March 2021 - Agile IFA

When you’re making financial decisions, who do you speak to? One of these people is likely your partner. Yet, despite seeking financial advice from a partner, research shows it’s often not acted on, particularly when it comes to investing.

Investing is a big decision and there are a lot of factors to consider, from the amount of risk to take to which product to invest through. It’s natural to want to discuss some of these aspects with someone. Almost half (48%) of Brits consult their partner when making investment decisions, but only a fifth act on the advice offered, according to research from Barclays.

Instead, the research shows that potential investors value professional advice. Some 44% of investors said investments were an essential area to seek expert support with. This compares to 41% that said health was an essential area on which to seek expert advice.

Clare Francis, director at Barclays Plan & Invest, said: “While we tend to lean on our partners for emotional support in most aspects of our life, relying solely on their advice when it comes to money and investments can be a little nerve-wracking.”

Expert advice can help you understand investment options and how they suit your goals. However, you don’t have to choose between discussing it with a partner and talking to a financial planner. Working with a financial planner as a couple when investing can be beneficial. Here are three reasons why.

1. It can help you understand you and your partner’s priorities

Priorities play a big role in financial decisions. What you want to do with your money and your long-term goals will affect which investment options are right for you. Part of the financial planning process involves looking at what your long-term aspirations are.

Going through this process as a couple can help bring both your aspirations together and you may realise you’ve overlooked some areas. For example, you may want to invest for early retirement, while your partner is thinking about how you could provide a financial helping hand to children in the next few years.

Investment decisions should focus on what you want to achieve. As a result, an open conversation with a partner about short-, medium-, and long-term goals is essential. In many cases, you can create an investment strategy as part of a wider financial plan that reflects a variety of goals.

2. It can help ensure you both feel comfortable with investment risk

All investments come with some risk and volatility at times. However, not all investments carry the same level of risk and it’s important both you and your partner feel comfortable with the risk that is being taken. Investment risk should link to your goals and other factors, such as the timeframe and other assets you hold.

A financial planner will be able to create an investment portfolio that reflects your risk profile. If you’re making financial decisions as a couple, it can provide added confidence about your financial security and that of your partner. It can also help you answer “What if?” questions about the future, such as what to do if investments perform poorly over the next few years or whether you need to stop regular contributions, for example.

3. It can make investing part of your wider financial plan

You shouldn’t make investment decisions in isolation. Instead, they should be a part of your wider financial plan, but it can be difficult to know how they fit in. Discussing your goals with your partner and a financial planner can help you build a blueprint that suits you and brings together all your assets. It means all your assets are helping you work towards aspirations, whether that’s early retirement, paying off the mortgage, or leaving a legacy for your family.

Please contact us if you’re thinking about investing or would like to review your current investment portfolio. We’re here to help you make investment decisions that reflect your goals and those of the people most important to you.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

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.

When you want to unwind, what do you do? Maybe you go for a run or put your feet up with a book? However, research suggests one of the best things you could do is turn up some music. But don’t just put on any tune – 80s pop could be the best at reducing anxiety.

Researchers hooked up over 1,500 volunteers to blood pressure and heart rate monitors and then played them a variety of music. Songs from the 80s were the most effective at reducing stress, according to a report in the Daily Mail. It discovered the likes of Wham!, Pet Shop Boys, and Duran Duran can reduce blood pressure, an indicator of low anxiety, when compared to other genres. Some 96% of volunteers were less anxious when listening to 80s music.

High blood pressure can have a serious impact on your health, including increasing the risk of a heart attack or stroke. In some people, feelings of anxiety or stress can trigger high blood pressure. While choosing the right music isn’t a substitute for lifestyle changes or medical treatment, the findings present an interesting view on how music can improve wellbeing.

Other genres had a positive impact on wellbeing too, including 2000s pop and even heavy metal. In contrast, techno, dubstep, and 70s rock anthems made blood pressure rise.

The music genres that had a positive impact might seem like a strange mix. The researchers suggest upbeat pop music can induce endorphins and serotonin in the brain, which increase feelings of happiness and calm. They also propose that heavy metal music can help listeners process feelings better, leading to lower levels of stress.

