Author: Chris Thorpe

Eccentric Willy Wonka boasts a lot of enviable skills as a businessman – he’s innovative, understands his target audience, and inspires loyalty from his employees. But his skills at succession planning left a lot to be desired. 

Over the years many actors have taken up the role of Roald Dahl’s iconic chocolatier Willy Wonka. The character is getting a new lease of life in December when Wonka releases in cinemas.   

While the new movie looks at how Wonka became the owner of a successful business selling fantastical sweets, the original novel, Charlie and the Chocolate Factory, focuses on his succession plan.

With no children to leave his business to, Wonka hides five golden tickets in chocolate bars to win a tour of his world-famous chocolate factory. He plans to pass on his company to one of the lucky winners.

Despite the risky approach, the competition pays off when Charlie Bucket secures one of the golden tickets. 

While Wonka’s method might be perilous, research suggests some business owners could also be taking a risk when it comes to their firm’s future. 

According to a report in FTAdviser, more than a third of businesses have no succession plan in place, and a further 10% haven’t thought about it.

Yet, what will happen to their business is a concern for many business owners. 21% said they were most worried about seeing their business fail and 18% were concerned about their employees’ prospects. 

Without an effective succession plan, there’s a chance your business’s legacy doesn’t live up to your expectations or pass to the person you want to hand the reins to. 

Creating a succession plan can seem daunting and involve a lot of work. However, if it’s something you’ve been putting off, here are seven reasons to make it a priority. 

1. It provides a chance to think about your different options 

There’s more than one way to step away from your business when you’re ready. You might plan to pass it on to your children, or you may want to sell it to fund your retirement. 

Going through your preferences now provides an opportunity to explore the different options and consider which would be right for you. 

2. The process could help you identify potential leaders and skill gaps

Handing over his business to someone with no experience might work well for Wonka, but it’s not advised.

As part of your succession plan, you may review the skills and expertise of your current team to identify where there could be gaps in the future. You might then create a training development programme to upskill existing employees or seek to hire someone who fits your needs.

It’s a step that may improve the long-term security of your business and give you peace of mind. 

3. Preparing your business may be a lengthy process  

Depending on your plans, preparing your business to hand over could be a process that takes years. Perhaps you need to dedicate time to training existing employees to take over some of your tasks, or you might want to sell the business with an established customer base that you need to build.

Setting out your succession plan now could mean you have more options, reduce stress, and give you a chance to overcome potential obstacles. 

4. It could improve processes in your business now 

When creating a succession plan, you’ll often want to consider how the business would operate if you weren’t there and how to make processes as efficient as possible.

So, even if passing on your business is years away, a succession plan can be a useful exercise. You might find ways to increase productivity, cut costs, or help your team work more efficiently. It could improve your business now and mean it’s in a better position in the long term too. 

5. A succession plan could boost confidence in your business 

When Wonka announced he’d be handing over his business to an 11-year-old boy, we’re sure not everyone was thrilled about the decision or optimistic about the firm’s prospects. 

A lack of a succession plan could harm confidence in your business. For instance, customers might worry about whether you’ll be able to fulfil orders over the long term. A succession plan could also give your employees more confidence in their security. 

6. A succession plan may be useful if the unexpected happens 

A succession plan isn’t just useful if everything goes according to plan, it might also be valuable if the unexpected happens.

If you fall ill, having processes and a leadership team in place that you can trust could make the difference between your business continuing to run smoothly or facing challenges. Knowing that your business is in safe hands might mean you’re able to focus on your recovery. 

A robust succession plan could also make it easier to step back from your business sooner than initially planned if you decide to. 

7. Your decision may influence your long-term plan

As a business owner, your firm is likely to affect your lifestyle and finances. 

Your business plans and when you hope to move on might influence areas like your pension or investments. So, understanding how and when you want to move on from your business could mean you’re able to make informed decisions about your personal life and assets.

Contact us to talk about your succession plan and what it means for your future 

If you’d like help with your succession plan, we may be able to offer support and could make your decisions part of your personal financial plan too.

