The world of investment is changing, especially where it is no longer possible to ignore statements from our own UK Government making it clear that change is happening.
The Climate Change Act 2008 committed the UK to an 80% reduction in carbon emissions relative to the levels in 1990, to be achieved by 2050. In June 2019, secondary legislation was passed that extended that target to “at least 100%”.
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November 2020 and the world is still in the midst of the Global pandemic that is Covid-19.
Lockdown, and the easing of restrictions, has led us to living life and looking at life differently and more closely.
But how often should we be looking at our financial wellbeing?
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Last year my blog subject covered The Office of Tax Simplification’s (OTS) second report on simplifying inheritance tax.
I thought it was, therefore, a good time to reflect on what if anything has changed. The short answer as Paul Daniels would have said is ‘not a lot’. I won’t cover all the findings, but instead focus on a few areas impacting on financial planning.
Read moreIn simple terms, volatility is the erratic up and down movements often seen on financial charts.
It’s something you may have heard fund managers talk about – they demonstrate that their fund doesn’t have the move up and down as much as the index they are trying to match or the objective return of the fund.
Over the last decade we have generally seen markets move up, there have been some big movements down, but they have recovered quickly. These recoveries are what traders and fund managers call corrections.
Read moreThis April, ISAs celebrate their 21st birthday. So, I thought it would be a good idea to remind you how good an investment vehicle they can be, just before the end of this tax year.
Statistics suggest ISAs have become a huge hit with savers. The value of adult ISAs stand at over £600 billion, shared between around 22 million account holders. They have also proved popular with successive Chancellors as a means of encouraging the saving habit with the annual subscription limit having almost trebled since launch.
Read moreWith so much uncertainty out there, people are quite rightly thinking about every decision made. Sometimes even holding back on non-essential expenditure in order to keep savings or build on savings just in case.
These decisions are all based on you weighing up the pros of buying that TV vs the risk that you may need the money soon. This simple decision has lots of moving parts to it and is affected by your past decisions and experiences, as well as other considerations. You are assessing risk.
Read moreThe Help to Buy ISA is a government backed scheme that provides a 25% bonus on the balance of the account with a maximum bonus of £3,000, provided the money is put towards the purchase of your first home before 1st December 2030 – so long as the house price is lower than £250,000 (£450,000 in London).
This month, The Office of Tax Simplification (OTS) launched their latest report. The topic this time was inheritance tax.
The OTS does not consider policy issues such as should a tax abolished – they instead look at the administrative side of taxation.
Read moreFor first-time buyers who are saving toward a deposit, opening a Help to Buy ISA really is a no-brainer. Offering a 25% bonus of the total you have saved, in addition to interest accrued, there is no other savings account that can get close to these returns.
For many first-time buyers, saving for a deposit represents the biggest hurdle between them and getting on the property ladder. For this reason, the Help to Buy ISA will be music to many people’s ears.
The government backed scheme means that for every £1,000 you save, the government will credit you with an additional £250. This type of return is streets ahead of traditional savings platforms and is why over 1 million people have opened accounts since their inception.
If you want to reap the rewards of this scheme you will need to act fast;
the deadline to open a Help to Buy ISA account is 30th November 2019.
The account allows for regular saving; the first instalment can be of up to £1,200, with a maximum of £200 able to be deposited in each month thereafter. Whilst there is no limit on the amount that can be saved into a Help to Buy ISA, the bonus is capped at a maximum of £3,000. In other words, you will attract the 25% bonus on the first £12,000 of savings only. Given the monthly caps on deposits, it would take just over four and half years to qualify for the maximum bonus so opening an account early is essential to fully make use of the scheme.
The accounts are available to anyone aged 16+ and can be used to buy a property of up to £250,000 (£450,000 in London). If you are looking to buy with a partner or friend, you can each open an account meaning your bonus could total £6,000. Although the accounts are designed for longer term saving, the bonus can be applied to as little as £1,600 meaning it is still worthwhile opening an account, even if you are as little as three months away from purchasing.
In some circumstances, a Help to Buy ISA may not be the best fit; perhaps you wish to buy a property in excess of the threshold or you wish to deposit more than the ISA allows.
Whilst the Help to Buy ISA has had much press, the Lifetime ISA (LISA) has flown largely below the radar. One of the reasons for this is the lack of availability; to date, only a handful of providers offer the LISA. Another is its name; the Lifetime ISA is predominantly thought of as product for retirement planning.
Sure enough, a LISA has many benefits for retirement planning, but it can also benefit first time buyers in much the same way as a Help to Buy ISA, with some key differences.
