Tax increases and rising inflation continue to keep affluent individuals awake at night, but our users are noticeably making the shift from merely worrying to taking proactive steps to protect themselves.
The scramble to side-step the dividend tax hike begins in earnest
Dividends are an essential income stream to many of our users, and naturally particularly so for retirees. Now that news of the dividend tax grab to plug the health and social care funding gap has really sunk in, we’re starting to hear much more about focused action before it kicks in.
When the new tax year begins in April 2022, dividends above the £2,000 allowance will be levied at 33.75% for higher rate taxpayers and 39.35% for those paying the additional rate – that is unless those investments are sheltered in ISA or pension tax wrapper.
Juggling allowances is certainly an area where professional advice is warranted, but rest assured the wealth management sector is doing a huge amount to help individuals defend their wealth
We’ve been hearing a lot from users who are keen to use “bed and ISA” services, whereby investments are switched over to an ISA structure, but also from savers who want to bolster their pension pots with good dividend-earning securities yet who are also worried about going over their lifetime pension allowance limit (LTA). Juggling allowances is certainly an area where professional advice is warranted, but rest assured the wealth management sector is doing a huge amount to help individuals defend their wealth.
Fears grow over more thunderbolt tax rises
It is hoped that the dividend tax hike will raise £600 billion in additional revenue, but The Institute for Fiscal Studies has made it clear that this is unlikely to be enough to plug the gaping hole in the nation’s finances and warned that more tax increases are likely.
What has really got our users alarmed is how tax rises can now seemingly be conjured out of thin air in defiance of manifesto promises and a “soak the rich” mindset appearing to take hold. The truth however is that although taxes which appear to only affect the very, very wealthy might have good “optics”, they invariably hit the affluent hard too.
Our users are coming to realise that they might have to change their financial plans, investment strategies and investment holding structures pretty rapidly in response to government swoops
Inheritance Tax, pensions allowances and income tax in the higher brackets are all front of mind. Our users are coming to realise that they might have to change their financial plans, investment strategies and investment holding structures pretty rapidly in response to government swoops, and that having an adviser on hand who is well apprised of their situation could be an invaluable asset in the months (and years) to come. Tax mitigation is a crucial pillar of wealth management that is potentially as important as investment returns, so never neglect this side of things.
Top Tip
Lee Goggin
Co-Founder
Interest in inflation-proofing strategies spikes
Inflationary fears have been brewing for months now, but we’re now seeing a lot more interest in the practical steps that affluent individuals can take to stop their wealth being eroded away before their eyes. The Bank of England has predicted that inflation will peak at just over 4% over the winter and stay at that level until the second quarter of 2022, but there are plenty of voices saying that this level doesn’t reflect inflation as represented by goods and services in real life and that the level could run higher for longer.
The Bank of England has predicted that inflation will peak at just over 4% over the winter and stay at that level until the second quarter of 2022, but there are plenty of voices saying that this level doesn’t reflect inflation as represented by goods and services in real life and that the level could run higher for longer
Central banks are of course in a quandary, in that raising interest rates by anything more than a little is a highly unappetising option given gargantuan levels of government debt. The reality then, some say, is that all bets are off. Hyperinflation may be an unlikely scenario, but the spiralling nature of these situations means the doomsayers can’t be entirely discounted.
We recently ran a piece on how investors might look to inflation-proof their portfolios that has received a striking amount of interest from our High Net Worth readers, and which has prompted many conversations with those anxious about this emerging threat to their financial plans. As ever, we are pleased to see people taking action rather than just worrying and there is great comfort to be had by talking to an expert to see what is possible.
Don’t feel beaten by a morass of wealth management complications
This is undoubtedly a hugely challenging time on the wealth management front, what with inflation, tax hikes and an ever-changing investment environment still haunted by COVID-19 to contend with. However, there is nothing to be gained by being beaten into apathy: there is almost certainly more you could be doing to protect and grow your wealth, although there are certainly things that it would be unwise to attempt without professional advice.
There is nothing to be gained by being beaten into apathy: there is almost certainly more you could be doing to protect and grow your wealth, although there are certainly things that it would be unwise to attempt without professional advice
The firms on our panel work with their clients in various ways, and it may be the case that you can pay for a one-off piece of advice work before transitioning to something far lighter-touch. There everything to gain, and certainly nothing to lose, in allowing us to set up some free, no-obligation discussions with a shortlist of firms perfectly matched to you.
To get a flavour of what the wealth managers on our panel have achieved, read a few of our case studies. Better still, let the leading firms we work with explain their track records themselves!
Important information
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.