Please contact us to arrange a meeting to talk about your aspirations. 

Please note:

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

Households are paying more in taxes, research suggests. At a time when high inflation may be affecting your outgoings, finding ways to reduce your tax bill could be valuable. If you’re married or in a civil partnership, planning with your partner could help you get more out of allowances. 

According to the Institute for Fiscal Studies, at the time of the last general election in 2019, UK tax revenues amounted to around 33% of the national income. By the time of the next general election in 2024, the figure is predicted to have increased to 37%.

Only during the immediate aftermath of the two world wars have government revenues grown by as much.

The think tank notes the response to the Covid-19 pandemic explains some of the increased tax burden. However, it adds higher government spending on things that pre-date the pandemic also plays a role. 

On average, the changes mean households are paying an extra £3,500 each year in tax. Yet, the tax rise isn’t shared equally and some families may have seen their tax bill rise much further. 

HMRC collected £19.8 billion more in tax between April and August 2023 than a year earlier 

Figures released by HMRC support the claim that taxes are rising. 

Between April and August 2023, HMRC receipts were £331.1 billion – £19.8 billion higher than the same period in the previous year. 

Some of the receipts in the HMRC data are paid by businesses, but others come from individuals. For example, the amount of Income Tax paid was £9.5 billion more than a year earlier. 

So, how could planning with your partner potentially reduce your tax burden?

Many of the tax allowances available are for individuals. As a result, passing assets to your husband, wife, or civil partner to utilise both of your allowances could be useful. 

Here are five allowances you might want to consider as part of your financial plan. 

1. Personal Allowance

The Personal Allowance is the amount you can earn before you’re liable for Income Tax. For 2023/24, it is £12,570. 

If your spouse or civil partner doesn’t earn above this threshold, they may be able to pass on some of their unused allowance to you under the Marriage Allowance.

£1,260 of the Personal Allowance can be transferred to the partner with the higher income, which could reduce your annual income Tax bill by up to £252 each year.

The higher-earner must be a basic-rate taxpayer to use the Marriage Allowance.

2. Personal Savings Allowance

The Personal Savings Allowance (PSA) is the amount you can earn in interest before it could become liable for Income Tax.

As interest rates have increased over 2022 and 2023, you might face an unexpected tax bill if you don’t review how much your savings are earning.

Crucially, your PSA depends on the rate of Income Tax you pay. Basic-rate taxpayers can earn up to £1,000 in interest before paying tax. The PSA falls to £500 for higher-rate taxpayers, and additional-rate taxpayers don’t benefit from a PSA at all. 

So, if you could exceed your PSA or you’re an additional-rate taxpayer, transferring savings to your partner may help you get more out of your money. 

3. ISA allowance

In addition to the PSA, the ISA allowance may be useful to avoid paying tax on your savings.

Each individual can contribute up to £20,000 in the 2023/24 tax year to ISAs. You can choose a Cash ISA, where the money would earn interest, or a Stocks and Shares ISA, where your money would be invested and potentially deliver returns. 

The interest or returns earned on money held in an ISA aren’t liable for Income Tax or Capital Gains Tax (CGT). Using both your and your partner’s ISA allowance could help you save or invest more efficiently. 

4. Dividend Allowance

Dividends may be a helpful way to boost your income. 

You might take dividends if you own a company or you could receive them through some investments. In 2023/24, you can receive up to £1,000 in dividends before tax is due.

If you might exceed this threshold, transferring dividend-paying assets to your partner could effectively double the amount you could tax-efficiently receive as a couple.

The rate of tax you pay on dividends above the allowance depends on your Income Tax band. So, if your partner pays a lower rate of Income Tax, transferring dividend-paying assets to them could also mean you benefit from a reduced tax bill. 

You should note that the Dividend Allowance will fall to £500 in the 2024/25 tax year. 

5. Capital Gains Tax annual exempt amount

CGT may be due when you dispose of certain assets, including investments that aren’t held in a tax-efficient wrapper, second properties, and some material items.

