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what might be in the autumn budget?

In normal years, the Autumn Budget (formerly the Autumn Statement) is announced in November. However, with less than 6 months left on the countdown to Brexit, this year is far from a normal year.

At the end of September, Chancellor Philip Hammond revealed that the Autumn Budget would be released on 29 October which is also, unusually, a Monday – traditionally budgets are announced on a Wednesday. Since the Wednesday would’ve been Halloween, perhaps the Chancellor moved the budget forward by two days to avoid a potential Budget horror show.

Hammond’s Twitter feed indicates that we can expect the Chancellor to balance the books. Aside from this there has been little concrete information about what the Budget might contain. However, Hammond has given us a few hints:

The end of the freeze on fuel duty
It’s likely that the eight year freeze on fuel duty will come to an end this year. Last month, Hammond said that the freeze on fuel duty has meant the Government has “foregone” £46 billion in revenue and, if the freeze continues, will miss out on £38 billion more.

NHS spending
One of the Chancellor’s main concerns will be finding the money to fulfil Theresa May’s pledge to pump an extra £20 billion into the NHS by 2023. The prime minister herself admitted that this would require tax hikes, but was unclear as to which taxes would be raised.

Digital tax
At the recent Tory conference, Hammond said that Britain will impose a new “digital service tax”, even if other countries fail to follow suit. However, what this tax might look like is currently unclear.

He called for a reform of the international tax system for an era where digital companies account for much of global business, with Britain leading the way. Business leaders have mentioned that such a tax could compromise the UK’s reputation as a good place for digital companies to do business.

Of course, what will have the largest bearing on the eventual success of any changes to the budget is any Brexit deal. A good Brexit deal will boost growth and balance public finances without the need for major tax hikes.

We eagerly await the Chancellor’s Budget at the end of the month.

Sources
https://www.independent.co.uk/news/uk/politics/philip-hammond-tax-cut-self-employed-scrap-conservatives-national-insurance-contributions-nic-class-a8526236.html
https://www.telegraph.co.uk/politics/2018/09/11/chancellor-hints-fuel-duty-rise-fund-nhs-campaigners-warn-struggling/

what financial wellbeing means for your health

The latest Financial Wellness Index has revealed that people with very little savings and those who are struggling to pay their bills are also those who are suffering from poor health. Conversely, those enjoying good health are more likely to experience a higher level of financial wellness. The findings raise the question of whether working to improve your financial situation could have a positive impact on your health, or indeed whether a healthier lifestyle might also lead to healthier finances.

The Financial Wellness Index from Momentum UK is put together by the Personal Finance Research Centre at the University of Bristol. It examines a number of fundamental elements of subjects’ financial lives, as well as the macroeconomic state of the UK, to generate the country’s overall Financial Wellness score out of 100.

The latest report has revealed that 17% of people who consider their health as being ‘poor’ have also missed at least one bill payment over the course of the last year, considerably more than the 5% of those who class their health as being ‘excellent’. Similarly, only 5% of those who have a healthy diet have missed a bill payment, compared to 11% of those who eat unhealthily.

The trend can also be seen in the amount of savings held by healthy and unhealthy people. 15% of people in poor health have no savings, compared to just 8% of those in excellent health. There are also considerably more unhealthy (29%) than healthy people (19%) with less than £100 put away. This in turn has an impact on standard of living, with 42% of people in poor health having to reduce their lifestyle expenses such as socialising and holidays, compared to just 23% of people in excellent health.

“The link between financial and physical health is strong in this year’s index, which is not wholly surprising when you start to analyse the similarities in behaviour needed to achieve both”, says Momentum UK’s managing director Samantha Seaton. “Whether you’re improving your fitness or trying to improve your financial picture, success will be found by taking small steps to achieving your longer-term goals”.

