Early end to the tax year? Get your skates on to fulfil your allowances
The tax year ends on 5 April, but thanks to the Easter holiday, many won’t be around to process that last minute deposit this year. Therefore, now is the time to be planning this so you don’t miss the deadline.
The last day of the tax year is always 5 April, with the tax year 2021/22 starting on 6 April. But a quirk in the annual public holidays this year means that 5 April is the Easter Monday bank holiday.
On top of that, the Friday before, 2 April, is also a bank holiday. This means realistically if there is anything you need to get sorted; it should be arranged before the last working day – 1 April.
With that in mind, there are several allowances and limits you need to look at to be ready for the unusually early tax year end.
Pension - Make sure you’ve contributed as much as you can to a pension. The annual limit is £40,000 per person. If you’ve maxed yours and have spare cash, consider adding to a spouse’s annual allowance if they have spare.
ISA - Make sure you’ve topped up your ISAs to their maximum potential of £20,000.
JISA - If you have kids under 18, make sure they’ve had their full allowance contribution. The allowance was more than doubled last year from £4,368 to £9,000 – if you’ve missed that it would be easy to not realise you could add more.
CGT – Make sure if you have any investments or assets that are due for disposal that you do it ahead of the new tax year to maximise your £12,300 allowance. This is especially important in light of possible CGT changes from the government
State pension – Less well-known but still important is if you’ve missed any National Insurance contributions in the last five years and would like to make up the difference. You can do so by paying for extra State Pension entitlement. It’s important to note that this has a limit of six years for the end of the tax year for which the contributions are paid.
Marriage allowance – If your spouse earns under the annual allowance of £12,500 you can transfer up to £1,250 to them each year to spread the load. Marriage tax allowance can be claimed back up to five years assuming you qualified in each of those years.
IHT – Every year you have an allowance of £3,000 for cash gifts. If you miss a year you can carry it forward, but only for 12 months. You can also gift £5,000 to a child getting married, or £2,500 to a grandchild.
If you think you need to fulfil any of these allowances before 1 April, get in touch with your adviser right away to discuss your options.
Too late to beat the stamp duty deadline?
If you’re buying a home, time is ticking if you want to take advantage of the Government’s stamp duty holiday and save yourself up to £15,000. The tax break means that anyone buying a home worth up to £500,000 doesn’t have to pay property taxes. However, after 31 March, the threshold reverts back to £125,000, meaning you will have to pay potentially thousands more in taxes.
While anecdotal, there are some indications that the property market is cooling as the deadline looms and people abandon hope of making it across the line. Halifax Bank for instance published its latest house price figures showing asking prices suffered their biggest fall in January since April 2020. There is also a question hanging over the market as to whether Rishi Sunak will extend the holiday. At the time of writing, a chorus of voices is assembling calling on the Chancellor to extend the holiday and avoid a cliff edge.
Ways to beat the deadline
Unfortunately, we won’t know until 3 March what the Chancellor decides (read our full piece on 'what’s in store for the Budget'). With that in mind, and less than two months to go until the deadline, have you missed the boat? And what can you do to ensure that your purchase completes on time? If you haven’t already started the purchase process, then in all honesty the likelihood that you’ll beat the deadline now is slim, unless you’re buying with cash and are not part of a chain. However, if you are part way through the process, here is what you can do to speed things up.
Find a solicitor with capacity - Many property lawyers, or conveyancers, are reporting that they are swamped at the moment because of the wave of buyers looking to beat the deadline. If you don’t have a conveyancer lined up, then call around until you find a reputable one that has the capacity to complete all of the necessary paperwork by the deadline.
Book your survey as soon as possible - A survey is a vital part of the homebuying process and can’t be skipped. Like conveyancers, surveyors are likely to be very busy right now. Take the initiative and line one up as soon as you possibly can.
Stay in regular contact with your estate agent - As time is not on your side, your estate agent will be one of your best friends over the next few weeks. If you’re relying on the stamp duty savings, and are in a chain, tell your estate agent to stress to the others in that chain that it’s vitally important to work as quickly as possible. That’s a little bit out of your control, but it may inspire a bit of urgency to others in the chain.
Get expert mortgage advice - A good mortgage broker will not only find you a good interest rate, but they will also be able to tell you which lenders are suffering delays and which ones can give you an offer quickly. Ask you adviser what documents you need at the very beginning so you can save time further down the road.
Be organised and pushy - Your broker, solicitor, lender and surveyor all have a vital role to play in making sure you beat the deadline, but so do you. It’s your job to make sure that you act quickly and provide the necessary documents as quickly as possible when asked for them. And if things are delayed, don’t be afraid to apply pressure on whichever part is holding things up.
