5 things to do before the 5th

Some tax year tips!

As 5 April approaches, along with the cut off for any potential tax savings to be gained this financial year, now is the time to take a quick look at your finances and make sure you are as tax efficient as possible.

After all, you really don’t want to wake up in a bad mood on the 6th realising you’ve missed some golden opportunities to save money!

So my top five tips are as follows:

1. Make the most of your capital gains tax allowance

Your Capital Gains Tax (CGT) allowance is a simple way to reduce any tax liable on the sale of certain assets, especially at this time of year as we approach the end of tax year.

Everyone has an annual £11,300 CGT allowance. Which means that you can sell assets that are liable to CGT without having to pay any tax on the first £11,300 of gains. There are certain assets that are exempt of any CGT liability (such as your main home, car and ISAS.)

Now is the perfect time of year to consider the way in which you dispose of your assets. As you cannot carry your CGT exemption over to the next year, you can stagger the way in which any tax becomes liable. For example, if you are planning to sell shares and are likely to make £20,000 from the proceeds, then you can take advantage of this time of year and sell them in two batches, either side of the 5 April Tax year end.

Married couples and civil partners should consider asset transfers between each other, in order to minimise their tax liability on future capital gains. As the CGT allowance is an individual one, married couples and civil partners are able to cover up to £22,000 of gains between them once they have shared ownership of joint assets. Just make sure that any transfers are genuine, outright and unconditional with no strings attached.

2. Use your seasonal bonus wisely

Any year-end bonus payment you may receive is an ideal way to top up your pension in order to make sure you are taking full advantage of your allowance. Especially as any allowance not used in a particular tax year is lost forever.

If you are able to make a pension contribution using your bonus sacrifice, then the boost your pension would receive could be worth almost double the net amount you would receive if you took the bonus as cash.

3. Keep your child benefit

Introduced in 2013, many families have been hit by the “high income child benefit charge”. The claw back is at the rate of 1% of the amount of child benefit for every £100 of income over £50,000. Which means that when your adjusted net income hits £60,000, you effectively lose all of the benefit.

Anyone approaching, or earning above £50,000 will start to see a reduction in the child benefit allowance if their bonus takes them over the £50,000 threshold.

So putting any end of year bonuses into your pension could also help avoid crossing that threshold and seeing your child benefit reduced.

4. Gift your way out of an Inheritance Tax Bill

It’s likely that, upon your death, your estate will be subject to Inheritance Tax (IHT). Currently charged at 40% on anything over £325,000.
You can however use your annual exemption to make £3,000 worth of gifts every year, without being liable to IHT.

You can also carry over any leftover annual exemption from one tax year to the next, but the maximum figure is £6,000 per year. You can choose to gift smaller items too, including £250 each to as many individuals as you wish. Wedding and Civil Partnership gifts are also tax exempt up to £5,000 to a child, £2,500 to a grandchild or great grandchild and up to £1,000 for anyone else.

5. Your ISA allowance is there – so use it

There are just a few weeks left to use this year’s ISA allowance, as the amount you are allowed to invest in ISA’s resets on 5 April, with no possible way of you carrying over that tax break into the next financial year. In short – if you don’t use it, you lose it!

So any UK resident aged 18 or over, can invest £15,000 this tax year. You can split this between one Stocks and Shares ISA and one Cash ISA, or you can just invest in one type.

If you are aged 16 and 17 you also have a £15,000 ISA allowance (to be used in a Cash ISA only). And let’s not forget that parents can also put up to £4,000 into a Junior ISA for each of their children under the age of 18. Either way that’s a big tax saving sitting there waiting to be taken advantage of.

As always, if you need some more information, or want to discuss your personal circumstances, please contact us at Bridgewater Financial Services and we’d be delighted to help save you money!

The Great British Tax Grab

– and six ways to prepare against it

First the very good news

Reading this and acting accordingly will save you money in the coming year!

That’s because, in just a few months (April 2018) the tax-free dividend allowance is going to be reduced from £5,000 to £2,000. This will reduce any tax-free sums investors receive in dividends by over half.

Those hit hardest will be any small business owner, who pays themselves via a dividend, as well as investors who are dependent upon income from shares or funds; especially those who are now retired.

However, there are things you can do that might help save you from ‘the grab’.

How will the tax grab work?

From April this year basic rate taxpayers with dividends of £5,000 will have to pay an extra £225, higher rate taxpayers an extra £975 and additional rate taxpayers an extra £1,143 in extra income tax.

The numbers speak for themselves and we would advise clients to start exploring the ways they can mitigate the impact of these changes.

