Tax-efficient investments, proper diversification and all-round optimisation is – or at least should be – the name of the game in March.
Our users are harnessing new financial year energy this month as they look ahead to a new start for myriad tax mitigation and investment opportunities.
In February, we noted that the last-minute tax planning rush we typically see was more pronounced than ever. Although we are still hearing from those who have allowances yet to use and so on (there is still time!), now our users’ attention is definitely turning to tax-efficient investments for 2023/24 tax year.
Interest in Venture Capital Trusts has been particularly noticeable, with many users aware that income tax relief on these vehicles is meant to end for investments made on or after 6 April 2025 due to an EU “sunset clause” imposed in 2015. The Chancellor has made vague promises that the relief will remain beyond 2025 and the Labour party, which will likely take power next, has also signalled continued support. The fact remains, however, that we only have a few more years of certainty as things currently stand and many of our users have been keen to take advantage as soon as possible in consequence.
VCTs are of course only one of a range of tax-advantaged investments High Net Worth Investors could consider, with the Enterprise Investment Scheme and its “little sister” the Seed Enterprise Investment Scheme perennially popular too
VCTs are of course only one of a range of tax-advantaged investments High Net Worth Investors could consider, with the Enterprise Investment Scheme and its “little sister” the Seed Enterprise Investment Scheme perennially popular too. Tax breaks, including very substantial ones on Inheritance Tax, are a big draw, but so too is the chance to support UK business and diversify portfolios away from blue-chip names alone. It may be very worth your while discussing with a professional what tax-efficient investments could bring to your wealth plan.
Recent research1 has suggested that close to half of UK landlords will sell their investment properties in 2023 if the Bank of England base rate hits 4.5% – which many expect may happen this spring. Yet if our conversations with people seeking wealth management services are anything to go by, this may be a significant underestimate.
An increase in the base rate will of course hit landlords with non-fixed rate mortgages hard, and simply raising rents to cope may not be an option many landlords feel able to take in this difficult economic environment. But that is far from the only disincentive forcing people away from property and towards other forms of investment. The Renters’ Reform Bill’s proposals, notably an end to “no-fault” evictions by the repeal of section 21 of the Housing Act 1988 is an obvious one.
Since so many people’s main “pot” of wealth is their family home, the wisdom of even greater exposure to the property market may be questionable – and even more so when a prolonged downturn in prices is being predicted by many
Even without the potential for soaring costs and far greater travails, we have always encouraged users to think about their property holdings in terms of diversification. Since so many people’s main “pot” of wealth is their family home, the wisdom of even greater exposure to the property market may be questionable – and even more so when a prolonged downturn in prices is being predicted by many. A diversified investment portfolio may be a more productive and less risky home for your wealth.
1 Finbri UK Landlords’ Report 2023
Few can have escaped the recent hype around the rivalry between the AI chatbots Bard and ChatGPT and this has given rise to some fascinating discussions with our users around which approach to take to the tech sector.
Much-discussed errors in the output of the former (from Google) caused an incredible overnight $100bn drop in the share price of the firm’s parent, Alphabet. Meanwhile, news that the former (from OpenAI) would be integrated into Microsoft’s Bing search engine and Office product suite caused near hysteria. Headlines screamed that Google’s search dominance is coming to an end, leading it to declare a commercial “code red”.
Sustaining a dominant market position is a hugely complex challenge when a new product – or indeed a regulatory or social change – can flip the table. Understanding, and hopefully getting ahead of, these tech trends is probably one of the hardest tasks facing today’s investors
The furore demonstrates how tech companies’ share prices are not just dependent on producing the next “big thing”. Sustaining a dominant market position is a hugely complex challenge when a new product – or indeed a regulatory or social change – can flip the table. Understanding, and hopefully getting ahead of, these tech trends is probably one of the hardest tasks facing today’s investors.
It’s probably fair to say that every company is a tech company to an extent today, so having deep tech expertise on hand is vital to building a truly future-proof portfolio. If you would like to learn more about the research bench strength of the UK’s leading wealth managers, get in touch.
This month’s enquiries underline yet again what diverse wealth management concerns people have on their minds at any one time. Rarely do our conversations centre on one query, but rather interlocking questions of investments, financial planning and the efficient use of debt. Rest assured, understanding your situation and needs holistically is precisely what professional wealth management is all about.
Whatever you worry or dream about wealth-wise, getting the expert advice you need is just one step away: complete our short wealth manager matching questionnaire or speak to our expert and unbiased team and well-established and respected firms will come to you for further assessment at a time that suits.
The investment strategy and financial planning explanations of this piece are for informational purposes only, may represent only one view, and are not intended in any way as financial or investment advice. Any comment on specific securities should not be interpreted as investment research or advice, solicitation or recommendations to buy or sell a particular security.
We always advise consultation with a professional before making any investment and financial planning decisions.
Always remember that investing involves risk and the value of investments may fall as well as rise. Past performance should not be seen as a guarantee of future returns.