If you’re ultimately unsure at whether it is worth it to try and beat the rush or perhaps wait and see if the Chancellor gives you extra time, get in touch to discuss your options.
Spring Budget 2021: what to expect in Rishi Sunak’s financial address
Rishi Sunak delivers his second Budget on 3 March against the backdrop of record government spending and escalating national debt. There is much speculation that the Chancellor will use the Budget to balance the books and introduce tax hikes. Increases to income tax and VAT seem to be off the table, as it could hinder much-needed economic growth. However, there are a number of other lesser-known rates that he could target that would produce significant windfalls for HM Treasury – so called stealth taxes.
Capital Gains Tax
Capital Gains Tax (CGT) – the levy you have to pay when you make a profit on an asset sale –is one tax thought to be in Sunak’s sights. CGT is currently charged at 10% for basic rate taxpayers and 20% for higher rate payers. This rises to 18% or 28% respectively if you’re selling a second property. It is thought the Treasury is toying with the idea of reforming the tax, bringing it in line with income tax. That would mean raising the rates to 20% for basic rate taxpayers and 40% for higher rate taxpayers. According to a review by the Office for Tax Simplification this could net an extra £14 billion for the Treasury, and bring to an end what it calls various ‘distortions’ caused by differing rates between CGT and income tax.
Pensions tax relief
Pensions tax relief reform is something that has been discussed in political circles for some time. The relief is designed to incentivise people to save for their retirement by diverting some of the money you would have paid in tax into your pension instead. At present, higher rate taxpayers have a better deal, gaining 40% relief on their pension contributions, compared to 20% for basic rate taxpayers. It has been suggested the Treasury could introduce a flat 20% rate of relief, saving it more than £20bn a year.
Property wealth tax
HM Treasury is said to be looking at the idea of an annual property ‘levy’ or wealth tax. This would replace council tax and stamp duty completely and be revenue neutral – meaning that the treasury would not bring in extra cash from the changes. It would, however, hit hardest those people living in areas where house prices are higher, such as London and the South East. A 0.48% annual levy has been proposed. A homeowner in London with a property worth £516,000 – the average for the area – could expect to pay £2477 a year under the new system. Someone with a property worth £140,000 in North East of England would pay just £672.
One-off wealth tax
Another idea recently touted was that of a one-off wealth tax – amounting to 5% of an individual’s wealth, paid in 1% increments over five years. The plans, suggested by the Wealth Tax Commission, would see anyone with wealth over £500,000 impacted. This idea is however less likely to gain traction than others, considering the Conservative Party’s generally reticent attitude to creating new taxes, particularly on older, wealthier voters.
While these ideas have all been either leaked or touted in the press in one way or another, none are guaranteed as of yet. If you would like to discuss the potential implications of any of these changes with your adviser, don’t hesitate to get in touch.
Upcoming Webinar on Mental Health
We're holding a webinar on the subject of 'Investing in our Mental Health - helping you to manage mental security for the future' on Thursday, 11th March 2021 at 2pm.
Topics to be covered in the webinar
- What is mental health - the basic principles
- When, how and why does our mental health change?
- How can we tune in to the challenges others are experiencing
- Widening our understanding of self-care
What you will take away from the webinar
- A better understanding of what mental health looks like today
- How to identify with behaviours of loved ones around you that don't even know they are displaying signs
- A more practical understanding of how you can support yourself and others
Speaker: Matt Holman, Simpila
About Matt:
In 2016 following a personal mental health challenge Matt changed his career and committed to helping others who are struggling with the demands of the world. His company, Simpila is dedicated to making a difference in the world and enhancing the awareness, education and support for mental health across companies and society.
In 2017 working with friends in their company Happiful, Matt was the publisher of Happiful Magazine, the first magazine devoted to promoting positive mental health. The magazine now has in excess of 100,000 subscribers.
In 2020, Matt was recognised by Buying Business Travel Magazine Hotlist 2020 as a Global Influencer, alongside major travel suppliers and Greta Thunberg, focusing his energy to support the impact business travel can have on mental wellbeing. Matt is also the co-founder of the Global Business Travel Wellbeing Community.
Webinar Joining Instructions
To join the webinar all you will need is a web browser and Internet access.
To join the webinar, simply click on the link below:
You’ll then be taken to the registration page where you will need to enter your name and email address and then click the ‘Enter’ button.