So here are six of the best ways to guard against the grab
• Put investments in joint names
• Make use of exempt wrappers
• Split investments or income to minimise tax
• Rebalance your investments
• Place equity investments within an investment bond
• Review your current position

Joint names

Two names are always better than one when it comes to avoiding any tax grab. By switching investments into your and your spouse’s name you may help prevent paying excess tax.
Take a retired couple with a £100,000 investment in a UK equity income collective fund (held in one name), who receive £4,000 pa income distributions. The April 2018 changes would mean that an additional tax of £150 to £762 would be due (depending upon tax status).

If the fund was switched to joint names, this could help avoid any increase in tax paid, as both spouse’s tax-allowance is now utilised.

Exempt wrappers

Equity investments held via ISAs, Pensions or VCTs are exempt from dividend taxation. Meaning that a couple investing £40,000 in a UK equity income collective investment fund in a stocks and shares ISA this tax year (at a distribution yield of 4%) will receive £1,600 pa tax-free.

That’s a saving of £120 and £610 each year. Plus they can invest into their ISA each year from then on, which further increases the tax saving.

Split investments or incomes between spouses

It doesn’t have to be a 50:50 split, as clients need only hold specific proportions of investment in order to utilise any dividend allowance and take advantage of lower marginal dividend tax rates.
A couple with a jointly held £200,000 of UK shares and collective investment funds would receive £8,000 pa income distributions.
Although they might both have their dividend allowance available from 6 April 2018, if one is a HRT and the other a BRT, then they would be wise to split their investment 25:75 in favour of the BRT. That way the dividend tax on anything over their tax allowance only gets taken at 7.5% and not 32.5%.

That’s a saving of £500 each year – which is a significant 25% tax difference of £2,000.

Get the balance right

Rebalancing your investments between those taxed as interest or dividends can be a clever move. If you currently hold a mix of investments, with some taxed as savings income and some as dividends, then you should review your position to ensure that both your personal savings and dividend allowance are being properly utilised, so that you are achieving the full £6,000 pa for each as tax-free income.

With tax on savings set higher than dividends, you may wish to consider investments in exempt wrappers. Equally with your personal savings allowance at £1,000 pa (BRT) or £500 (HRT) each, means that a corporate bond collective investment fund with a distribution yield of 4% equates to a £50,000 tax-free investment per BRT couple.

Make better use of investment bonds

Tax deferred investment bonds (onshore) may be an advantageous way of holding UK equity investments. Especially if you are an individual who has fully used your dividend and other allowances, or you are a trustee of a discretionary trust who just doesn’t receive them. As dividend income received by onshore investment bond life funds is free from corporation tax.

What that means is the overall tax paid by a UK equity life fund could be significantly lower than the BRT credit given.

For example, a HRT investing in a UK equity fund through an onshore investment bond would have no on-going tax liability and, if they are a BRT on encashment, pay no further tax


As always, whenever the government present a new change in the rules, designed to catch the complacent napping, now is the time to wake-up and take action.

You may have been under the tax-allowance prior to April 2018, or just wish to make sure that you are taking advantage of all the tax breaks available. Whatever your motivation, a review of your individual position can only ever be a good thing.

Now is the time to contact your adviser regarding the changes that are coming. As always, here at Bridgewater Financial Services we are here to help. If you would like one of our dividend taxation experts to look at your tax position, then please get in touch on 0161 637 2191 and arrange a consultation.

REMEMBER – April will be here before you know it!

Just because the markets change, you shouldn’t follow.

Back in December I wrote a blog regarding my Top 10 Investment tips. A blog designed to give you a guide to investing in the stock market and, more importantly, some practical advice on how to swerve some of the more avoidable traps that can lay in wait.

My Top 10 were:
• Embrace Market Pricing – it knows the worth of a stock
• Trying to outguess the market isn’t a sensible strategy
• Past performance is no indicator of future positions
• Play the long game and let the markets do the work
• Have a look at the woods as a whole, not just the trees
• Fish in the wider oceans
• Try to avoid bandwagons
• Keep your emotions out of your investments
• Don’t believe all that you read in the papers
• Stick to your plan – focus on staying on course

The full blog can be found here:

A little insight into the great investment question

However, with the ongoing volatility and distractions in and around the markets, I thought that I might just reiterate one or two important points regarding holding your nerve.

2B or not 2B?

I’m sure that when Shakespeare wrote that he didn’t have Bitcoin or Brexit on his mind. However these two modern days B’s seem to be claiming most of the financial headlines at the moment. On one hand Bitcoin seems to be the answer to everyone’s prays. Presented as a get-incredibly-rich-quick scheme that seems like a no-brainer, but you have to ask who’s really making the money now. The simple answer may lay at the feet of those brokers who are trying to drive investment in the commission-rich bubble that is Crypto Currencies. Yes, the history of Bitcoin growth is phenomenal, but as I said previously ‘Past performance is no indicator of future positions’ and you should always ‘Try to avoid bandwagons’. Couple that with the fact that Bitcoin lives in the dark web (the domain of criminals and terrorist) and you have to also ask would you trust any investment made where organized crime lurks in the shadows?