The new study challenges previous research, which indicates calming classical music is more likely to reduce stress. So, is it just the beats that are leading to less anxiety? Nostalgia is likely playing a role.

Why a bit of nostalgia is good for you

Music can take you back, sometimes decades. A favourite tune from the 80s might transport you to simpler, more carefree times in your past. In some cases, it might also be the memories associated with the music that has a calming effect.

In the past, however, nostalgia wasn’t seen as a positive emotion.

When the term was first coined in the 17th century, it described a medical condition and form of melancholy. It was associated with a yearning for the past. That may be true in some cases, but many people feel nostalgic when they fondly remember past experiences while still enjoying the present.

Clay Routledge, a professor of management at North Dakota State University, who has recently published a study on nostalgia, set out some of the benefits of reminiscing about the past in a Wall Street Journal article. These include:

Helping to find creative inspiration
Improving self-confidence and optimism
Helping people feel more connected
Providing a greater sense of meaning
Offering motivation to pursue goals.

In fact, a growing body of evidence suggests nostalgia can be a good thing and even help you move forward in life. Routledge notes that while nostalgic memories often contain a mixture of emotions, the positive usually outweighs the negative. Revisiting childhood memories or important life events doesn’t have to be a negative experience – it can be valuable.

“Step back in time”

Sometimes we’ll be nostalgic due to how we’re feeling, but more often there’s a specific trigger. It could be the smell of dinner cooking that takes you back to your childhood home, a chat with an old friend that reminds you of a holiday, or a certain song playing on the radio.

Listening to music can evoke strong memories. Research suggests that because music provides a rhythm and rhyme, it can help unlock memories we have stored but can’t quite remember. With the right music playing you may be able to retrieve every detail of a certain event but struggle without the soundtrack. There’s a strong link between music, memory, and emotions.

Putting on the right playlist could let you “step back in time” (released in 1980!) a la Kylie Minogue, and go a long way to improve your mood.

The pandemic has led to more people taking control of their finances and investing. If you’re looking for some investing tips, the following pearls of wisdom from Warren Buffett are a great place to start.

Known as a businessman and philanthropist, Warren Buffett consistently ranks on lists of the world’s richest people, with an estimated net worth of over $80 billion in October 2020. He primarily made his money through investing and is often known as one of the world’s most successful investors. So, while the antics portrayed in The Wolf of Wall Street may seem more exciting, learning investment lessons from Warren Buffett can be far more valuable.

Here are just a few of Warren Buffett’s quotes to guide your investment outlook.

1. “We’ve long felt that the value of stock forecasters is to make fortune-tellers look good.”

While everyone wishes they could see into the future and accurately predict market movements, it’s impossible. So many factors influence the market that consistently predicting how stocks will perform isn’t an option. As Buffett previously noted, even professional investors with a wealth of resources at their fingertips make mistakes, as do stock forecasters.

So, if you’re not trying to time the market to maximise investments, what should you do? It starts with building a long-term plan.

2. “Only buy something that you’d be perfectly happy to hold if the market shut down for ten years.”

Backing up the above point, don’t continuously chop and change your investment portfolio. You should buy stocks with the view to holding them for the long term. Don’t try to predict the market or make knee-jerk decisions when values fall. Have faith in the investment strategy you’ve put in place. In most cases, sitting tight is the best course of action, even amid volatility.

As a general rule, you should invest with a minimum timeframe of five years. This provides an opportunity for market peaks and troughs to smooth out. When you look at the long-term market performance it will usually show a general upwards trend, with market volatility balancing out.

3. “Don’t watch the market closely.”

Complementing a long-term outlook, don’t check the market or your portfolio too regularly. Daily movements can be sharp, and it can mean you end up making investment decisions that aren’t right for you and your goals. It’s the same with the media, which often focuses on large falls or big gains, rather than long-term performance.

Focus on the long-term, not how your portfolio has performed in the last day, week, or month.

4. “Never invest in a business you cannot understand.”

Understanding the value of your investments is important and that means you need to understand the business.

That doesn’t mean you have to miss out on opportunities. You can take some time to research potential investments you don’t understand, or discover plenty of alternative options to major trends. For example, Buffett admitted he missed out on opportunities to invest in the likes of Amazon and Alphabet, which owns Google, because he didn’t understand the value they offered – and yet he’s still one of the most successful investors in the world.