The annual exempt amount means that in 2023/24, you can make profits of up to £6,000 before CGT is due.

Similar to dividends, transferring assets to your partner could mean you’re able to use both of your annual exempt amounts and potentially benefit from a lower rate of CGT as your tax band affects the rate you pay.

In 2024/25, the annual exempt amount will fall to £3,000 for individuals. 

Arrange a meeting with us to discuss how you could potentially reduce your tax bill

If you want to make the most out of your money and reduce your tax bill, please get in touch. We could help you create a long-term financial plan that cuts how much tax you pay with your goals in mind. 

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.

This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate tax planning. 

Trusts may be a useful way to pass on wealth, but research suggests it’s an option some people are dismissing. 

You can place a variety of assets in a trust, from investment to property, for the benefit of another person, known as the “beneficiary”. The trust is then managed by one or more trustees according to the instructions you’ve set out.

There are many reasons why using a trust to pass on wealth to your loved ones could be right for you. Among them are:

• Ensuring your assets are passed to the right person
• Reducing a potential Inheritance Tax (IHT) bill
• Passing on assets more efficiently 
• Allowing you greater control over how the assets are used
• Creating a legacy for future generations 
• Decreasing the risk of assets leaving your family.

Yet, despite seeking advice, research suggests many people who could benefit from using a trust aren’t doing so. 

The majority of life insurance is not placed in a trust despite the advantages 

According to Royal London, families are frequently recommended trusts by financial planners. Yet, few are following the advice offered. 

For instance, just 3 in 10 people with a term life insurance policy have placed it in a trust. Life insurance would pay out a lump sum to your beneficiary if you passed away during the term.

Writing your life insurance in trust can ensure the payout goes to the right person. 

A life insurance payout that’s not placed in a trust could also be included in your estate for IHT purposes. So, it could inadvertently lead to an IHT bill that you’ve not considered. 

In addition, by placing a life insurance policy in a trust, the money paid out wouldn’t need to go through the probate process. As a result, your family could receive the money much quicker. This could be particularly important if your loved ones rely on your income to cover daily expenses.

In contrast, the survey found simpler alternatives are far more likely to be followed, which could suggest part of the reason families are overlooking trusts is because they don’t understand them. 

4 questions to answer if you’re thinking about setting up a trust

1. Why are you considering a trust? 

There are several different types of trust. Which option may be right for you will depend on your goals. 

A trust that holds assets for a grandchild until they’re an adult would be very different to a trust that’s designed to provide a regular income for future generations. So, setting out why you think a trust could be right for you is useful – it could help you identify which type of trust could be used and if there are any alternative solutions you may want to consider. 

2. Do you want to benefit from the assets held in the trust during your lifetime?

In some cases, you might want to benefit from the assets you place in a trust during your lifetime. For instance, you may receive an income from investments held in a trust, which will be inherited by your children when you pass away. 

Doing this could reduce a future IHT bill, but there are other benefits too. It could provide security in the future if you were unable to manage your assets or finances, as the trustee would be responsible for doing this according to the terms of the trust.  

It’s important to be clear if you want to continue using the assets as it may affect the type of trust that’s right for you and how it’s set up.

3. Who will be your beneficiaries? 

Setting out who would be the beneficiary of the trust may be important when you’re deciding which assets you’d like to pass on.

Your beneficiaries may also affect the terms of the trust. For some people, you may be happy for them to access the assets, while for others you may want the trust to provide a regular income instead. 

4. Who will act as trustee? 

Trustees are responsible for managing the trust in line with your instructions. 

You can choose someone you know personally, such as a close friend or family member, or a professional trustee, like a solicitor, which would come with a cost. 

If you decide to ask a relative or friend to act as a trustee, it’s a good idea to speak to them first. Ensuring they understand what their duties would entail and your wishes can help them decide if it’s a responsibility they want. 

Seeking professional help is often advisable if you want to set up a trust

Once a trust is set up and assets are transferred, it can be difficult, and, in some cases, impossible, to reverse the decision. So, seeking professional support is often advisable.