Brexit is another big distraction for the markets. Ask yourself if anyone really knows what’s going to happen after Brexit. I’d argue that, given the fact that no one yet knows what the terms of Brexit will be, it’s impossible to know what impact Brexit will have on the markets.
We all know that fear helps sell newspapers, which is why the newspapers love stirring-up doubt and fear over the negotiations with the EU and what that will mean to all our futures. Again I remind you of one of my Top 10 Tips “Don’t believe all that you read in the papers”.

Plain sailing or stormy waters?

Ultimately how bullish you are is a matter for you. But I would advise that changing a winning strategy just because the markets are a little volatile is unwise. Even the most bullish captain would find it hard to justify steering towards a storm, just to see if there is some opportunity to catch some strong winds in the sails. It’s not an option for traversing the seas and certainly it shouldn’t be an option for navigating the markets either.

In turbulent times, we batten down the hatches and ride out the storm. It’s exactly the same for the markets, you sit tight and wait for the markets to settle. Again, as I said in my Top 10 Tips “Play the long game and let the markets do the work”.

Keep calm and carry on

Back in December I finished my Top 10 Tips with this piece of advice: “Stick to your plan – focus on staying on course”. Nothing has changed. You should always focus on what you can control and what your long-term investment strategy is. Stick to what you’re doing and avoid reacting to movements in the market, no matter what Joe Public is saying.

If you’re looking for advice, then get it from someone who knows. Speak to your adviser about elements of your investment strategy that might concern you, or ask them about the ‘golden opportunities’ being presented to you. Either way they will be able to share some emotion-free expert insight, based upon long-term investment strategy and researched market knowledge.

Always remember – there’s no such thing as a silly question

When it comes to your finances, if you want to know more, please ask. Your adviser is there to help guide you to the many opportunities that present themselves and to steer you away from the pitfalls. If there is anything you’re not sure of, or you wish to discuss an opportunity that you believe the markets present, then speak to a qualified adviser. If you don’t currently have one of your own, then please don’t hesitate to contact Bridgewater Financial Services, as we will be only too pleased to help.

The psychological science behind our unique approach to your finances

Psychology is a wonderful thing and a little application of some of the science that sits behind all the great psychological theories can pay dividends in your financial life too. Allow me to explain.

Accordion to scientific studies, 90% of people do not realise I replaced the beginning of this sentence with an instrument.

That was just a little jolt to remind you that we are not always completely aware of what’s going on in our own brains, before we get into this light trip around motivation and goal fulfilment.

It’s fair to say that Psychology is a vast, complex and interesting area of study, with branches that reach into every possible aspect of the human condition. But what I want to talk to you about in this blog, is the idea of ‘Self-Actualisation’.

Abraham Maslow first proposed Self-Actualisation in 1943 when he proposed his motivational theory often depicted as hierarchical levels within a pyramid.

Maslow suggests that we need to move through each individual level from the base up, resolving each one, to eventually reach a state of ‘Self Actualisation’.


Put simply, the process involves us overcoming our needs in a hierarchical order. Each need (or motivation) sets drives in play that help us to overcome one stage and move onto the next. Eventually reaching fulfilment.

Maslow and your finances

Once you understand the basic principle of Maslow’s motivational theory, you can apply it to all areas of existence. At Bridgewater Financial Services, we apply this science, in conjunction with you, to your financial goals.

In the same way that the hierarchy of needs proposes a pathway through life, we believe that an individual’s financial needs can be identified and pursued along the same structure as Maslow proposed:

Where Maslow identifies the fundamentals for survival (hunger, thirst shelter), in financial terms we equate this to budgeting, healthy cash flow and an appraisal of the current financial situation.

Maslow points toward protection for life’s unpredictable events (accidents, ill health). Financially this would equate to insurance, protection and provision for loved ones.

Here Maslow identifies our striving for acceptance in our intimate relationships with our family and peers. Ultimately being resolves once we feel that we are an important person to those significant others. Financially speaking this is manifest in short and long term savings plans as well as pension provisions and legacy planning. In short, all those things we do for the future benefit of our family and ourselves.

Step Four – ESTEEM
According to Maslow, this is what motivates us to achieve high standing compared to our peers, driven along by a need for prestige and status. Financially speaking this is where we focus upon investment portfolios, creating a financial independence and non-reliance upon salary. It’s where we build upon existing wealth and protect against future financial uncertainty.