Sources
http://www.mindfulmoney.co.uk/mindful-news/new-research-finds-clear-link-between-healthy-living-and-financial-wellness/

Second 2015 Budget Announced for 8th July

Chancellor George Osborne has surprised voters, political and business leaders alike by announcing that he will take the unusual step of delivering a second 2015 Budget on 8th July, just one hundred and twelve days after the Budget of 18th March. With an Autumn Statement also due later in the year, the second Budget will mean the Chancellor will deliver three important economic summaries and policy plans in the space of just nine months.

Speaking to the BBC, Mr Osborne described this second Budget as a ‘stability Budget’, explaining that his aim was to clarify policies announced in the Conservative’s pre-election manifesto and to announce further measures to keep Britain’s economy on the right track.

Mr Osborne said:

“I don’t want to wait to deliver on the commitments we have made to working people. [The July 8th Budget] will continue with the balanced plan we have to deal with our debts, invest in our health service and reform welfare to make work pay. But there will also be a laser-like focus on making our economy more productive so we raise living standards across our country.”

Individual details on what the July 8th budget is likely to include are currently fairly sparse, but the Chancellor has already announced that specific details will be provided on the £12 billion of welfare cuts already proposed. Business productivity has also been mentioned several times, with Mr Osborne pointing out that the UK still produces a quarter less for every working hour than America and Germany.

More funding for apprenticeship schemes are likely to be announced, with the Chancellor intimating that he would like to see three million more individuals find places. Details on funding for the NHS and a further crackdown on tax avoidance are also expected. The second Budget may come too soon for details on the already-announced ‘second hand’ annuity market, but there is still a possibility that Mr Osborne will release further plans, when he stands again in the House of Commons on 8th July.


Sources: http://www.bbc.co.uk/news/uk-politics-32761566

 

building your financial future

 

How much money do I need?

Budgeting for retirement or as we like to say ‘ change of circumstances’ can be more difficult than budgeting whilst you’re still working. Some costs may increase, such as heating your home, and you’ll have to work out exactly how much income you will be receiving from your pension. The average British wage is about £26,000 – to replicate that in retirement you’d need a pension pot of more than £300,000. However, according to ‘Which?’ it’s unlikely that you’ll need as much money in retirement as you did while you were working, although the amount clearly depends upon your own hopes and expectations of how you will enjoy your life!

When sitting down to plan your budget, it’s a good idea to first get some idea of your current spending. A report by ‘Which’ suggests keeping three months’ worth of bank and credit card statements, payslips going back three months and three months of shopping receipts – remembering to factor in one-off spends like birthdays, Christmas, holidays and car repairs. Then work out where you think you’ll spend more once you’ve retired – because your situation is changing so will your spending habits. You’ll need to compare this with how much income you’ll be getting in retirement (from pensions, benefits or savings), to find out if there are any shortfalls.

The above simple plan is a long way off proper financial planning, but it should provide a handy starting point for indicating the income you might need in your retirement. Once you know that, we can set about working out exactly what you do need to make sure you can do everything you want in your later life.

It is also worth bearing in mind that the sums of money you spend on certain things can change for the better in retirement. The following are again good suggestions to start considering.

  • Have you paid off your mortgage? If so, that will significantly reduce your monthly spend. However, if you’re still renting in retirement, you’ll have to factor that cost into your outgoings when budgeting.
  • Have your children moved out? Raising a child until they’re 18 costs almost £220,000 in total – so your costs should come down significantly once they’ve flown the nest.
  • You’ll save on commuting. The average annual rail cost of commuting into London is £3,800, and that’s without factoring in parking at train stations.
  • Public transport. Over-60s get free off-peak travel on buses. And if you live in London, you can claim a Freedom Pass, which means you can use London’s public transport for free.

Some spending in retirement can typically go up, however:

  • Leisure spending – you’ll probably be spending more money on hobbies and holidays. Think about how many holidays you’ll want to take per year and remember to take advantage of senior discounts on dining out and theatre tickets.
  • Travel insurance – Which? research has found that people over 65 tend to pay more because statistically, they’re more likely to fall ill whilst on holiday. Shopping around will help secure you the best deal.
  • Heating. As you’ll be spending more time at home, the chances are bills will be higher. The Winter Fuel Payment, currently available to people born on or before 5 July 1952, could get you between £100 and £300 tax-free towards your fuel bills.

