPG at £2,500 per household. This was calculated like the price cap, keeping the cost per kWh lower than the market price – effectively subsidising household bills. The EPG was set to rise to £3,000 in April, but at the Spring Budget Chancellor Jeremy Hunt confirmed it would be maintained at the same initial level until June this year. The Government has also been paying a £400 rebate to all households, which should have been arriving monthly in the bill payer’s bank account over six months in payments of around £67.
Energy price outlook
The Government’s EPG is set to end in June. However, it looks increasingly likely that Ofgem will set a new price cap at this point below the EPG level anyway – rendering it effectively unnecessary. This is chiefly thanks to easing of the energy price shock and the market normalising, as it adapts to the new environment after Russia’s invasion of Ukraine.
In terms of actual prices to expect, this is subject to change, but current estimates from Cornwall Insight, an energy market analysis firm, suggest a new price cap of £2,024 in July this year, and £2,074 from October. This is of course subject to change as the market develops, but hopefully the direction of travel will continue downward for now, particularly if the global economy shows signs of weakness in the months ahead.
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 20th April 2023.
The ins and outs of insurance protection
Insurance protection is an often-overlooked aspect of good wealth management. While we’re able to control our proactive wealth growth through saving, tax planning and other wealth tools, personal protection cover looks after what we can’t control. It is a critical aspect of an overall portfolio and should be a key consideration for anyone looking to ensure their loved ones are taken care of should the worst happen.
What do we mean when we talk about “protection?”
Insurance protection comes in a few different formats. This isn’t travel, home or car insurance which are all typical everyday insurance policies we buy through comparison sites. These kinds of policies underwrite you, your earnings and your future longevity.
What kinds of policies are there?
Life Insurance
Life insurance is perhaps the best-known protection policy but can vary in a few ways. Life insurance pays out a lump sum to a nominated person or persons should you die unexpectedly. The lump sum can vary depending on the policy you obtain, but it is common for cheaper policies to only cover outstanding major debts such as a mortgage.
You can opt for the level of pay-out you want; however, this will be reflected in the monthly payments you have to make. It is also possible to opt for a policy that pays regular payments rather than a lump sum. The proceeds of a life insurance pay-out are tax-free, but if your partner were to receive a large cash lump sum, inheritance tax could be a future consideration for them.
Income protection
Income protection is designed to pay out if you fall ill or suffer an injury which leaves you unable to work. Income protection typically pays out regular payments that, assuming you have the correct level of cover, should take care of your essential living costs should you be unable to work. This is particularly important if you don’t have savings to fall back on or have regular payments such as a mortgage that you would not be able to pay, were you to be unable to work due to ill health.
Income protection can pay out continuously until retirement if you become unable to work over the long term. Payments are tax free and multiple claims can often be made.
Critical illness
Critical illness insurance is a policy designed to pay if you fall sick with a major illness such as cancer, stroke or heart attack, or if you suffer a life-changing injury that prevents you from being able to work. However, the key difference with income protection is that critical illness cover only covers a list of illnesses specified in the policy, typically the most common kinds of serious illnesses.
The benefit of critical illness insurance is that it is generally cheaper than income protection, which is a broader policy. You will receive a tax-free lump sum pay out should you fall ill with one of the covered conditions, and partial pay outs can generally be claimed if you fall ill with a less serious condition. Some plans cover children in your policy too.
How much cover do I need?
The level of cover you need should be whatever you feel comfortable would take care of your needs, while meeting an acceptable monthly premium cost. As a rule of thumb, start with any major payments such as the mortgage and calculate from there how much you think you would need were you unable to work, or how much your partner or children might need to ensure they can continue to live in the family home.
Life insurance is really important if you have dependents, be they a partner or children. However, if your partner could cover the mortgage without your income and you don’t have dependent children, it might not be a necessary policy. It is also important to check with your workplace whether you have some kind of death in service benefit in place. This can sometimes negate the need for, or reduce the cover required for your policy.
What affects protection costs?
The costs of protection come down to your personal circumstances. In the first instance, the level of cover you require, and the longevity of that cover, will determine the cost of the policy premiums. Beyond that, a series of other factors matter too. Insurers will assess you based on your age, weight, pre-existing health conditions and your family medical history. They will also take into account other lifestyle factors such as whether you engage in extreme or dangerous sports, whether you work in a dangerous job or if you smoke. All of these can increase your ultimate premium levels.
