High Net Worth Individuals are reassessing their financial affairs in light of the recent Budget announcement and seeking advice on how to navigate an increasingly uncertain investment environment.
Planning required post-Budget (and the base rate cut)
Chancellor Rishi Sunak’s Spring Budget announcement has acted as a big prompt towards professional advice for the UK’s affluent individuals. Rumours have swirled for months about which tax breaks would be for the chop as the Conservative government starts its “levelling up” programme. Now of course, the coronavirus has added the further imperative to keep the economy moving as the world teeters on the brink of a global recession.
Here is a round-up of a few key announcements; speak to your advisor for the full impact on your situation:
- The axe finally falls on Entrepreneurs’ Relief
Entrepreneurs’ Relief has long been suspected to be on the block, with this controversial tax break thought to only be taken up by a tiny group of some 5,000 individuals a year at a cost to the Treasury of £2.7bn annually (up from £427m a decade ago). Previously, it has been possible through Entrepreneurs’ Relief to pay Capital Gains Tax at a discounted 10% rate when selling a business (rather than 20%) and to do so for gains of up to £10m over a lifetime. That limit has been cut to £1m.
Previously, it has been possible through Entrepreneurs’ Relief to pay Capital Gains Tax at a discounted 10% rate when selling a business (rather than 20%) and to do so for gains of up to £10m over a lifetime. That limit has been cut to £1m
Financial planning related enquiries have naturally spiked from entrepreneurs who had built their financial plan around benefitting from Entrepreneurs’ Relief and who now need to amend their wealth management roadmap. Luckily, there are many tax-efficiency strategies entrepreneurs can pursue. Read these top tips for preparing to sell a business. Then, use our matching service and meet an advisor to see what your best path is.
- Pensions relief for top-rate payers
For higher-earners, one very welcome Budget announcement was that the tapered allowance threshold for pensions tax relief will increase to £200,000 (from £110,00 previously) for the 2020/2021 tax year. In practice, the annual allowance will only kick in for those who have an adjusted income above £240,000.
Although undoubtedly a move to ease pressure on the NHS (since the pension tapering issue has severely affected senior practitioners), this is clearly a boon for higher-earners irrespective of sector.
Any moves to simplify and reduce taxation are to be welcomed, and we would urge affluent individuals to take advice about the impact of any changes right away. However, you don’t need to wait for the government to extend tax breaks to make significant savings
Any moves to simplify and reduce taxation are to be welcomed, and we would urge affluent individuals to take advice about the impact of any changes right away. However, you don’t need to wait for the government to extend tax breaks to make significant savings.
Tax mitigation is an area where wealth managers can really add value and there are a variety of perfectly legitimate strategies High Net Worth Individuals can pursue. Indeed, keeping your tax exposure as low as possible is one of the three key pillars of a good wealth management plan.
- A big boost for children’s savings
One eye-catching move boosting saving for children was the annual tax-free allowance for both Junior ISAs (JISAs) and Child Trust Funds (CTFs) being more than doubled from £4,368 to £9,000. The adult ISA allowance remains at £20,000, although this is already a generous level that should be fully utilised each year as part of an overall savings and investment plan.
One eye-catching move boosting saving for children was the annual tax-free allowance for both Junior ISAs (JISAs) and Child Trust Funds (CTFs) being more than doubled from £4,368 to £9,000
- Savers hammered again with base rate cut
Although necessary to mitigate the effects of the corona virus outbreak, the cut to the Bank of England base rate extends further savers’ pain after more than a decade of rock-bottom interest rates.
Wealth that that is not at least keeping pace with inflation is in fact being eroded away. With some accounts already paying less than 0.1% interest, cash may not be the safe haven asset it appears at all.
Wealth that that is not at least keeping pace with inflation is in fact being eroded away. With some accounts already paying less than 0.1% interest, cash may not be the safe haven asset it appears at all
In contrast, you can typically expect to achieve net returns of around 6% a year with a wealth manager. The raised annual investment limits for JISAs and the long time-horizons involved may mean that a stocks and shares JISA is an even more attractive way to save for the next generation.
Top Tip
Our 3-minute matching tool was made for scenarios like significant rule changes suddenly coming in that could seriously affect your wealth – the type this Budget certainly contained. We help cash-rich, time-poor people find the professional advice they need to optimise their finances long term – and allow them to deal with “game-changers” effectively, on both the financial planning and investment sides of wealth management.
Lee Goggin
Co-Founder
Investors wonder whether now is the time to buy “on a dip”
It would be fair to say that our users are for the most part pretty conservative investors, since they are investing very important pots of money like retirement savings. However, many have more aggressive investment ambitions and are prepared to take on more risk for the chance of greater reward. Others still want to take on more risk for a segregated amount of their investment portfolio, perhaps as for a “rainy day” type fund.
Those with more of an appetite (and capacity) for risk have been asking us this month if they should take advantage of market dips to buy undervalued assets. Have markets truly priced in that the coronavirus outbreak is expected to prompt a global recession? Are some equities, in fact, cheap? Is there actually a lot further for bourses to fall if the news flow worsens?
Have markets truly priced in that the coronavirus outbreak is expected to prompt a global recession? Are some equities, in fact, cheap? Is there actually a lot further for bourses to fall if the news flow worsens?
Don’t simply dive into big investment moves without taking professional advice. You must understand your true risk-profile as an investor first; an assessment of this is carried out at the start of any advisory relationship and is an incredibly valuable exercise. Then, it is vital to get things like asset allocation and diversification right to maximise returns and minimise risk.
The end-of-year overdrive ensues
Despite the coronavirus panic, the impending end of the tax year is prompting the usual deluge of enquiries from individuals anxious not to miss deadlines for things like ISA contributions.
We always tell those people that it’s never too late – or too early – to take positive steps to improve the management of your wealth. That said, I do always like to emphasise to our busy users how useful having a wealth manager can be in avoiding these last-minute scrambles. With a professional on your side, you can relax knowing contributions (and investments) are always going to be made at the optimum time.
Timing is indeed all when it comes to so many things in savings and investments, and sometimes really significant savings can depend on when a particular decision is executed – and in what form.
Timing is indeed all when it comes to so many things in savings and investments, and sometimes really significant savings can depend on when a particular decision is executed – and in what form
If you have left things a little late this year, you can quickly be introduced to a shortlist of best-match wealth managers via our 3-minute search and have an expert optimise your financial affairs in very short order indeed. Please don’t hesitate to get in touch with any questions you might have.
Do you share our users’ thinking?
A consultation with a selection of best-matched wealth managers costs nothing through our service and could save you thousands, by minimising fees, maximising returns or trimming your tax exposure – or, most likely, a mixture of all three!
Take action to get your first wealth manager in place, or find a better relationship, and it could be one of the best financial decisions you ever make. So, whether you have a specific wealth management need related to the end of the tax year, or you wish to optimise things more broadly, we have a panel of leading wealth managers standing ready to compete for your business.