The same goes for products, make sure you understand how your pension or ISA works. If you’re not sure or would like to learn more about product options and how they fit into your plans, please get in touch.

5. “Beware the investment activity that produces applause; the great moves are usually greeted by yawns.”

In the media, investing is often portrayed as exciting and a way to get rich quick; think The Wolf of Wall Street. It can mean investors focus on finding the next ‘winning’ stock to deliver astounding growth in a short space of time.

The truth of investing is very different. It can be a means to help you grow your wealth, but it’s far more likely to take places over long periods without the excitement of buying and selling shares every day. The ‘dull’ investment strategy is often more likely to be suitable and deliver the long-term growth you want.

6. “In the business world, the rear-view mirror is always clearer than the windshield.”

It’s easy to think “I should have invested in Amazon” with the benefit of hindsight, as the quote from Warren Buffet highlights.

This also plays into a common financial bias called “hindsight bias”, where people perceive past events as having been more predictable than they actually were. It can cause overconfidence and may mean you end up taking more risk than is appropriate for you. Remember, events are rarely easy to predict, which is why a long-term outlook is important.

7. “Price is what you pay. Value is what you get.”

Finally, there’s often a focus on the price of stocks and shares when investing. But even when prices fall, it doesn’t mean it’s a “good” investment that will deliver returns in the future. Likewise, the price of investments falling doesn’t mean you should immediately sell them – look at the bigger picture and the value they offer.

Your investments should consider the value they bring you too. This links back to your financial plan. Rather than numbers being the focus, how will investing help you? It may mean a more comfortable retirement or the ability to buy a holiday home.

Please contact us to talk about your investment portfolio and how it can help you achieve your goals.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

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.

Saving for retirement should be part of your financial plan and can help you secure the lifestyle you’re looking forward to. But watch out for these eight pension mistakes, which could ruin your plans.

1. Putting off paying into a pension

The sooner you start paying into a pension regularly, the better.

Throughout your career, even small regular deposits can add up. You will also have longer to benefit from the compounding effect of investments. However, some workers are cutting back or stopping pension contributions. According to Royal London, two in five workers aged between 18 and 34 stopped or reduced pension contributions due to Covid-19. Unbiased reports almost a quarter (24%) of under 35s have no pension savings at all.

That being said, it’s never too late to start a pension and plan for retirement.

2. Opting out of a workplace pension

The majority of workers are nowadays automatically enrolled into a workplace pension. While you can opt out, this would often be a mistake when you consider the long-term benefits. Pensions are a tax-efficient way to save for retirement, and by opting out you are effectively giving up “free money”.

Pension contributions benefit from tax relief at the highest level of Income Tax you pay, providing an instant boost to savings. On top of this, employers must contribute to your pension too. Currently, employers must pay a minimum of 3% of pensionable earnings on your behalf.

3. Making only the minimum contribution

Linked to the above point, paying only the minimum contribution level under automatic enrolment is likely to leave a shortfall when you retire. When you’re automatically enrolled, 5% of your pensionable earnings go to your pension.

Despite this, 37% wrongly believe the auto-enrolment minimum pension contribution is the government’s recommended amount to be comfortable in retirement, according to the Pensions and Lifetime Savings Association.

4. Sticking with a default pension fund

Pension providers typically offer several different funds, with various risk profiles. You’ll begin paying into a default fund, but you can switch. You may want a lower risk investment fund if you’re close to retiring or a higher risk option if you have other assets you can rely on. The default fund may be the right option for you, but you should review the alternatives.

It’s also worth noting that many pension providers will start to reduce the level of investment risk you take as you near an assumed retirement date. Make sure the age you plan to retire is accurate.

5. Not checking pension performance

Your pension is usually invested and like other assets, you should track its performance with a long-term outlook. Regularly checking investment performance can help ensure you’re on track and identify where gaps may occur. In addition to reviewing investment returns, you should also review the charges you’re paying to the pension provider. In some cases, switching provider or consolidating pensions can make financial sense, as well as making your retirement savings easier to manage.