An insurer will consider your marital status, how many dependents you have, your living costs and debts before suggesting any policy level. This can be very tricky to assess. If you would like to talk about your cover options or anything else related to your long-term wealth journey, 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 20th April 2023.
Faster State pension age rise paused: what it means for you
The Government has abandoned plans to bring forward the increase in the State Pension age, at least for the time being.
Claims surfaced in January that the Government was seeking to bring forward the State Pension age increase to 2035, leaving people aged 54 and under with an extra year to wait before receiving the valuable benefits. This was largely down to money-saving pressures from the Treasury as it looked to steady the Government’s long-term finances. However, now this would appear to no longer be necessary.
The Government has kicked a final decision on this into the long grass and it is not expected to happen until after the next General Election in 2024, as it is seen as a vote-losing decision if taken. Work and pensions secretary Mel Stride confirmed the pause to MPs, commenting: “Given the level of uncertainty about the data on life expectancy, labour markets, the public finances, and the significance of these decisions on the lives of millions of people, I am mindful a different decision might be appropriate once these factors are clearer.”
Current plans
Under current plans, the current State Pension age of 66 is set to rise to 67 between 2026 and 2028. It will then rise to 68 between 2044 and 2046. The latter change will affect anyone born after April 1977. A report published last year by Conservative peer Lady Neville-Rolfe aimed to ensure no one spent more than a third of their lives in retirement. The report recommended bringing forward the State Pension age increase to 68 by several years to 2041.
However, the Government is still reviewing actuarial data around life expectancy. A review by the Government into its retirement system funding found that life expectancy was not increasing as fast as expected, leaving the State Pension funding in a better position. Major events such as the pandemic and various crises in the health and care system appear to have clouded the picture on life expectancy for Brits somewhat. If indeed life expectancy isn’t increasing, or is even reversing, then the age changes may no longer be necessary at all.
The State Pension was created after the Second World War when life expectancy for average working adults was much lower than currently. This is why, in recent decades, the Government has been forced to undergo drastic changes to the rules and age boundaries, including equalising the retirement age for both men and women.
The State Pension has undergone a 10.1% uplift this year which means those in receipt of the new full State Pension will receive £10,600 a year. While this is a small amount of money, it still forms an essential, consistent part of retiree incomes, especially in later life.
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 20th April 2023.
Budget Statement Spring 2023 Summary
The “Back to Work Budget” could create a quiet revolution in financial planning outcomes
Chancellor Jeremy Hunt’s Spring Budget 2023 took place against a backdrop of great economic uncertainty, with interest rates rising, inflation stubbornly high and the banking sector beginning to wobble. Uncertainty over inflation, interest rates, the progress of the economy and even the banking sector abounds.
However, despite concerns about how much fiscal power this would leave the Chancellor in the Budget, he managed to introduce a series of measures that could lead to a radical rethink in terms of financial planning strategies.
Spring Budget 2023 – the key measures
Economic forecasts
The Office for Budget Responsibility (OBR) has issued fresh economic forecasts showing a modestly improved outlook for the UK economy.
It predicts the UK will no longer slip into a technical recession – two quarters of economic retraction – in 2023 but growth will instead flatline, before picking up in the middle of the decade: 1.8% in 2024, 2.5% in 2025, 2.1% in 2026, 1.9% in 2027.
Inflation is set to fall to 2.9% by the end of 2023, according to the OBR, down from a peak of 11.1% in October 2022, while it expects the Bank of England base rate to peak at 4.3% in the third quarter of 2023.
The fiscal watchdog has forecast higher-than-expected employment but predicts unemployment will rise to 4.4% in 2024 from 3.7% at the end of 2022, before returning to a structural rate of 4.1% by 2028.
Employment will increase in the long-term thanks largely to the State Pension age increase in 2028 and other measures in the Budget designed to encourage people back into the workforce, it says.
Real household disposable income is expected to fall by 5.7% over two years (2022-23 and 2023-24), 1.4 percentage points less than previously expected. The fall is thanks chiefly to rising energy costs for households and will be the largest decline since 1956-57.
As for the property market, the OBR sees house prices falling around 10% between the fourth quarter of 2022 and the end of 2025. However, it believes prices will have recovered by the end of 2027.