You will then be in the webinar waiting room, ready for the meeting to begin. When the meeting begins, you’ll see the presenter on your screen.
Joining by mobile phone
Please note that if you intend to join the webinar by mobile phone, you will need to download the ClickMeeting Webinars app in advance. The phone access pin for the webinar is: 222642844#
PLEASE NOTE:
The webinar system does not support Internet Explorer. For a flawless webinar experience please use the latest versions of Chrome, Safari, Firefox, Opera or Edge browser.
Also, where possible please use a fast and strong Internet connection and turn off any unneeded browser tabs and apps during the webinar.
There's also a video with full instructions of how to join via your laptop, desktop or mobile phone.
The World In A Week - Snakes And Ladders
Some elements of investing can be a zero-sum game. When one side of an investment gains, the other side loses. For those investing in GameStop, the profits made when the stock went up was reflected in the losses made by the hedge funds who were betting on the stock going down. It is all well and good when the dice roll means you land on a ladder, but it is not so pleasant when you land on a snake.
So, it would appear that the Reddit bubble has burst and there will undoubtedly be some pain for those individuals who entered the battle late. GameStop’s share price started the week at $316.56 and finished at $63.77, representing an almost 80% drop for the week, still significantly above its 52-week low of $2.57.
From a psychological perspective, we hope that these speculative episodes do not deter true investors from taking appropriate risks for their long-term investments, as they do not affect or influence our robust investment processes.
In a world that is waiting for vaccinations to inoculate sufficient people in order to ease lockdown restrictions, knowing that central banks and governments are still committed to providing liquidity and stimulus is critical. This was underlined in the Bank of England’s Monetary Policy Committee minutes last week, where they explored the possibility of negative interest rates. However, it was stressed by Governor Andrew Bailey that while we should expect the Bank of England to have investigated all monetary options, he did not want to send any signal that it intended to set a negative bank rate at some point in the future. It is also clear that President Biden wants to reassure the US people by pushing ahead with the latest instalment in a long line of fiscal stimulus plans. The $1.9 trillion economic relief plan looks set to be pushed through, with or without the support from Republicans.
It seems that “doing whatever it takes” is the modus operandi for most central banks and governments during this pandemic, and the originator of the phrase has returned to the political spotlight. Former President of the European Central Bank, Mario Draghi, who adopted the phrase in 2012 to give reassurance that the Eurozone would not crumble, has been asked to head up the Italian government. Can he repeat his success as Super Mario and stabilise a faltering Italy?
The final person sliding down the gameboard is Jeff Bezos who announced that he will be stepping down as Chief Executive of the world’s largest e-commerce retailer. Climbing a ladder to fill those shoes is Andy Jassy, who was heading up Amazon Web Services and will have a big plate to deal with once the pandemic has receded.
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 8th February 2021.
© 2021 Beaufort Investment. All rights reserved.
The World In A Week - GameStop & Match
Well, who would have thought a small US bricks and mortar video retailer would grab the attention of the world? As we keep seeing of late – expect the unexpected! We’ve not heard the term David vs Goliath being used as yet, but we’ll coin it!
GameStop is the company in question. A company sitting in a very precarious financial position and being heavily bet against by the hedge fund firm, Mervin Capital. Then, in step many private investors, fueled by social media chat on sites like Reddit, have protected the company from the “bully boys” of Wall Street. Well, what have we seen? The share price rocket over +900% this year, even though the stock price took a -70% hit on Thursday. A company in the abyss worth less than $1bn a few weeks ago, suddenly skyrocketing to a market cap over $25bn, is simply staggering! The plot continues to thicken – industry watchdogs and regulators are warning about market abuse and potentially looking to step in. The trading platform that many ‘Redditors’ use to transact Robinhood Markets has stopped taking trade orders on the stock, with many private investors now crying foul – why can hedge fund managers do as they see fit, but mom & pop can’t? Lawsuits are being threatened, but Robinhood has probably taken the right moral action, to stop the same investors losing their shirt, as highlighted by the stock price fall on Thursday. At the same time Robinhood also had to go looking for a cash injection itself, as they had to put up the collateral for these trades after they got so big!
Why should we care? Is this a real attempt to rescue the company or David trying to lay one on Wall Street Goliaths, and why if that’s the case? Woolworths, C&A, Blockbuster are just a few high street names that have fallen by the wayside. Why? Because the model had stopped working and demand shifted elsewhere. However, is this whole episode significantly more profound and a reflection of the failures that lead to the Great Financial Crisis, and the widening social and economic gaps that continue to persist under capitalism. Will this be a watershed moment?