6. Losing track of old pensions

Most people will be automatically enrolled into a workplace pension. If you switch jobs, it can mean you lose track of where your retirement savings are.

If you’re not regularly checking your pension, it’s an asset that can slip your mind. Just 1 in 25 people consider telling their pension provider when they move home, according to the Association of British Insurers. It’s estimated there are 1.6 million unclaimed pensions worth £19.4 billion.

Going through your paperwork can highlight if you’ve “lost” a pension. The government’s tracking service can help if you can’t find the details you need.

7. Assuming State Pension will be enough

Almost two-thirds (64%) of people expect the State Pension to fund their retirement, research from accountants Kreston Reeves found.

The State Pension is a valuable benefit. However, for most people, it is not enough to enjoy the retirement lifestyle they want. For the 2021/22 tax year, the State Pension will pay £179.60 per week (£9,339.20 per year), assuming you have 35 years of National Insurance contributions or credits. Building up a separate pension provision is often essential for a comfortable retirement.

8. Relying on an inheritance

With conflicting short and long-term goals, it can be difficult to set money aside for retirement when you’re still working. For some, it means an expectant inheritance is the focus of their retirement plan. However, it means your retirement could be at risk due to factors that are beyond your control.

First, you can’t be sure when you’d receive an inheritance. You may need to delay your retirement as a result. Second, even if you’ve spoken to loved ones about receiving an inheritance, circumstances can change. A parent’s assets can be quickly depleted if they need care later in life, for example. Despite this, nearly one in five people are anticipating an inheritance to support them in retirement, according to a survey from Hargreaves Lansdown.

Planning for retirement is important. Please contact us to create a retirement plan that suits you, we’re here to help you avoid mistakes and secure a retirement lifestyle you can look forward to.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available.

Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation which are subject to change in the future.

The 2020/21 tax year hasn’t even finished yet, but it’s the perfect time to start thinking about the next 12 months. While this time of the year is often associated with using up allowances before the deadline, getting a head start on 2021/22 can be just as beneficial.

The new tax year starts on April 6, with the weeks before the deadline often associated with making financial decisions to use up allowances. From moving money into an ISA, to investing through Venture Capital Trusts, using allowances can help reduce tax liability and make your money go further. In some cases, leaving decisions until the last minute can make sense, but there are reasons to set out a plan at the start of a new tax year. Here are six of the most important:

1. Avoid last-minute decisions

Leaving your financial decisions until the last minute can mean you need to rush, which could lead to mistakes being made or not fully exploring all your options as you simply don’t have the time.

In some cases, how you use allowances will have a significant impact on your finances. If you decided to use your pension Annual Allowance, for instance, you would not be able to withdraw this money until you reached pension age, which could be decades away. It’s important you consider how making use of allowances will affect your short- and long-term plans. Thinking about your plan for 2021/22 now means you have plenty of time to consider your options.

2. No worries about delays

Sometimes things outside of your control can have an impact on plans. Delays with providers and other parties are one example. If you decide to invest through an ISA with just a few days to go until the new tax year, there is a risk that you’ll end up missing the deadline. In some cases, that could mean paying more tax than you need to.

Deciding how you’ll use allowances over the next 12 months means you can minimise the impact of delays or other factors that you can’t control.

3. Spread your contributions across the year

If you plan to put a significant sum of money away, whether in an ISA, pension, or an investment portfolio, spreading out contributions across the full year can make it more manageable.

The ISA annual allowance, for example, is £20,000. If you want to make full use of this, adding around £1,650 per month from your income or other assets can mean it becomes part of your regular outgoings rather than a lump sum you need to find at the end of the tax year.

The same is true for pension contributions. It’s also worth noting that your employer may match or increase their contributions in line with your own when it’s coming straight from your income, but are unlikely to do so if you make a one-off contribution.

4. Benefit from interest and the compounding effect

Not only can spreading out contributions make managing your finances easier, it can also be financially beneficial. If you’re using a cash account, such as a Cash ISA, you’ll receive interest on your contributions. Depositing money sooner in the tax year, whether as regular contributions or a lump sum, means you have more time to benefit from interest. The compounding effect means the longer your money is held in an account, the greater the interest it will deliver over time.