Meanwhile, it sees mortgage rates peaking much lower than previously, just above 4% in 2027 – 0.8 percentage points lower than it predicted in November.
Business and economic measures
The Government has pressed on with the previously announced hike of corporation tax to 25% from 19%. However, Jeremy Hunt stated that just 10% of businesses would end up paying this level of tax.
He also announced the replacement of the business tax super deduction with a ‘full capital expensing’ scheme, worth £9 billion a year over three years to businesses. The OBR forecasts this will increase business investment by around 3% a year.
The Ministry of Defence has had a spending boost of £11 billion over five years, while a new potholes fund of £200 million has been created for local councils to fix roads. The Chancellor is also setting £60 million aside to help local pools and leisure centres in financial straits.
Meanwhile nuclear power will be reclassified as sustainable for tax purposes alongside wind and solar, while a new ‘Great British Nuclear’ institution will be created to oversee a transition to more nuclear power for the country. The government will also tender for the provision of small nuclear reactors.
Personal taxation
Big change comes for pensions. The pensions annual allowance is rising 50% – from £40,000 to £60,000.
The big rabbit from Jeremy Hunt’s hat came with the abolition of the pensions lifetime allowance. It had been expected to be raised from £1.073 million to £1.8 million but it has been removed completely. The charge has been cancelled from the new tax year 2023-24, while it will be abolished entirely in a future finance bill.
Alongside this, the money purchase annual allowance (MPAA) and tapered annual allowance (TAA) have been hiked from £4,000 to £10,000.
Plus, the adjusted income level required for the tapered annual allowance to apply to an individual increases from £240,000 to £260,000. However, the pensions tax-free lump sum has been capped at 25% the original lifetime allowance or £268,275.
All these changes will take effect from 6 April this year. There are no changes to income tax thresholds or ISA allowances for the new tax year. There are also no new reductions to dividend or capital gains tax allowances, other than those already announced for the new tax year.
Households, lifestyle and sins
Among the Chancellor’s banner announcements were big changes to how childcare provision is funded and regulated in England and Wales. The childcare staffing ratio is being aligned with Scotland at 5:1 while nurseries will receive a significant funding uplift and all schools will begin to offer wraparound care from September 2026.
Hunt also announced a giveaway worth more than £6,500 a year on average for young families with the extension of free childcare hours to children aged nine months and over.
Any child over two years old will be able to receive 15 hours of free childcare a week from April 2024. From September 2024 this will be extended to nine months and over and from September 2025 this will increase to 30 hours. The policy is expected to cost the Government around £4 billion a year, according to the OBR.
The energy price guarantee (EPG) has been extended for a further three months. This will cap the average household energy bill at £2,500.
It is expected that the price of energy will fall below the guarantee level in the intervening period, making further guarantees from the Government unnecessary as average bills reach £2,200 by year end according to the OBR.
Fuel duty has been frozen for another year while the 5p reduction – introduced last year amid soaring prices – has been maintained for another 12 months.
As for sin taxes, alcohol duty is increasing in line with RPI. The Government is increasing draught relief – the level of tax on fermented alcohol bought from a pub (i.e., beer, cider and wine) – giving pubs an 11p tax advantage over supermarkets. Tobacco duties are increasing again by RPI + 2%.
High earners are failing to claim pension tax relief – how to claim
High earners have failed to claim around £1.3 billion in pensions tax relief in the last five years, according to figures obtained by pension provider PensionBee.
While the number of people failing to claim has fallen in the past five years, the amount of money going unclaimed is still too high. In 2020/21, the average amount that taxpayers failed to claim was £425 for basic rate payers, and £527 for higher rate payers. Anyone can claim tax relief on pension contributions, up to 100% of their income with a cap of £40,000. If you are a basic rate taxpayer, you’ll get a 20% top-up on your pension contributions, while if you’re a higher rate taxpayer, this increases to 40%. Additional rate taxpayers receive 45%.
The reason why higher rate taxpayers miss out on valuable extra contributions comes down to a technical way in which employers pay their staff. Those who pay to a pension provider using a “net pay” or “gross tax basis” arrangement will earn tax relief automatically. However, if your employer and pension provider operate on a “relief at source” method, the pension provider will claim 20% of the tax relief from HMRC and pay it into the pot. If you’re paying the higher rate of tax, the relief isn’t automatically applied at the higher level.
