A multi-faceted tax raid is set to rock even the modestly wealthy in the UK, meaning it is incumbent on us all to take a long hard look at our financial strategies as the year draws to a close.
Although no tax hikes were announced in the Summer Statement, news of a review of the Capital Gains Tax regime followed close behind. Our users now feel they’ve been put on warning for painful changes to come in the Autumn Budget and many say they’re already taking advice on their options.
The tax is a red-button issue for the affluent since those who pay it are also twice as likely to be paying higher-rate income tax than the general population. Our users say they are variously worried about changes to allowances, exemptions and loss reliefs – all of which were mentioned in Chancellor Rishi Sunak’s request for reform proposals.
Some now believe the Government intends to bring income tax and CGT into alignment, doing away with the 20% rate higher-rate taxpayers currently enjoy
Even more ominously, his letter to the Office for Tax Simplification (OTS) also questioned “how gains are taxed compared to other types of income”. Some now believe the Government intends to bring income tax and CGT into alignment, doing away with the 20% rate higher-rate taxpayers currently enjoy.
The temptation to do so must be great given this looks like a neat – and redistributive — way to plug the gaping hole in the public finances. The pandemic furlough scheme and Job Retention Bonus have been costed at over £100 billion, while a 2019 study by the Institute for Public Policy Research said such aligning income tax and CGT would raise £90 billion over five years.
Many experts now say major CGT and Inheritance Tax (IHT) changes are inevitable, and concerns about the latter are coming up more and more in our conversations with users.
As with others, the Government has made no mention of further increasing this much-hated tax as yet, but this has done little to assuage rising panic: polls1 are currently showing that 80% of people believe IHT rates will have to rise to pay for the COVID-19 bailout package.
As we recently highlighted, the extreme depletion of Treasury coffers has had experts drawing comparisons with the post-war period, when IHT levels hit a punishing 80%. Although such astronomical levels would be politically explosive for a Conservative government, our users are wondering how tight the screws could go.
How you structure your wealth for transfer down the generations is crucial, but you may not know that certain types of investment can confer big IHT benefits too – at least for the present
The good news is that there is a huge amount that can be done to mitigate your IHT exposure. And, although it is certainly preferable to take advice as early as possible, money-saving action can be taken at any point. How you structure your wealth for transfer down the generations is crucial, but you may not know that certain types of investment can confer big IHT benefits too – at least for the present.
The clock may already be ticking on some of the most powerful tax mitigation relief strategies, since the OTS’ 2019 review on IHT criticised both the seven-year gifting rule and the use of Business Property Relief for junior stock market (AIM) investments. If IHT is a concern, we would advise you seek advice promptly.
The intelligent use of Capital Gains allowances, exemptions and reliefs are core to many people’s wealth management strategies, but dramatic – and rapid changes – seem likely. This is just the kind of situation where having an adviser on hand who is intimately acquainted with your affairs is essential. You still have time to get one in your corner, however. Find your best matches, fast and free with us.
As tax increases loom, our users are thinking about how they can participate in any further market upswings and, more particularly, when and what to buy.
We’re currently hearing from lots of DIY investors who are keen not to be left out, but equally wary of getting burnt. While it is always better to put your money to work, they are right to be worried about getting the timing and exposures correct rather than blindly rushing in.
It appears there are certainly bargains to be had. For instance, experts are saying that European equities, which have been unloved for a good while, are due a return to normal valuation. Meanwhile, research2 has revealed that over 30 UK listed companies are currently trading at a discount to their liquidation value, highlighting a potentially huge opportunity to add fundamentally strong stocks at bargain prices.
However, there is also a real risk of indiscriminate buying contributing to what some already see as frothy valuations – not to mention a highly uncertain future as the COVID-19 pandemic rumbles on. Now may well be an excellent opportunity to increase your investments, but it is vital to do so in a considered way.
You can still act quickly; wealth managers are very much open for business. Arrange for a free, no-obligation discussion of your current holdings and goals, and you can quickly be set on the right path by an expert.
We’re delighted to have seen a real uptick in the number of female users seeking advice in recent weeks. Readers will know that one of our longstanding missions is to encourage women to get more proactive about making their money work as hard as it might, highlighting this regularly in our coverage.
What seems to have really struck a chord recently, however, are new figures making stark the reality of the gender wealth gap.
Research3 now values the average woman’s pension at less than half that for a man (£73,000 versus £162,000), with that plummeting to a quarter for divorced women4. Even more disturbing is the Pensions Policy Institute’s revelation that there are 50% more women than men facing retirement without any private pension savings.
Despite women’s growing power as earners and entrepreneurs, they have to contend with a range of dangers to their long-term financial health
Despite women’s growing power as earners and entrepreneurs, they have to contend with a range of dangers to their long-term financial health – all of which may be compounded by a lesser likelihood to invest first place and risk-aversion when they do.
Wealth managers have long recognised the particular needs of female investors and have excellent strategies for helping women catch-up. Many also have specific services for women who need to wisely invest financial settlements post-divorce, for instance.
Whatever your situation, age or knowledge level, please don’t neglect your chance to maximise your financial wellbeing.
This summer is a hot one for financial concerns, and these are just the leading issues being raised by the High Net Worth Individuals asking us for help finding wealth management advice.
We’ve been matching users with wealth managers at record-breaking rates in recent months, helping people to gain peace of mind during these unprecedented times – and often to make significant financial gains too.
If you have a clear idea of the services you are looking for, then use our smart matching tool to find your best-matched advisers in minutes. Alternatively, for an informal, exploratory discussion, get in touch with our expert team.
1 The Private Office
2 Bowmore Wealth Group
3 Close Brothers
4 Now Pensions