As financial planners, we can help you understand which assets to place in trust to meet your goals and the effect it could have on your wealth. It can give you confidence in the steps you’re taking.

Legal advice may also be valuable. Depending on your needs, setting up a trust can be complicated and a solicitor could help you avoid potentially costly mistakes.

Contact us to discuss if a trust could help you pass on your wealth

Trusts can be useful in a variety of scenarios but it can be difficult to understand if they’re right for you and the steps you need to take to use them effectively. We can provide advice tailored to your circumstances to help you create an estate plan that aligns with your wishes, including setting up a trust if it’s appropriate. 

Please get in touch to arrange a meeting to discuss your estate plan. 

Please note:

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

The Financial Conduct Authority does not regulate trusts, estate planning, tax planning, or legal services. 

Regular financial reviews may help keep you on track to meet your goals and give you confidence in the steps you’re taking. As well as reviewing your assets, you might also want to make changes to your plan.

Last month, you read about why you shouldn’t skip your financial reviews and how they could help you reach your goals. Now, read on to discover two reasons why you might want to make changes to your financial plan during a review. 

Updating your plan in response to short-term movements could harm your goals

While there are times when it’s appropriate to update your financial plan, you should be aware of the risks of responding to short-term movements or bias.

Stock market volatility can be nerve-wracking. If you’ve read about the value of shares falling, it can be tempting to withdraw money from the market to preserve your wealth. However, it could have a negative effect on your progress towards your long-term goals.

Historically, markets have delivered returns over the long term, and investors who weather the ups and downs have benefited in the long run. By taking money out of investments during a downturn, you turn paper losses into actual ones.

Of course, investment returns cannot be guaranteed and do carry risks. Understanding which investments align with your circumstances and objectives may help you take an appropriate level of risk.

Similarly, after speaking to a friend about how they’re investing in a certain asset that’s going to deliver “great returns”, you might want to follow suit. Behavioural biases, like following the crowd, could lead to you making unnecessary changes to your plan, which could harm the projected outcomes. 

Remember, your goals and circumstances should be at the centre of your financial plan. If changes are tempting, taking a step back to calculate what’s driving the decisions could be useful. 

So, following a financial review, why might you make changes? There are several reasons why it may be appropriate, including these two.

1. Your goals or circumstances have changed

Your financial plan should be built around your goals and circumstances. Over time, these may change, and altering your plan may ensure it continues to reflect your lifestyle.

Perhaps you want to bring forward your retirement date, so you increase pension contributions as a result to provide you with financial security? Or becoming a parent might mean taking out life insurance would provide peace of mind, or you’d like to build a nest egg for your child. 

A financial review is a chance to let your financial planner know about changes in your life.

It means they can offer advice that’s suitable for you and your aspirations. In some cases, it could mean altering your plan so that it continues to align with your life. 

2. Government changes will affect your plans

Sometimes government announcements will affect what’s suitable for you. Changes to allowances, tax hikes, and more could mean adjusting your financial plan would help you get more out of your assets. 

The recent announcement that the government will abolish the pension Lifetime Allowance is a good example.

From 2024, there’s expected to be no limit on how much you can save into your pension over your lifetime. It might mean it’s appropriate to increase your pension contributions or it could alter your retirement date. 

Keeping on top of the latest news and then understanding what it means for you can be difficult.

Your financial reviews provide an opportunity for your financial planner to explain what announcements mean for you. Tailored advice can help you identify potential risks or opportunities that may lead to changes in your long-term plan. 

Contact us to discuss your financial plan

If you have any questions about your financial plan or would like to understand how we could support you, please get in touch.

Next month, read our blog to find out why financial reviews may help you reduce impulsive financial decisions and focus on your long-term aims. 

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.

Economies around the world continue to struggle with high inflation and weakening demand affecting GDP. Read on to discover some of the factors that may have affected your investment portfolio in September 2023. 

When reviewing short-term market movements, remember to focus on your long-term investment goals.