How to claim for higher rate relief
The first thing to do is check with your employer whether your pension payments are paid under relief at source. This also includes self-invested pension pots (SIPPs) that you contribute to independent of your employer. If that is the case, then to claim the additional tax relief you’ll need to fill out a self-assessment tax return. If you already do this annually that is good, you can use the form to make the claim. PensionBee says around 75% of higher rate payers already do this. However, this leaves one in four not claiming, while around half of additional rate taxpayers don’t either.
You can either fill out a self-assessment tax return, or instead contact HMRC to claim. Claims can be backdated for up to four years, which could add up to a highly valuable extra amount into your pension pot.
Pension savings are especially valuable because unlike in ISAs, your wealth is given a head start thanks to the tax-free element. This means over years of contribution and investment; your money will have more resources to grow with over time.
Of course, a pension is just one aspect of an overall wealth growth strategy. If you would like to discuss this or your options more broadly, 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 14th March 2023.
The pros and cons of getting a smart meter
Smart meters have been a contentious program encouraged by the Government as it looks to make the way households record their energy usage more efficient.
According to the most recent data from the Government, there are now over 30 million smart meters installed in homes and businesses around the country. Over half (54%) of all energy reading meters are now smart. Conversely, energy firms have been accused of pushing too hard on customers to install such meters, and much scepticism remains about their usefulness.
What do smart meters do?
Smart meters replace traditional meters in homes and businesses and allow for two key processes to take place. Firstly, they communicate directly with your energy provider using a mobile network signal and provide them with real-time information on your energy usage. This has the benefit that you won’t ever have to take a reading and update it manually with your provider. It also means that the energy firm you use can bill you as accurately as possible based on your usage. The second benefit is that you will get a portable monitor for your home that will show you a breakdown of your energy consumption. This has the benefit of showing you in real time how much energy you are using. If you turn on high-usage appliances such as tumble dryers or dishwashers, it should show you how much those appliances are using.
The Government also says smart meters have a benefit at a national level as they help it to ascertain an accurate picture of how the country is using energy. The Government has long-term goals relating to climate change that include reducing overall consumption, so this information is useful to it in this process. It also has secondary benefits such as alerting engineers and providers when there is a power cut and how to localise the issue to resolve it quicker. This saves them time and money, which theoretically ultimately leads to lower energy bills for households.
Can they save you money?
Smart meters can only save you money in the sense that they show you exactly how much you are using, and whether certain appliances in your home are using too much. They can also show you how much your base usage is. In other words, without turning on expensive appliances such as tumble dryers, you can get an idea of how much electricity and gas your home is consuming over the course of a typical day. It may be that you’ve got electronics or lighting that are using large amounts of electricity without you knowing. Or perhaps you’ve got the heating on too high, and this is driving up your gas usage.
In essence, all a smart meter can do to help you save on energy bills is to present you with a more accurate live view through the monitor of your consumption. However, it’s up to you to work out how to reduce that consumption if you feel your bills are too high.
The drawbacks of a smart meter
Smart meters present your energy provider with accurate and up to date information on your energy usage. If your usage goes up, this can lead to the provider adjusting your direct debit upwards to anticipate higher usage. Smart meter technology has also been criticised as unreliable. While less of an issue now, it was the case that when switching providers sometimes smart meters would not be able to carry over to the new provider, effectively turning them back into ‘dumb’ meters where you have to take a manual reading. While this is less of an issue with so-called SMETS-2 meters, ensuring a new provider is receiving the right information – if and when you do switch – is really important.
Smart meters can also suffer from technological foibles such as loss of signal, software issues and other problems that prevent them from accurately providing information to your energy supplier. It is important to keep an eye on it and your bills to ensure they’re charging you fairly and correctly.
Energy firms have also been criticised in the past for forcing smart meters on customers, using heavy-handed and pressure tactics to encourage adoption. The installation of smart meters can also be an issue for renters who manage their own energy bills but have a landlord who might not be willing to have one installed.
The energy outlook
Energy prices for households have been at record levels this winter, leading to eye-watering bills despite the Government’s energy price guarantee – which it has spent lots on protecting consumers from the worst rises. The good news is that gas prices – on which overall energy prices are reliant on – have mostly come down from record levels. This doesn’t unfortunately lead to lower energy bills immediately. This is because energy firms buy their energy from wholesalers on a longer-time horizon over many months.