Although interest rates are low, over time the process can deliver sizeable benefits, especially if you’re making full use of allowances.

5. Drip feeding investments could make sense for your financial plan

Much like a cash account, spreading investments across the tax year or adding a lump sum at the beginning can mean you have longer to benefit from potential returns and the compounding effect. However, with investing, spreading your contributions throughout the year can also provide some protection from market volatility.

Investing regularly with smaller amounts means you’ll buy stocks and shares at different points in the market cycle. Timing the market is impossible to do consistently, so drip-feeding investments mean you’ll buy at high and low points, which can balance out over time.

6. Take the opportunity to set goals

Finally, a new tax year provides a good opportunity to review what you want to achieve in the next 12 months and beyond. It can help ensure your financial plan reflects your wider goals and will help you reach them.

Please contact us to discuss your financial plan and the steps you should be taking in the 2021/22 tax year.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A year after lockdowns around the world began, Covid-19 continues to affect economies and investment markets. While the volatility experienced almost 12 months ago may have calmed, uncertainty remains and it’s important for investors to focus on their long-term plan.

In February, Kristalina Georgieva, managing director of the International Monetary Fund (IMF), called on leaders of the G20 to deliver strong policies to support the global economic recovery. She set out three points to achieve this:

Speed up vaccinations
Provide more support to households and businesses
Provide additional support for the poorest countries.

With millions now vaccinated, there is light at the end of the tunnel. However, Covid-19 continues to present risks and there are concerns of new waves emerging when restrictions ease.

UK

Official figures from the Office for National Statistics show UK GDP suffered its worst annual slip on record, falling 9.9% in 2020. However, we avoided a double-dip recession following growth of 1% in the final quarter. After introducing a third national lockdown at the end of 2020, it’s uncertain if the growth will continue into 2021.

Highlighting the challenging economic circumstances faced by the UK is a recent Bank of England announcement. The central bank opted to keep interest rates where they are, at a historic low of 0.1%, but said banks should prepare. Negative rates aren’t guaranteed but consideration suggests the bank is preparing further hardship. It’s a move that would have a significant impact on savers.

Another key indicator of the economy is unemployment figures. Official statistics show the UK jobless rate was 5.1% in the final three months of 2020. This compares to 3.8% at the end of 2019 and represents a five-year high. Crucially, the furlough scheme is providing some cushioning. Provisional HMRC estimates show there were 4.7 million jobs furloughed at the end of January.

Despite supermarkets being among the “winners” of lockdown, Asda has announced a major shake-up to operations that will put thousands of back-office jobs at risk in a further blow to the unemployment figures.

There are some positive signs for the retail sector, however. According to figures from data company Springboard, footfall is rising. In the last week of February, the company reported a 10.5% increase in high street footfall, as well as a 4.5% and 1.2% increase in shopping centres and retails parks, respectively. The reopening of non-essential shops is still several weeks away but the increase suggests pent-up demand that could deliver a much-needed boost to the sector.

The pandemic has overshadowed Brexit, but two months after the UK left the EU, companies are reporting trade challenges. A report from the Chartered Institute of Procurement and Supply found two in three supply chain managers are experiencing delays of at least two or three days. This compares to 38% that said the same in January. It could signal that businesses will face further obstacles as markets and businesses reopen.

Europe

Statistics from Eurostat suggest the eurozone could be on track for a double-dip recession. In the final quarter of 2020, the economy shrank by 0.7%, adding to the 6.8% decrease for the whole of 2020. The dip follows many governments introducing new Covid-19 restrictions towards the end of the year.

Despite this, confidence is rising in some parts of the economic area. German business confidence beat expectations, rising to 92.4 in an index run by the Ifo Institute, a few points higher than the 90.5 forecast. The index also showed renewed confidence in the constriction, retail, and other service sectors. As the largest economy in the eurozone, this is a welcomed sign.

US

With Joe Biden’s inauguration taking place on 20 January 2021, February was his first full month in office, and it was a month of mixed signals.