Planning for Retirement needs to go beyond this sort of initial informal research to fully include careful attention to Lifestyle Planning, but the above initial considerations should help you to start thinking about whether your current savings are going to be enough to do everything you want to do with your retirement.


Sources: www.which.co.uk (Published advice on the website: January 2015)

 

building your financial future

The 8 most important points from the 2014 Budget

The Chancellor may have gone for the popular phrase from Chancellors of yore by taking ‘a penny off a pint’, but what were the real big announcements during The Budget 2014? We summarise the 8 main points:

1. Changes to pensions mean many more options than just buying an annuity

In measures to be introduced in April 2015, pensioners will have complete flexibility on how much of their pension they want to take at retirement, effectively eliminating the need to buy an annuity. This opens up many more options for what to do with your pension in your retirement years.

2. ISA revisions are great for savers

The ISA limit was increased to £15,000 a year and it was announced that Stocks & Shares ISAs and Cash ISAs would be merged into a New ISA. Again, this gives savers much more flexibility and potentially allows more of their income to be shielded within the tax free accounts.

3. New additions to the bonds market

A new Pensioners Bond will be introduced at the start of 2015 with what were described as ‘market leading rates’, thus giving pensioners another option for what to do with their newly released pension savings! There were also changes to Premium Bonds, with an increase in winners promised.

4. Personal tax allowance increase

The personal tax allowance was confirmed as increasing to £10,500 in April 2015, with the increase at the start of the tax year in April going to £10,000. Good news in that a little more of our money is saved away from taxation!

5. Small pension limits increased

For any small pension pots currently held, there was an increase in the total amount of individual pot that can be taken as a lump sum to £10,000. The Chancellor also announced an increase in the total number of pots, up to this size, that could be taken to three, meaning £30,000 could be taken in total.

6. Flexible drawdown limits reduced

In yet another pensions related matter for what was a busy Budget for the industry, savers now only need to have £12,000 (as opposed to £20,000) in their pot in order to access flexible drawdown.

7. Small measures for individuals and businesses; fuel duty, minimum wage and apprenticeships

Whilst these might not be the headline grabbers in overall cost terms, they will have an impact for many individuals and business owners. Fuel duty has been frozen in another attempt to get the current high costs down, whilst both the minimum wage and the number of apprenticeships were increased, with the Chancellor promising to ‘double’ the latter.

8. The new pound coin!

Perhaps it’s not actually one of the most important points from The Budget (though the Chancellor would point to the increased percentage of forged pound coins, which cost the economy) but it will certainly be one of the more visible ones when the new coin starts to enter circulation at some point around 2017.

Sources: gov.uk

building your financial future

Budget 2014

 

Radical changes proposed in today’s Budget could herald the biggest shake-up to UK pensions ever. And it could happen as soon as 2015.

These welcome proposals would give pension savers more freedom, choice and flexibility than ever before over how they access their pension savings.

In this brief budget over view we cover the following – more information will be issued when we have more details.

1. New ISA
2. NS&I – Premium Bonds / Pensioners Bond
3. Pensions – Retirement Income
4. Tax Allowances and Thresholds

 

New ISA
In a major simplification for savers, the annual subscription limit will be increased to £15,000 (from £11,520), and there will no longer be a lower cap on the amount saved into a cash account. So your clients can save any combination of amounts up to £15,000 overall between their cash and stocks and shares ISA.

The simplified product will be known as a NISA (New ISA), and all existing ISAs will become NISAs. Savers may also transfer their stocks and share ISA to cash.

This measure is intended to give greater choice and flexibility for savers but, in the current climate of low interest rates, clients should be carefully advised about switching fully to cash.