Currently the energy price guarantee (EPG) ensures the average household will only pay a maximum of £2,500 a year for their energy. This figure can however be higher or lower based on a household’s usage as the guarantee relates to a cap on units of energy rather than the overall bill. The EPG is set to expire after March 2023. Energy consultancy Cornwall Insight has good news, however. It says that energy bills should on average come back down to below the EPG this year. Based upon current gas price levels, it believes average household bills should be around £2,200 by July-September 2023. While this is still well above historic levels, it should help to soften any further blows to household bills.
This outcome is still uncertain as Europe continues to suffer from energy market disruption thanks to the conflict in Ukraine. Much still depends on how governments respond to these ongoing geopolitical issues and how this ultimately affects wholesale fossil fuel prices.
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 14th March 2023.
Could you soon be working a four-day work week?
Four-day work weeks could soon be the norm after a major study found considerable benefits for workers and businesses.
The study, which involved 61 firms from a range of industries, encompassing around 3,000 workers has been hailed as a major success as the majority were convinced of its practical benefits. Not only did worker turnover decrease, employees reported a lower level of burnout while some firms also experienced unusual increases in revenues – suggesting it made those businesses more productive.
The success of the trial has seen politicians call for its wider implementation while major businesses, such as Sainsburys and Dunelm, are considering adopting the practice. It’s safe to say that the four-day work week trend could soon be coming to your workplace. However, what are the potential financial implications?
How a four-day work week would affect you and your money
The trial was explicitly designed so that workers would enjoy more free time while continuing to earn the same amount of money as if they were working five-day weeks. From an earnings standpoint – no one should lose out.
There is also a potential impact on the success of the business you work for, in the long term, if the findings of the trial bear out more widely. If businesses are able to improve productivity and earn more money, it could lead to better pay rewards for workers too.
Another aspect that could be of benefit is what people do in their extra free day. While some may choose to spend more time on leisure activities, with kids or grandkids, or just relaxing, others may choose to pursue part-time work or even a side hustle business to earn extra money with their new-found time.
There are other important financial perks to consider such as the cost of childcare. The UK has some of the most expensive childcare costs in Europe, so as a parent or grandparent being able to help out with kids an extra day a week could be a financial, as well as familial boon. Since the pandemic, there has also been an increasing shift of older workers abstaining from the workforce. The reasons for this have been debated, with some citing wealthy retirement pots for many who don’t need to work, while others lay the blame on a healthcare crisis for older people. The introduction of more flexible working patterns such as a four-day week could be helpful for older workers looking for a softer reintroduction to the workplace, or flexibility to meet their lifestyles.
Drawbacks of a four-day work week
While there appear to be considerable benefits to a short working week, there are also some drawbacks.
Implementation may vary but some employers could ask workers to fulfil the same number of hours as they would over five. For instance, instead of working 5x eight-hour days employees could do 4x ten-hour days. Not all businesses will find shorter work weeks practical either, particularly those that rely on shift work. This could lead to staffing shortages in key sectors such as healthcare or hospitality.
Ultimately though, in financial terms, no one should be worse off from working less days in the week. Plus, with the freedom of an extra day to yourself, it could be an ideal time to start something new or spend more time on yourself.
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 14th March 2023.
Get your finances in shape before the end of the tax year 2022/23
A new year has dawned, and there are just a matter of weeks left before the end of the tax year.
As usual, that means you need to familiarise yourself with a range of new rules, limits, and allowances. It’s really essential to be aware of this as now is the time to take advantage of left-over allowances that you have yet to use, or to prepare for new, higher taxes coming down the line. So, what is there to expect? We already know a good deal of what is coming but the Government is set to publish a Spring Budget which will take place on 15 March. While this won’t necessarily contain immediate measures, it could present some last-minute challenges for our finances.
With that in mind, here’s what we know is coming, and how to be prepared.
Things that are changing from 6 April
Capital gains tax
The Chancellor Jeremy Hunt announced a big change to the Capital Gains Tax (CGT) allowance in his Autumn Statement in November last year. The allowance has been slashed from £12,300 to £6,000 and is set to be slashed again in 2024 to just £3,000. The first cut will take effect from the new tax year, which means maximising what is left of the higher CGT allowance now is essential.