What we have seen over the last few months is that global economic data has been much stronger than forecast, which highlights the ability of humankind to adapt (or bouncebackability as they used to say on Soccer AM) in the face of adversity.
In other news – there continues to be mud-slinging in Europe over the slow and unequal rollout of the vaccines, we’re sure many Brexiteers are sitting there saying “I told you so!”. Finally, the AstraZeneca vaccine has been given the approval in Europe, and the Novavax vaccine shows 89% effectiveness in UK trials. Normality may return…..
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 1st February 2021. © 2021 Beaufort Investment. All rights reserved.
The World In A Week - Bitcoin & Other Video Games
Markets were broadly positive last week with the MSCI All Country World Index (ACWI) of global stocks up +1.0%, giving a return of +3.2% for the year to date. In a slight reversal of the trend which started in Q4 last year, we witnessed expensive markets such as the US and China outpace cheaper markets in the UK and Europe.
Beyond the rather sedate market-level movements, the week saw the continuation of some truly bizarre single stock activity. Shares in video game retailer GameStop surged +80% on Friday, as amateur traders coordinating on the online message board Reddit used stock options to trigger a “short squeeze” in the stock. This caused the market capitalisation of GameStop to rise from $1.3bn at the end of 2020 to $4bn. GameStop is lossmaking, reporting a -31% drop in sales in December 2020 and is a brick-and-mortar retailer which is facing digital disruption.
In the US, equity options’ trading volume on retail platforms such as Robinhood has exploded recently as punters funnel their stimulus cheques into highly speculative bets. This has been concentrated in a handful of names such as the FAANG stocks, Tesla and a series of other tech and biotech names.
Another market that continues on a wild ride is of course Bitcoin and the wider cryptocurrency market. Bitcoin rose 4x vs the US Dollar between October last year and January 2021, before falling -22%. For an asset which is touted as a replacement currency, we struggle to understand how something so volatile and speculative serves as a store of value or medium of exchange. While it has been interesting to witness some multi-asset investors adding Bitcoin to their holdings in the last year, Beaufort Investment is not in the business of adding things it does not understand to our client’s portfolios.
These developments continue to give the Investment team cause for a certain degree of caution that speculative excesses are building in certain areas of markets. Conversely to this, it is likely that fantastic opportunities for future returns reside in the more unloved and unglamorous areas of markets. Now is the time to employ significant selectivity and nuance to one’s investment approach.
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 25th January 2021. © 2021 Beaufort Investment. All rights reserved.
The World In A Week - Cheque Mate
The political situation in the US continued to dominate the news headlines last week with President Trump impeached for the second time during his term. National Guard troops have been deployed to Washington D.C. amid safety concerns regarding the upcoming inauguration of President Elect, Joe Biden, taking place this Wednesday. President Elect, Joe Biden has announced his plan to issue a subsequent stimulus package, amounting to $1.9 billion to boost domestic consumption and this will include $1,400 stimulus cheques and $350 billion in state and local aid. He has also proposed to raise the minimum wage to $15 per hour and has encouraged widespread adoption of the vaccine which has started to be rolled out across the US.
Restrictions tightened further in the UK, with travel corridors closing until mid-February to restrict the spread of the new COVID-19 variant. Any travellers arriving at UK borders must provide evidence of a negative test in the preceding 72 hours.
The UK economy declined by -2.6% in November, with high street shops and restaurants being forced to close with the tiered lockdown system in place. This was still way ahead of expectations, but November’s decline was a clear example of the economic impact caused by a lockdown given the prior months of May to October all generated positive GDP growth as the country phased out of the national restrictions. The UK is a service dominated economy and the transition to a more resilient remote working environment has been successful, enabling more companies to trade effectively during the pandemic. However, following the national lockdown imposed in December by Boris Johnson, the likelihood of the UK entering a double-dip recession is high, should we remain in full lockdown for the next two months.
Elsewhere, China’s economy expanded 6.5% in Q4 of 2020, amounting to a 2.3% annual GDP growth in 2020 with the International Monetary Fund predicting that China will be the only country to experience growth at all. China’s economic growth figures have historically faced scrutiny over their reliability. However, the country was quick to react to the virus and has benefited from being a strong exporter following the trade deal agreed with the US.
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 18th January 2021.
What does the Brexit deal mean for your finances?
After more than four years since the 2016 referendum, the UK and the European Union have agreed a Brexit trade deal. But while a compromise has been found, the divorce may still have far-reaching consequences for the money in your pocket. So now a deal is in place, it’s a good time to take stock of your finances and ensure they are in a solid position now the UK has left the bloc.