UK

Official data shows the UK economy contracted by 0.5% in July. The Office for National Statistics (ONS) attributed the poor performance to strike action and poor weather. 

However, there was some good GDP data. The ONS said the UK economy reached pre-pandemic levels earlier than thought in the final quarter of 2021. The revision is good news as economists previously believed the UK was lagging behind other countries. 

Inflation is falling but remains above the Bank of England’s (BoE) 2% target. In the 12 months to August 2023, it was 6.7%.

Despite high inflation, the BoE’s Monetary Policy Committee voted to hold its base interest rate of 5.25%. The Bank’s governor, Andrew Bailey, said he believes inflation will fall “quite markedly” by the end of the year. However, he added, it would be premature to cut interest rates now. 

Quarterly data from the central bank shows the public is dissatisfied with the strategy for controlling inflation. Public satisfaction was at its lowest since records began in 1999. 

While interest rates didn’t rise in September, households are struggling.

The Resolution Foundation warned average working household incomes are on course to be 4% lower in 2024/25 in real terms when compared to 2019/20 thanks to high interest rates, steep tax rises, and a stagnant economy. 

The number of mortgages in arrears also demonstrates the pressure some families are facing. According to the BoE, the number of mortgages in arrears hit the highest level in almost seven years. 

Businesses are feeling the strain from rising interest rates too. Think tank Cebr predicts that 7,000 businesses will fail every quarter in 2024.

Statistics from the Insolvency Service indicate some businesses are already struggling to balance costs.

Company insolvencies jumped by almost a fifth in England and Wales in August when compared to a year earlier. However, it’s important to note that insolvencies were at a historic low during the pandemic as businesses benefited from government support. 

Despite some negative statistics, the FTSE 100 recorded its best day of 2023 so far – the index gained 1.95% on 14 September. 

Europe

GDP data for the eurozone was revised downwards. Statistics show GDP expanded by only by 0.3% in the second quarter of 2023, which has led to concerns that the bloc could fall into a recession in the second half of the year. 

Inflation in the eurozone fell to 5.2% in the 12 months to August. However, there’s a big difference between economies across the bloc. Hungary had the highest rate of inflation at 14.2%, while Spain and Belgium saw prices increase by 2.4% when compared to a year earlier. 

In response, the European Central Bank raised its three key interest rates by 25 basis points. 

PMI data indicated that business output is still contracting as new orders fell and firms were forced to pay more for raw materials and other costs. Germany and Austria were among the worst-performing nations in the eurozone. 

As the largest economy in the eurozone, Germany is often used as a barometer for the economic area.

Unfortunately, signs suggest Germany’s economy could be faltering. The European Commission said it expects the country’s GDP to fall by 0.4% this year as energy price shocks due to the war in Ukraine hit the country hard.

Sentix’s index for the eurozone also suggests Germany’s performance is leading to pessimism among investors. 

While many countries are struggling to manage soaring inflation, Turkey’s is among the highest. In the 12 months to September 2023, inflation was 61.5% and its base interest rate was 25% in September.

US

Inflation in the US is lower than in some other developed economies. However, at 3.7% in the 12 months to August 2023, the figure is higher than it was a month earlier. 

Similar to countries in Europe, PMI data suggests business productivity flatlined in September. S&P Global said the service sector lost momentum in August, while manufacturers reported a drop in sales. 

Towards the end of the month, there was a risk that the US government could partially shut down. A group of Republican members of the House of Representatives refused to compromise with their own party’s leadership. 

Credit rating agency Moody’s warned a shutdown could threaten the US’s triple-A rating and cause market volatility. 

It would follow Fitch downgrading the US government’s credit rating in August due to a “deterioration of standards”. 

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.

High inflation over the last year has collectively cost savers billions of pounds in real terms, according to an Independent report. Have you considered the effect the rising cost of living could have on your wealth?

While inflation may not reduce how much you have in your savings account, in real terms, the value may fall. 

As the cost of goods and services rises, what you could purchase with your savings falls. Usually, this happens at a gradual pace. However, as inflation has been higher than the Bank of England’s (BoE) 2% target for two years, the effect has been more noticeable. 