The annual subscription limit for Junior ISA and Child Trust Fund (CTF) will also be increased from £3,840 to £4,000.

All of these changes will have effect from 1 July 2014

NS& I
Two key measures were announced for savers with National Savings and Investments. Premium Bonds get a decent fillip: increased investment (£30,000 to £40,000 in June 2014, up again to £50,000 in 2015/16) and bigger prizes (two £1M prizes a month from August 2014).

The proposed fixed rates on the Pensioner Bond look attractive – 2.8% gross/AER for a one year term, and 4.0% gross/AER for a three year bond.

But there’s a £10,000 maximum investment limit and the income will be taxable

Pensions – Retirement Income

The detail isn’t set in stone. But this signals a clear Government desire to give savers more control, and responsibility, over their destiny in life after work. It could represent pension utopia, but only with advice to solve an increasingly complicated retirement equation.
These proposals will be consulted on this year, but in recognising the need for flexibility there is a boost for drawdown users almost immediately.

The chancellor has announced two welcome changes to income drawdown rules from 27 March:
•Capped income drawdown – limit up 25%: The maximum yearly income allowed under the pension capped drawdown rules will increase by 25%, from 120% to 150% of the GAD basis amount, for income years starting after 26 March 2014.
•Flexible income drawdown – MIR cut to £12k: The yearly secured income needed to meet the ‘minimum income requirement’ to access flexible drawdown will be cut from £20,000 to £12,000 for those applying to start flexible drawdown after 26 March.

Taken together, these changes give pension drawdown users even more flexibility to dial income up or down to adapt to changing circumstances.

Pension triviality limits increased

The Chancellor has announced welcome changes to the pension triviality rules from 27 March 2014:
•Triviality limit up to £30k: Individuals over age 60, with total pension savings of £30,000, or less can take it all as a trivial commutation lump sum – the current limit is just £18,000;
•Stranded pot rules relaxed: Small stranded pension pots of up to £10,000 can be taken as a lump sum – a significant increase from the current £2,000. And the number of small stranded personal pension pots that can be taken as a lump sum is increased from two to three.

These changes improve choice for more consumers who may otherwise have been forced to receive very small regular pensions for life, with limited ability to shop around for the best annuity. In both cases, up to 25% of the lump sum can be paid tax-free with the balance taxed as income.

55% Drawdown death benefits charge set to be cut

It’s been a day full of good news for drawdown users with the announcement of a consultation on the 55% tax charge on drawdown lump sum death benefits.

With much greater freedom proposed on taking pension benefits, there are plans to cut the rate of tax payable on drawdown death benefits from April 2015 to make it more closely aligned to income tax charges on drawdown.

Having a rate of tax on death which is greater than the income tax on withdrawing income could see the tax tail wagging the retirement income dog. The Government have recognised the need to have a tax system where pension savers are not penalised by only taking what they need from their pension fund.

This should see the ability to pass on pension death benefits to loved ones given a further boost and make the use of bypass trusts even more appealing.

Tax allowances and thresholds

Income tax:
•The personal allowance, set at £10,000 for 2014/15, will rise to £10,500 in 2015/16 for those born after 5 April 1948. At the same time, the level at which income tax becomes payable at higher rates will rise by 1% to £42,285, meaning that higher rate taxpayers with incomes below £100,000 will also be better off by £184 – a little less pressure on the ‘squeezed middles’.
•Age related allowances will remain at £10,660.
•From the 2015/16 tax year, a spouse or civil partner who doesn’t have income to fully use up their personal allowance, will be able to transfer up to £1,050 to their partner, provided that partner is a basic rate taxpayer.

Capital Gains Tax
The annual exemption will rise by £100 to £11,000 in 2014/15, and to £11,100 in 2015/16

 

As always should you require more information please do not hesitate to contact us on 01737 225665 or advice@conceptfp.com

 

building your financial future

The Year of Hard Truths – A Look Ahead to the 2014 Budget

Chancellor of the Exchequer, George Osborne, will deliver the 2014 Budget on Wednesday, 19th March – little more than three months after he delivered the Autumn Statement.