The Chair of the Federal Reserve warned the US economic recovery was uneven and “far from complete”. Echoing this, the University of Michigan’s monthly consumer sentiment hit a six-month low. The results found future economic prospects are a concern for the general public. Despite this, there are positive signs. Retail sales, for example, jumped 5.3%, far stronger than the 1.1% expected, according to the Commerce Department.

There are also signs that the travel industry is picking up, although Boeing has faced another blow. The company has already endured the worst period in its history after its failings were found to be the cause of two fatal crashes, leading to its bestselling plane being grounded, which was then followed by the pandemic. Now, further questions are being asked about the safety of some of its 777 engines, leading to additional bans and stock prices falling.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

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.

On Wednesday 3 March, Rishi Sunak delivered his second Budget as chancellor. The Budget outlines the state of the economy and the government’s spending plans.

The World Health Organization declared Covid-19 a pandemic on 11 March 2020, the same date as the 2020 Budget. Since then, the pandemic has led to lockdowns, restrictions, and an enormous rise in government spending.

The Office for Budget Responsibility (OBR) estimates borrowing for the current tax year will be £394 billion, the highest figure seen outside of wartime. So, it’s no surprise that Covid-19 continues to influence Sunak’s decisions.

The chancellor noted the economy has been damaged, with GDP shrinking by 10% in 2020, and that the road to recovery would be a long one. However, he added: “We will continue doing whatever it takes to support the British people and businesses through this moment of crisis.”

As usual, the Budget began with an overview of the economy.

The economic outlook

The OBR expects the economy to grow faster than previously forecast. The economy is now forecast to grow by 4% in the coming fiscal year, and then by 7.3% in 2022.

However, Sunak noted that the pandemic is still inflicting profound damage on the economy. The OBR predicts that, in five years, the economy will still be 3% smaller than it would have been otherwise.

The improved outlook also means peak unemployment is expected to fall. It’s now expected to reach 6.5%, compared to the initial forecast of 11%.

Covid-19 support measures

As expected, Covid-19 support has been extended to cover the spring and summer months.

The Coronavirus Job Retention Scheme, often known as the “furlough scheme”, will now run until the end of September. It will continue to provide 80% of wages (up to £2,500 per month) to workers unable to work due to the pandemic. From July, employers will need to pay a proportion of their wages.

Self-employment grants will also continue, with two further instalments over the coming months. The scheme has been extended to include the newly self-employed who missed out on previous grants and have now filed a tax return.

The chancellor said total Covid-19 support measures are now worth more than £400 billion.

Personal finance

The Personal Allowance – the threshold before you need to pay Income Tax – will increase from £12,500 to £12,570 as planned in the 2021/22 tax year. The threshold for higher-rate taxpayers will also rise from £50,000 to £50,270 in 2021/22.

However, both these thresholds will then be frozen until 2026. So, while you may not face an immediate tax rise, the freeze will affect income in real terms over the next few years.

The chancellor also announced that several other allowances will freeze, rather than rising in line with inflation:

The pension Lifetime Allowance (£1,073,100)
The Capital Gains Tax allowance (£12,300)
The Inheritance Tax nil-rate band (£325,000) and residence nil-rate band (£175,000)

Again, these freezes could affect personal finances in the long term.

Business

The headline announcement for businesses is the rise in Corporation Tax.

From April 2023, Corporation Tax, paid on company profits, will rise from 19% to 25%. However, small businesses with profits of less than £50,000 will continue to pay the current 19% rate and there will be a taper.

Only businesses with profits of more than £250,000, around 10% of firms, will pay Corporation Tax at 25%.

However, a new “Super Deduction” will allow companies to reduce their tax bill when they invest.

From 1 April 2021 until 31 March 2023, businesses can reduce their tax bill by 130% of the cost of investment in a bid to encourage firms to invest for growth. It’s a move that hasn’t been tried before, but the OBR predicts it could boost investment by 10%.

Other important announcements include:

Restart grants to help businesses reopen as lockdown restrictions lift. Retail firms can apply for up to £6,000 per premises, while hospitality businesses can receive up to £18,000.
Recovery loans will be available to provide businesses with a capital injection. The scheme will offer loans from £25,000 to £10 million until the end of the year, with the government guaranteeing 80% to encourage lenders.
The business rate holiday for retail, leisure and hospitality firms has been extended for a further three months until the end of June. There will then be a six-month period where rates will be two-thirds of the normal charge.
The reduced VAT rate of 5% for the hospitality industry will remain in place until the end of September. There will then be an interim 12.5% VAT rate until April 2021.