If the interest rate your savings earn doesn’t keep pace with inflation, the value of your money decreases.

Inflation could reduce the value of your savings in real terms, but cash may still be useful

The BoE calculations suggest £10,000 in 2021 would have to have grown to £11,774 in August 2023 just to have the same spending power. So, your savings would need to have earned £1,774 in interest during that time.

Even though interest rates have started to rise as the BoE has increased its base rate to tackle high inflation, it’s unlikely your savings have grown at the same pace. 

The analysis published in the Independent suggests up to £113 billion has been wiped off the value of savings in the last year in real terms. 

While the value of your money may fall in real terms in a savings or current account, there are still times when they might be the right option for you, including these three:

• Handling your day-to-day finances: If you’re using money held in your account to pay for utility bills or other regular expenses, inflation will have little effect. 
• Saving for short-term goals: Investing could make sense when you’re saving for a long-term goal. However, if you’ll be saving over a shorter period, volatility might mean investing isn’t the right option. So, when you’re saving for a holiday next year or home improvements for example, a cash account could be right for you. 
• Creating an emergency fund: While you may not want to access your emergency fund now, you want to be able to easily make a withdrawal if the unexpected happens. As a result, a cash savings account could make sense. 

So, it’s important to set out what you want to use your money for. It can help you select an appropriate place for your wealth that aligns with your goals. 

Inflation is starting to fall, which could ease the burden for some savers. However, the value of the money held in a savings account could still fall in real terms. Meanwhile, investing might provide a way to grow your wealth. 

Investment returns may outstrip inflation 

It’s impossible to guarantee investment returns. Yet, investing does present an opportunity to potentially grow your wealth in real terms. 

Historically, markets have delivered returns over long time frames. If you’re saving for a goal that’s more than five years away, from buying a property to retiring, investing might be an option you want to consider. 

Market volatility is a normal part of investing. The value of your investments will rise and fall at different points. So, it’s often not appropriate if you’re investing with a short-term time frame, as a dip in the market could mean you lose money.

If you want to invest, considering risk is important.

All investments carry some risk. However, investment risk varies significantly and you can choose options that are appropriate for you.

There are many factors you may want to weigh up when deciding how much investment risk to take, including the reason you’re investing and the other assets you hold. We can help you create a risk profile and an investment portfolio that reflects your wider financial plan. 

Get in touch to talk about how to make the most of your money

Getting the most out of your money is about understanding your goals and how to use your assets to reach them. If you’d like to talk about your tailored financial plan, including whether investing is right for you, please contact us. 

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.

People often think of their financial plan as a way to grow their wealth and provide financial security. You might consider areas like your pension or financial protection to be core parts of your financial plan. Yet, while they’re important, your happiness is essential too. 

Financial planning is about helping you reach your financial goals, but it goes further than that.

It’s about making your money work in a way that aligns with your lifestyle aspirations and understanding how it could improve your wellbeing. 

After all, you might want the money in your pension to grow, but your money will often be linked to other aspirations you may have. For example, you might want investments to perform well so you can travel more in retirement, or to allow you to retire early so you can spend more time with grandchildren while they’re young. 

As a result, recognising what makes you happy now or could improve your life in the future should be at the centre of your financial plan.

Here are three steps you can take to make your happiness the focus of your financial plan.

1. Set out what makes you happy

Think about your day-to-day life. What gives you purpose and makes you happy? Setting out what is important to you can help you make conscious money decisions that reflect your wellbeing.

Without a clear focus, it can be easy to make decisions that aren’t necessarily right for you. For example, you might spend money on impulsive purchases that give you a brief serotonin boost, but you then have to compromise on something that would bring you longer-lasting happiness. 

It’s also worth thinking about the one-off experiences you’ve had that brought you joy. Which memories do you look back on fondly with a smile? You might want to make other similar experiences part of your long-term plan. 

2. Create clear objectives

Often, your happiness goals will be linked to finances in some way. So, setting out financial objectives with your wellbeing at the centre is useful.