When Osborne delivered his Budget in March 2013, the news for the UK economy wasn’t particularly good – in fact, many commentators were worrying about the UK slipping back into a ‘triple-dip recession.’ Since then, the forecasts and figures are much improved and in December, the Chancellor was able to predict growth of 1.4% in 2013 and 2.4% in 2014.

These figures have since been confirmed by the IMF, which recently gave a very positive assessment of the outlook for the UK. The anticipated growth of 2.4% is higher than for any other European country, and the economy is now growing at its fastest rate since 2007. Inflation was down to 2% in December and the latest figures show that unemployment has fallen sharply to 7.1% (much lower than most economists were anticipating).

So with the Chancellor surely in buoyant mood when he stands up to deliver his speech, can we look forward to some Budget handouts? After all, there is a General Election only 15 months away and the European elections are in May of this year, at which the Conservatives risk coming a poor third behind UKIP and Labour. After four years of pain, it must surely be time for the Chancellor to place less emphasis on austerity…

Sadly, the answer is ‘no’.

In a speech on January 6th, George Osborne warned that 2014 would be “a year of hard truths.” He stressed that the UK economy “still had a long way to go” and that difficult decisions would have to be made. Significantly, he still requires another £25bn of savings (or ‘cuts’ depending on your political standpoint) and is looking to the welfare budget for the majority of this, particularly targeting young people of working age.

The Budget speech will be one that George Osborne will enjoy giving – he will claim the credit for the improvement in the economy and a further fall in the UK budget deficit. But the mood will remain sombre and the message simple: the UK economy has come a long way and is doing better than a great many of its competitors – but we cannot relax now.

The Budget Deficit

The UK’s budget deficit narrowed sharply in December, when there was a net deficit of £1.03bn compared to the £3.58bn in the previous month. Historically (taking the period 1995 to 2013), the budget deficit has averaged £1.23bn per month. George Osborne will welcome the reduction and look ahead to further falls in the deficit, but to many right-wing commentators it will remain far too large for comfort.

Welfare Spending

As noted above, this is the area where the Chancellor will look for the bulk of his savings. He will argue that it is absurd not to target the huge welfare budget, given that savings would otherwise have to come from more (politically sensitive) areas such as schools. However, Osborne is likely to resist calls from some of his backbenchers to make cuts in NHS budgets. That money is likely to remain ring fenced.

Housing

Figures released by the Bank of England revealed that £12.4bn in new mortgage loans was approved in December, putting mortgage lending at a six year high. The housing market rose by between 8% and 10% in 2013 (depending on which survey you use) but this included some notable ‘hot-spots’ such as London and the South East, and Manchester.

When George Osborne announced his help-to-buy scheme in the last Budget many commentators worried that it would create a ‘housing bubble’ and these latest figures will have done nothing to calm those fears. The Chancellor – backed by a recent study from the Institute for Fiscal Studies – will refute them and claim the help-to-buy scheme as a resounding success.

Unemployment

As above, unemployment came down significantly in December. Most economists were expecting a fall to 7.3%: instead unemployment came in at 7.1%. The Chancellor will anticipate further falls in 2014 and don’t be surprised to see further measures to encourage employers to take on staff, particularly in sectors like manufacturing and engineering.

Interest rates

An unemployment rate of 7% is the Bank of England’s ‘forward guidance threshold’ at which it was theoretically going to consider interest rate rises. However, no sooner had the figures been announced than Governor Mark Carney was declaring that rate rises were unlikely at the current moment, the UK economy being “well short of escape velocity.” Expect to hear the Chancellor use a phrase like, ‘this Government has overseen the longest period of sustained low interest rates since…’

That then is the background to the March Budget and a look ahead to some of the points we expect to see in it.

As usual, we will be writing our own Budget Summary on March 19th and we’ll aim to have this with our clients the following day.