Businesses can also take advantage of the government’s drive to encourage apprenticeships and traineeships. Incentive payments for firms hiring apprentices will double to £3,000. Sunak also revealed he is launching a programme to help firms develop digital skills.

Housing

The chancellor announced two key measures for the property sector.

First, the Stamp Duty holiday will be extended by six months. Until the end of June, homebuyers purchasing a property worth up to £500,000 will not have to pay Stamp Duty. The threshold will then fall to £250,000 until the end of September. From October, the threshold will be £125,000.

Second, the government will provide mortgage guarantees to lenders offering 95% mortgages. The move aims to support first-time buyers with small deposits. These mortgage products will be available from April.

Culture

Cultural venues have been significantly affected by Covid-19. The Budget revealed a new £300 million “Culture Recovery Fund” to support arts, culture, and heritage industries.

In addition to this, a £150 million fund has been set up to help communities take ownership of pubs, theatres, and sports clubs that are at risk of closure.

Fuel and alcohol duty

Despite plans to increase fuel and alcohol duty, both have been frozen. The freeze means fuel duty will not rise for the 11th year in a row, while alcohol duty has not increased for two.

Infrastructure

A new “Infrastructure Bank” will launch this spring, with around £12 billion in initial funding and will be located in Leeds. It will invest in both public and private sector green projects across the UK.

It’s expected the bank will support at least £40 billion of total investment in infrastructure.

Questions?

Please get in touch if you have any questions about what the Budget means for you or your financial plans.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A year ago, Rishi Sunak delivered his first Budget just as the pandemic began to take hold. While his £30 billion package sounded significant, it’s a sum that has paled into insignificance over the last 12 months as the chancellor has spent £280 billion shoring up the UK economy.

As the chancellor acknowledged in his speech: “The damage coronavirus has done to our economy has been acute”.

So, who are the winners and losers of the 2021 Budget?

Winners

Retail, leisure, and hospitality businesses

It’s been a tough year for many sectors, and retail, leisure, and hospitality businesses have been particularly hard hit.

The chancellor announced £5 billion in government grants to businesses in these sectors. Non-essential retail businesses will receive grants of up to £6,000 per premises, while hospitality and leisure businesses will receive grants of up to £18,000.

Sunak also confirmed an extension to the temporary 100% business rates relief for hospitality, retail, and leisure until the end of June. He will then discount business rates by two-thirds, up to a value of £2 million for closed businesses, with a lower cap for those who have been able to stay open.

The chancellor also extended the temporary VAT reduction in these sectors from 20% to 5% until 30 September. There will then be an interim 12.5% VAT rate until April 2021.

Alcohol duties were frozen for the second year in a row.

Businesses with staff on furlough

In a pre-Budget statement, Sunak summed up his Budget: “We’re using the full measure of our fiscal firepower to protect the jobs and livelihoods of the British people.”

Sunak most clearly demonstrated this commitment by announcing the government will extend the furlough scheme until the end of September 2021 – longer than businesses expected.

The government will cover the wages for workers who have been put on leave due to the pandemic (up to a maximum of £2,500 a month) at the following rates:

80% until the end of June 2021
70% in July 2021
60% in August and September 2021

Employers will have to pay the difference to 80% – so 10% of wages in July and 20% in August and September.

This is a major commitment by the Treasury as the scheme costs around £5 billion each month.

Self-employed workers (including the recently self-employed)

The fourth Self-Employed Income Support Scheme (SEISS) grant for February, March, and April 2021 will cover 80% of monthly profits up to a maximum of £2,500 a month.

People who became self-employed in the 2019/20 tax year, and have filed a 2019/20 tax return, will also be eligible for the fourth and fifth grants, helping an additional 600,000 workers.

A fifth grant, covering May, June and July 2021 will also be available.

For self-employed workers whose turnover has fallen by 30% or more, the grant will continue to pay 80% of monthly profits up to £2,500 a month.
For self-employed workers whose turnover has fallen by less than 30%, the grant will pay 30% of monthly profits up to £2,500 a month.