These could be both short- and long-term objectives. Perhaps you have a hobby that brightens up your day, so you want to make the associated costs part of your regular budget. Or maybe you’re really looking forward to the freedom that retirement will bring, so you have a pension goal you want to achieve that would allow you to give up work sooner. 

Consider what money or assets you’d need to make your life happier. You can then turn your attention to how to reach these objectives with your circumstances in mind. 

3. Form a financial plan around your objectives

With your objectives set out, you can start to think about how to achieve them through your financial plan.

For example, if you want to retire early so you can indulge your passions, what is a tax-efficient way of saving the money you need? Or what steps can you take to create long-term financial security once you give up work?

By starting with what makes you happy you can make conscious financial decisions that support your wellbeing now and over the long term. 

A financial planner can help identify how to use your money to reach the goals you’ve set out. Having a plan that’s tailored to you may also improve how confident you feel about your finances, so you may focus on enjoying other parts of your life.

Contact us to create a financial plan that focuses on your happiness 

As a financial planner, we may help you get more out of your money with your lifestyle goals in mind. We’ll work with you to not only understand how you could grow your wealth, if that’s your goal and appropriate for you, but also understand how to use your assets to enhance your life.

Please contact us to arrange a meeting to discuss your life goals and how we could offer support in creating a financial plan for 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 investments (and any income from them) 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. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

The latest release from HMRC shows it collected a record £16.7 billion in 2021/22 through Capital Gains Tax (CGT) – a 15% increase on the previous tax year. Cuts to a tax exemption could mean CGT receipts might climb even further.

CGT is a type of tax you pay when you sell or dispose of certain assets. It may include property that isn’t your main home, some investments that are held outside of an ISA, or personal possessions that are worth more than £6,000. 

Previously, the annual exempt amount – the threshold up to which you can generate profits before CGT is due – was £12,300. However, the exemption fell to £6,000 in 2023/24 and will be just £3,000 in 2024/25.  

So, while the value of your assets may rise, the amount of profit you can make before CGT is due is falling. It could mean more individuals face a CGT bill or that your liability may be higher than you expect. 

Yet, some steps might help you manage your CGT bill. 

5 useful options that could reduce your Capital Gains Tax bill 

1. Use your annual exempt amount

Keeping your annual exempt amount in mind when planning how to dispose of assets could be useful. 

For example, if you plan to sell two assets and the profits would exceed the CGT threshold, delaying the sale of one until a new tax year when your annual exempt amount resets could reduce your bill.

If you’re married or in a civil partnership, you can also transfer assets to your partner without being liable for CGT. As a result, transferring assets to your partner could allow you to use both of your annual exempt amounts. 

2. Consider tax-efficient wrappers and allowances 

There are ways to hold assets tax-efficiently, which could mean you avoid CGT or potentially reduce your bill.

If you’re investing, an ISA could be one such option. Investments held in an ISA aren’t liable for CGT when you sell them or Income Tax when you withdraw your money.  

A pension may be another option if you’re investing for the long term. A pension is a tax-efficient way to invest. However, you may need to pay Income Tax when you withdraw money from your pension if your total income exceeds the Personal Allowance. 

There may be other allowances and tax-efficient wrappers that are suitable for you too. 

3. Manage your taxable income

The CGT rate depends on your other taxable income. If you’re not sure what rate of CGT you could pay please contact us. In 2023/24:

• The standard CGT rate is 10% (18% on property that isn’t your main residence)
• The higher CGT rate is 20% (28% on property that isn’t your main residence).

So, if you’re able to reduce your income from other sources, you could potentially halve the rate of CGT you pay. 

Whether this is an option will depend on your income and circumstances. For example, if you’re a retiree drawing a flexible income from your pension, you may choose to pause or lower your withdrawals to avoid exceeding thresholds. Or, if you’re an employee, you may increase your pension contributions to reduce your taxable income. 

If you want to understand the possible effects of reducing your taxable income, please get in touch. 