Time to look again at the FTSE 100?
The FTSE 100, the UK’s index of blue-chip companies, has lagged behind large international rivals since the referendum vote, particularly last year. The combination of Brexit uncertainty and coronavirus caused the UK’s leading index to plunge 14.3% in 2020 – its worst year since 2008. By comparison, China’s CSI 300 rocketed 27% last year, while the US’s S&P 500 and Japan’s Nikkei indices ended the year up roughly 16%. But what happens now the UK has a deal in place with the EU? Could we see a FTSE 100 resurgence? As ever, it depends on who you ask.
Some experts believe investor sentiment towards unloved UK firms could improve now a deal is in place, which could lead to higher share prices. However, others believe the FTSE’s lack of fast-growing technology companies will continue to hold it back, while COVID-19 may act as a drag in the short term. A resurgent pound on the back of the Brexit deal could also dent the profits of the many firms listed on the FTSE 100 that earn the bulk of their revenues in dollars or euros. As for smaller companies (i.e.: those listed on the FTSE 250 and AIM indices), a deal provides more certainty, which may help share prices.
Will I get more on my savings?
Now England is back in a national lockdown, it’s likely the Bank of England will keep rates at 0.1% to support the economy. Unfortunately, if you have a savings account, it means you will probably continue to get a poor rate on your cash for some time yet. That said, most experts recommend keeping between three and six months’ worth of outgoings in an easy-access cash savings account to cover emergencies.
Is my pension still safe?
There are roughly 1.3 million Brits living on the continent, many of them with private pensions with UK providers, according to the United Nations. While the Brexit trade deal does not cover pension products directly, the UK and EU are about to begin talks about how they will co-operate on financial services products in the future. The Brexit deal on goods gives hope that they will come to an agreement that doesn’t hurt those with financial assets such as pensions or property on either side of the English Channel.
But for now, the best advice is: sit tight and don’t panic. However, if you are after peace of mind, then it’s worth speaking to your financial adviser about any of the themes mentioned and options for your money as we move on from life in the EU.
Multi-year lows, record highs, and a pandemic – 2020 by the numbers
2020 was a year like no other. A global pandemic the likes of which has not been witnessed in our lifetimes changed the way the world works, and had a huge impact on global markets.
A huge decline in the first few months for most equity markets, and a rush to buy protection in the form of bonds and gold, was followed by record stimulus across the world from central banks as governments shelled out to companies to furlough staff.
Equities rebounded, with major markets including the US jumping to record highs. Bonds, meanwhile, move into negative territory, with many bonds now charging investors interest to hold them (rather than paying them an income).
Let’s not forget alternatives either. Gold, regarded as the ultimate safe haven, soared to a record peak above $2,000, and remains near there today. Meanwhile crypto currencies like Bitcoin saw unprecedented buying, more than quadrupling from lows in some cases, particularly as institutional investors started entering the market.
The numbers themselves are stark, and here are some of the highlights.
Equity markets break new records
US equity markets endured a bleak start to 2020, only to surge back in the second half as its huge weighting to technology stocks won out in the switch to working from home. In total, the S&P 500 rose 18.4% last year, while the tech-heavy Nasdaq index gained more than 40%. China, where the coronavirus pandemic began, also saw impressive gains in 2020, with the MSCI China index up almost 25%.
There were losers though, even as US markets smashed through record highs. The UK, blighted by both the pandemic and Brexit, struggled to make headway, with the FTSE 100 index shedding 15%, despite rallying off lows as the country reopened after the first lockdown.
A quarter of the world’s investment grade bonds now have a negative yield
As equities rallied, demand for safe haven bonds remained very much a priority for many investors (bolstered by central bank buying). By mid-December some $18.4trn of bonds were trading with a negative yield according to Bloomberg, with only US government bonds managing to still trade with positive yields across all time-horizons.
Gold
Having already risen substantially in 2019, gold’s meteoric rise continued in 2020, spurred by central banks buying up bonds by issuing more debt, and thus weakening their own financial positions. The precious metal jumped by more than 20% over the course of the year to leave the gold price just shy of $1,900 (a level it is not trading above). In truth, it could have been even better for gold, with the price actually rising above the $2,000 mark at one stage last year, before retreating late on.
Even with a year like 2020 behind us there are still many permutations of the coronavirus crisis left, meaning there is no doubt the next 12 months in markets are set to be as eventful as the last. If you would like to discuss any of the themes and ideas in this article don’t hesitate to get in touch with your adviser.