Homebuyers

As expected, the chancellor announced a three-month extension to the Stamp Duty holiday. This tax break will now finish at the end of June, at a cost of about £1 billion to the Exchequer.

The Stamp Duty nil-rate band will then be increased from £125,000 to £250,000 until the end of September 2021.

Sunak also relaunched the Help-to-Buy scheme to bring back 95% mortgages, which are mainly used by first-time buyers and have been in short supply due to the pandemic.

Here, the Treasury will offer lenders a guarantee covering 95% of property value, up to £600,000. This will encourage banks and building societies to lend to first-time buyers and current homeowners.

Sunak said: “By giving lenders the option of a government guarantee on 95% mortgages, many more products will become available, helping people to achieve their dream and get on the housing ladder.”

Lenders including HSBC, Lloyds, and Halifax will offer these deals from April 2021 onwards.

People claiming Universal Credit

The government have extended the temporary £20 per week uplift in Universal Credit benefits until the end of September 2021. This will be a one-off payment of £500.

The National Living Wage will rise to £8.91 from April 2021.

Businesses looking to invest

After announcing a hike in business tax rates (see below), the chancellor announced what he called the “biggest business tax cut in modern British history”.

A new “Super Deduction” will come into force for two years. This means that, when companies invest, they can reduce their tax bill by 130% of the cost of the investment.

Sunak gave the example of a firm currently spending £10 million on equipment. At present they benefit from a £2.6 million tax reduction but, under the Super Deduction they would get a tax break worth £13 million.

The Office for Budget Responsibility say it will boost business investment by 10%.

Drivers

The chancellor cancelled the planned increase in fuel duty.

People living in the East Midlands, Liverpool, Plymouth, and other freeport locations

Goods that arrive at freeports from abroad aren’t subject to the tax charges that are normally paid to the government. The tariffs are only payable when the goods leave the freeport and are moved somewhere else in the UK.

To help regenerate deprived areas, Sunak announced the creation of eight new freeports: East Midlands Airport, Felixstowe and Harwich, Humber, Liverpool City Region, Plymouth, Solent, Thames, and Teesside.

Losers

Medium-sized and large businesses

The first step to repairing the public finances came in the form of a Corporation Tax rise which will come into force in April 2023.

From April 2023, the Corporation Tax rate will rise to 25%. Despite a significant six-point increase in the rate, the chancellor argued that the UK will still boast lower Corporation Tax rates than the likes of Germany, Japan, the US, and France.

Small businesses – those with profits less than £50,000 – will benefit from a “small profits rate” of 19%. This means 1.4 million businesses will be unaffected and pay the same rate.

There will be a taper for profits above £50,000, so the 25% Corporation Tax rate will only apply to businesses who make profits of £250,000 or more. Sunak says that just 1 in 10 companies will pay the full higher rate.

Income Tax payers

While the chancellor announced no Income Tax, VAT or National Insurance rises, the decision to freeze the Personal Allowance at £12,570 and the higher-rate tax threshold at £50,270 from 2021/22 to 2026 equates to, essentially, stealth taxes.

A freeze drags more people into paying Income Tax and will also push 1.6 million people into the higher tax bracket by 2024, raising around £6 billion for the Exchequer.

Pension savers

In an expected move the chancellor announced he was freezing the Lifetime Allowance – the amount an individual can save into a pension before incurring tax charges. The allowance will remain at £1,073,100 until 2026.

This is another stealth tax, as it means that anyone whose pension savings are above this amount could face a levy of up to 55% on any additional lump sums or income taken from their pension pot.

Wealthier individuals and families

Just as the chancellor froze the pension Lifetime Allowance, he also announced a freeze in the Inheritance Tax (IHT) threshold and the Capital Gains Tax (CGT) annual exemption until April 2026.

The IHT threshold will remain at £325,000 with the “residence nil-rate band” at £175,000.

The annual Capital Gains Tax exemption will remain at £12,300 for five years.

As the value of assets such as house prices and investments rises over the next five years, this freeze will see more people face a CGT or IHT liability, raising additional revenue for the Exchequer.

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