Dividend allowance
The Chancellor has also slashed the dividend allowance from £2,000 to £1,000, which will take effect from the new tax year. It will be slashed again in 2024 to just £500.
Other thresholds
The Treasury is freezing most other thresholds at their current levels for longer, including income tax and inheritance tax (IHT). This means that, while you won’t see a headline tax increase, if you receive a pay rise it will be worth less than it would have, had the thresholds moved up in line with inflation or average earnings. Jeremy Hunt also announced that the 45% additional rate of income tax will have a new lower threshold of £125,140 from 6 April. This means if you’re earning above that level, you’ll pay more in tax than you were before.
Things you can do to prepare
There are a number of straightforward mitigating measures you can take to shield your wealth and income from these changes. Here are some ideas to get you started.
ISAs
ISAs are something of a miracle product, shielding you from any tax liability for things such as dividends or capital gains tax (CGT) that you would normally have to pay if you invested using a standard account. The annual £20,000 ISA limit is extremely valuable for wealth growth and preservation, and so it’s sensible to make as much use of it as you can, be it cash or investment ISAs. ISAs are the single best way to avoid the punishing implications of dividend and capital gains tax (CGT) allowance cuts as the tax wrapper on the account protects you from any tax implications whatsoever.
Pensions
Before you get to your ISA, you’ll want to make sure you’re contributing as much as possible into your pension. The annual allowance is £40,000 and comes with extremely valuable tax relief. This tax relief makes contributing to a pension more attractive than an ISA in the first instance as upfront extra money will help grow your savings pot larger over time. However, pensions do have implications when you begin looking to draw down wealth, including when you can access the money, how much you can get tax free and the size of the pot, making them somewhat of a more complicated vehicle than the ISA.
JISAs
Junior ISAs or JISAs are often overlooked but are also an extremely valuable allowance you can call upon. Ultimately, when we think about building wealth over a lifetime, a big consideration in that is what we leave behind for our children. Before getting into inheritance tax (IHT) considerations, contributing to a JISA for a child under 18 can be a great way to begin passing some of this wealth on as early as possible, while setting up your child for a prosperous future at an early age. The current annual JISA allowance is £9,000 and this will remain unchanged in the new tax year.
Inheritance tax allowances
Inheritance – or so-called ‘Death tax’ – is the most hated of all Government levies. However, there are various allowances and carve-outs available allowing you to limit your potential liability. The main one is the annual gifting allowance. You can gift up to £3,000 tax-free to anyone each tax year, which resets each 6 April. There is also a seven-year rule on giving away wealth, so the earlier you begin to prepare that process, if it’s something you’re considering, the better. As a parent you can also make a £5,000 wedding gift, or £2,500 if you’re a grandparent – although this is contingent on when your child/grandchild gets married rather than the tax year in particular!
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 12th January 2023.
The World In A Week - New data needed
Written by Ilaria Massei.
Almost all the major equity benchmarks ended lower in a week which delivered relatively few important economic data releases. The S&P 500 closed at -0.9% in GBP terms, in a week where the Fed Chairman, Jerome Powell, held a speech at the Economic Club of Washington and communicated to markets that the disinflationary process has begun. However, according to the latest jobs report, economic conditions have not deteriorated enough to justify a reversal in the hawkish monetary policy currently applied.
In the UK, the GDP Growth rate was released last Friday and signalled that the economy stalled in the last quarter of 2022, and narrowly escaped a recession despite a sharp economic contraction of 0.5% in December. A recession is defined as GDP contracting for two consecutive quarters. Although growth for the quarter was 0%, the contraction in December was mostly due to a drop in services output and strikes affecting the country during the Christmas period.
In China, the annual inflation rate rose to 2.1%, from 1.8% in December. This was the highest reading in three months, as easing of lockdowns have increased prices. On a monthly basis, consumer prices increased 0.8% in January, following a flat reading in December 2022 and marking the steepest rise since January 2021.
Japan was the only major equity market to end the week on a positive note, with the MSCI Japan Index closing up +0.8% in GBP terms. It has been a week full of speculation around the new potential nominees to be the next governor of the Bank of Japan (BoJ). Investors are looking for a shift in monetary policy, which could be delivered by Kazuo Ueda who seems to be more cautious about the risks of an ultra-loose monetary policy.
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.
© 2023 YOU Asset Management. All rights reserved.