Should you have any questions on how the planned changes in the Budget – or the outlook for the UK economy – might impact on your financial planning then as always, don’t hesitate to contact us.

 

building your financial future

Tough Times Ahead For Families

The above headline could have easily read “Tough Times Ahead for Everyone” but it is likely that the effects of the austerity budget, and the financial deficit it aims to redress, will be felt more acutely by the younger generations and these effects are likely to last for many years.

With inflation out pacing wage growth, tax credits being withdrawn, child benefit frozen and the Child Trust Fund abolished, families are becoming progressively worse off.  Undoubtedly the elderly on low incomes will also be hit by higher inflation but it is worth noting that winter fuel payments, free bus passes and free TV licenses have all been retained and that the basic state pension was the only benefit to be increased.

If this was a case of short term pain for long term gain things wouldn’t be so bad but unfortunately the longer term picture looks even less rosy.

The NHS is the only major department whose Budget has been increased and it is reckoned that around 45% of total spending goes to the 16% of the population who are over 65. This is perhaps not surprising, after all, it is inevitable that people will require more medical care towards the end of their lives but this generation are taking out more than they have put in. 

To redress this the state pension age has increased, and we are likely to see further increases over the coming years as the working population are forced to contribute to the welfare system for many more years.

The counter argument is that money is now passed down the generations, as increased home ownership provides the next generation with a level of inherited wealth not previously enjoyed.  However, inherited wealth cannot be relied upon as increased longevity and rising long-term care costs force more people to sell or borrow against their homes.

So what can be done?  The key issue to recognise is that while there may be less spare money available, saving for the longer term should not be the first victim of household budget cuts.  Because of the effects of compound growth, a pound not saved now will be far more damaging to your longer-term wealth than a pound not saved in later years.

Emergency Budget 22nd June 2010

In summary key highlights are:

Capital Gains Tax (CGT)

  • CGT will remain at 18% for basic rate taxpayers, but will rise to 28% for higher rate tax payers from midnight tonight.
  • The annual CGT allowance of £10,100 stays the same for this tax year but will increase in line with inflation year on year.

Pension Taxation

  • The Chancellor plans to launch a review of personal annual allowances for pension contributions to somewhere in the region of £30,000 to £45,000, with effect from April 2011. The Government still aims to raise the same revenue using this revised approach, as well as simplifying the rules for employers and scheme members. Individuals on income of less than £130,000, who were not impacted previously, may now be, particularly if they are a member of a Defined Benefit scheme.

The perceived ‘compulsory annuitisation’ by age 75 will be extended to age 77, while the Government consults on a permanent change to these rules. It will still not be possible to contribute to a pension after age 75

Pre Budget Report – PBR Summary

A quick summary for the pre budget report 2009 ….

The devil is in the detail with the finer print  – this just gives a high level overview,there was  hardly a sentence in the  speech that does not challenge the opposition or seek to bolster the Government’s credibility.

  • Pensions
    The Chancellor confirmed announcement made in the Budget regarding reduction in pension tax relief for people with incomes of £150,000 or over.
    The ‘anti-forestalling’ measures applying in tax years 2009/10 and 2010/11 will be extended to include those with relevant income between £130,000 and £150,000. The tax charge will also increase from 20% to 30% in April 2010.
    He announced cost savings which include the ‘phasing in’ of personal accounts.
    Public sector pay settlements to be capped at 1% for 2 years starting 2011/12.
  • Banking
    The provision the Government is making for the cost of ‘bank bailouts’ is to decrease from £50 billion to £10 billion. There will be a one-off 50% levy on individual discretionary bonuses above £25,000 paid by banks.
  • Tax
    National insurance to increase by 1% for both individuals and employers from April 2011, up from the 0.5% already announced – the additional rise is expected to raise £3 billion a year.
    The Chancellor is looking to increase the level at which individuals start to pay NICs in order to ensure that no one who earns under £20,000 will end up paying more.
    The Inheritance tax threshold frozen at £325,000 until 2011.