4. Offset losses against gains

No one wants to make a loss when selling assets, but it could reduce your tax liability. In some cases, it is possible to offset losses against gains to reduce CGT.

For instance, if you sold investments at a loss, you could use this to your benefit from a tax perspective as CGT is charged on your net capital gains during a tax year. 

You may also be able to carry forward losses to future tax years. Keeping good records may mean you’re able to use losses against gains in the future. 

5. Make Capital Gains Tax part of your long-term strategy

You may want to consider CGT when setting out and reviewing your long-term plan. Understanding when you plan to dispose of certain assets could help you identify ways to reduce the amount of tax you pay.

Contact us if you have questions about Capital Gains Tax

If you’d like to better understand how much CGT you could be liable for or want to make it part of your long-term strategy, please contact us. 

Please note:

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

HM Revenue and Customs’ practice and the law relating to taxation are complex and subject to individual circumstances and changes, which cannot be foreseen.

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.

205 years after it was published, the novel Frankenstein has inspired countless horror books, films, and more. The approach the scientist takes in the story to create a sapient creature might have more in common with effective financial planning than you think.

English author Mary Shelley published Frankenstein in 1818 after being inspired by historical tales of alchemists and the occult while travelling through Europe. 

The novel tells the story of young scientist Victor Frankenstein and his ambitions to create life. He assembles old body parts, strange chemicals and electricity from a lightning storm to bring his Creature to life. 

Frankenstein is considered, by some, to be the first true science-fiction story. It also has a couple of important lessons when creating a financial plan. 

Lesson 1: A bespoke approach could help you reach your goals 

Frankenstein’s experiment might not end well, but he does achieve his aim – creating an articulate life. 

He can’t simply use an existing body to create his Creature. So, Frankenstein must gather different parts that suit his needs. Taking a similar approach when you’re building a long-term financial plan could work too. 

There’s no one-size-fits-all financial plan. Your goals and finances will affect what’s right for you. The financial plans of two seemingly similar people may be very different.  

So, like Frankenstein, understanding which “parts” you need to create a financial plan could help you get more out of your assets and may mean you’re more likely to reach your goal.

Often, a financial plan involves bringing together lots of different areas that need to complement each other. If you aim to create long-term financial security, you might consider areas like:

• Adding to a savings account to create a safety net
• Contributing to a pension to create a retirement income
• Investing outside of a pension to provide flexibility
• Paying off your mortgage so your expenses fall later in life
• Taking out financial protection that could prevent shocks from derailing your plans.

Creating a plan that’s tailored to you may seem complex, as you’ll need to balance multiple factors. Yet, a “Frankenstein” approach could help you take steps that are right for you and discard those that aren’t appropriate. 

As a financial planner, we can work with you to create a bespoke financial plan that’s tailored to your needs. We’ll help you understand how different aspects of your plan can work together to support your goals, like the electricity that brings Frankenstein’s creation to life. 

Lesson 2: Keep track of your “creation”

When Frankenstein is selecting the features for the Creature, he purposely chooses beautiful ones. Yet, when the Creature is animated the result is “hideous”, and so, repulsed by his own work, the scientist flees. 

When Frankenstein returns, the Creature is gone, and it leads to a series of events that cause grief and guilt. 

Fortunately, you don’t need to worry about an eight-foot monster if you leave your financial plan unattended. But things could go awry if you don’t manage it.

Regular financial reviews could help ensure your plan continues to reflect your goals and that you remain on track.

Over time your wishes or circumstances may change. In some cases, making alterations to your financial plan could make sense. Factors outside of your control, such as a period of high inflation or government changes to tax allowances, might also affect how suitable your financial plan is. 

Financial reviews may highlight potential risks and opportunities. So, they may be an important part of getting the most out of your money over the long term. 

We can help you create a tailored financial plan

As financial planners, we can help you create a bespoke financial plan that suits your circumstances and goals. We’ll bring together different aspects of financial planning to create a holistic plan that’s tailored to you. 

If you’d like to talk to one of our team, please get in touch. 

Please note:

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