With a LISA, you are not capped at £200 per month and you can pay in anything up to £4,000 per financial year, in a lump sum or regular instalments. This could suit you if you already hold savings as you can invest much more quickly. With the end of the tax year just a few days away, you could make a £4,000 deposit now (before 5th April 2019) and then invest a further £4,000 as soon as 6th April 2019.
Upon withdrawal, the LISA will also qualify for the 25% bonus, providing the account has been open for at least 12 months. The £4,000 yearly limit means a potential bonus of £1,000 per year with essentially no cap on the maximum bonus allowed (the bonus is capped at £33,000 meaning you would have to have the account for more than 33 years to hit the limit).
The LISA also allows for a higher purchase price outside of London with a £450,000 limit applicable anywhere in the country.
There are many factors that will determine which type of account is right for you. The table below highlights some of the main features and differences of each:
| Help to Buy ISA | Lifetime ISA | |
| Opening age | Anyone aged 16+ | Anyone aged 18-39 |
| Maximum contribution | £200 per month (£1,200 in the first month) | £4,000 per tax year |
| Maximum property value | £450,000 | £250,000 (£450,000 in London) |
| Maximum bonus | £3,000 | £33,000 |
| Penalty if you don’t buy a house | None (You just don’t get the bonus) | Yes, unless you leave it until you are aged 60+ |
| How long before the account qualifies for bonus | Once you have saved £1600 (minimum 3 months) | 12 months from opening the account |
| When is the bonus paid | On completion | On exchange |
Should you have any questions, or need help deciding if a Help to Buy ISA is best for you, please contact one of Temple Wealth’s advisers. We can advise you on all aspects of the house buying process – from beginning to save for your deposit to finally buying a house and getting the right mortgage for you.
Call 01329 282882 or use the form on our Contact Us page.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.
Your home maybe repossessed if you do not keep up repayment on your mortgage.
With the help of a financial adviser and some simple financial planning ahead of the tax year-end (5th April 2019) you can make the most of the tax allowances available to you such as your ISA and pension Annual Allowance.
You have a £20,000 ISA allowance each tax year. This is a ‘use it or lose it’ allowance as it cannot be carried forward if it is not fully utilised. This allowance will remain at the same level in the 2019/2020 tax year.
There are 4 types of ISA and you can put money into one of each kind of ISA each tax year:
An ISA such as the Help to Buy ISA can be beneficial if you are saving to buy your first home. First time buyers get a 25% bonus from the Government on savings in a Help-to-buy ISA. The maximum bonus you can receive is £3,000 (if £12,000 has been saved). The deadline for opening a new Help to buy ISA is 30th November 2019.
With a Junior ISA,a UK child under 18 can currently save up to £4,260 in one tax year.
A financial adviser will be able to help you find the type of ISA most suitable for you and your investment goals.
UK individuals can ‘normally’ contribute up to £40,000 gross, or up to their annual gross income, per tax year into a pension scheme. This allowance will remain at the same level in the 2019/2020 tax year.
Funds are tax efficient within a pension although the Lifetime Allowance (currently £1,030,000) limits the total amount you can accrue in a pension pot without an additional tax charge.
You can take a look at our previous blog to find out if you are making enough pension contributions.
The Annual Allowance can be carried forward, subject to a few rules. If you have been a member of a pension scheme but have not fully utilised your Annual Allowance for the previous three tax years, you could be able to carry this forward to make a larger contribution in the current tax year.
Tapered Annual Allowance – this is when the Annual Allowance is reduced by £1 for every £2 of ‘adjusted income’ over £150,000. It can affect you if your income from all sources is over £110,000.
The Inheritance Tax (IHT) nil rate band is currently frozen at £325,000 until 5th April 2021.
Inheritance tax planning can enable you to utilise the available exemptions including:
The annual exemption for the current tax year is £11,700. This is also an allowance that cannot be carried forward if it is not fully utilised. Unused losses are carried forward and can be offset against future gains.
After 6th April 2019, the minimum wage for 18-20 year olds will increase from £5.90 to £6.15 per hour. For 21-24 year olds it will increase from £7.38 to £7.70 and for anyone aged 25+ it will increase from £7.83 to £8.21 per hour.
This will increase from £11,850 to £12,500 in the 2019/2020 tax year.
This will increase from £1,030,000 to £1,055,000 in the 2019/2020 tax year.
This will increase from £11,700 to £12,000 in the 2019/2020 tax year.
One of our independent financial advisers at Temple Wealth Management can advise you on how best to plan for the end of the tax year, as well as how to fully utilise your available allowances in the new tax year.
To discuss your end of tax year planning needs, contact one of our advisers on 01329 282882 or use our website contact form.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor. The Financial Conduct Authority does not regulate Tax Advice.