This is the pinnacle of the journey of self. The reaching of one’s full potential. In terms of your financial self, this is complete financial security, which may lead to an onward exploration of philanthropic activities.

A clear path to follow

Maslow clearly lays out his pathway to self-actualisation, which depends upon each stage having been achieved before we can hope to conquer the next. It’s an established psychological principal for the drives and motivations of individuals and has found a place in many applied aspects of psychology.

Likewise, the principal of motivation and the striving for self-actualisation have found a place in our company’s unique approach. We call it “The Values Discussion” It’s a unique approach we use with every new client. It helps quickly identify the exact stage you’re at financially and the best way to achieve your goals.

As we believe that financial planning is inexorably linked to individual motivations and desires. Just as psychological goals progress in Maslow’s theory, we believe financial goals follow an established order too. Once one set have been achieved and imbedded into your financial status, then a new set of goals present themselves. It’s also vitally important that these are approached in the correct order. Just as the process of self-actualisation shows us a clear and linear path through the stages, there is also a linear path that should be followed in our striving for financial nirvana.

Your financial journey is also not something that can be shortcut. When you build a house, you start with the foundations and work your way up to the roof. You can’t hope to put the roof on a structure that hasn’t already been built with strong walls.

The same is true concerning your finances. If you would like to learn more about how our unique approach can significantly benefit you, then please get in touch.

If however you’re looking for a cure for your fear of spiders, then sorry that’s not us. But we would suggest you Google ‘Arachnophobia’ and ‘systematic desensitisation therapy’ around the topic of operant conditioning.

A New Year and a New Financial You

Happy 2018!

It’s that time of year again, when we all make our New Year’s resolutions. Whilst I can’t help you with getting fit, quitting smoking or learning the piano, I can certainly help with any resolutions you may have made regarding getting your finances in a better order.

Whether you’re planning to spend less, or save more, this blog may help guide you away from the many potholes that throw our best intentions off course.

I’ve broken things down into easily digestible sections. Covering Pensions, ISAs, Investments, Insurance and Wills and LPAs. With some hints and tips to help keep you on track with all of them.

As a rule, I would say that realistic and well-defined objectives work far better than general goals and ambitions. For example, if your goal is to build up a nest egg, then a defined resolution to put £500 into a savings account each month works far better than the general intention to just ‘save more’. It sounds obvious, but you would be surprised how a well-defined objective can achieve a successful outcome.

Another way of gifting yourself a head start in your quest for a ‘new financial you’ would be to examine your existing tax and pension position. Making sure that you are taking full advantage of the available tax relief, as well as ensuring you are getting the most out of investments and any insurance plans you may have. Again, a little effort here at the beginning of the New Year can pay dividends further down the line.

Ponder your Pension

I’ve deliberately started with pensions, as I feel that sometimes we don’t give pensions the attention that they deserve. They are one of the most valuable assets we can have, yet they are often overlooked. As legislation has changed massively in the last few years, if you haven’t reviewed your pension position, then now would be a very opportune moment.

Have a look at where you are with your current scheme and ask yourself:

• Have I got the level of my contributions right? Too little and you could find yourself wanting in retirement and too much could create problems with your Reduced Lifetime Allowance)
• Does my investment strategy still fit with my attitude to risk, time horizon and any changes in my current situation?
• Is my pension scheme able to take advantage of the new pension freedoms, or is it one of the older schemes that can’t benefit?
• Does my pension fit with my retirement and estate planning?
• If my pension is a Final Salary Scheme, then with the increases in transfer values, is it worth requesting a transfer value and restructuring my pension?

Although not an exhaustive list, these are certainly the questions you should know the answers to if you want to make sure that your pension is in the best place it can be.

Investigate an ISA

If you are not taking advantage of ISAs, then I would suggest that it becomes top of your list of things to consider.
You can invest in an ISA up to a limit of £20,000 of which £4,000 can be paid into a LISA (for those eligible). It’s a great way of avoiding tax on your investments and guaranteeing a fixed return.

Please also remember that the annual ISA deadline is 5 April. So you can take advantage of the rest of this years ISA tax-free opportunity before the deadline, then do the same again after. It’s also worth mentioning that some providers take several working days to process new ISAs, so don’t leave it until the beginning of April, or you may miss this year’s deadline.

Examine your Investments

Now is a good time to check that your investment strategy is on course to achieve your goals. Start by looking at the latest report regarding your mutual funds, check to make sure that they match your appetite for risk and that you are happy with where your money is being invested.
When considering your investments, especially your exposure to risk, always include your pension, ISA’s funds and stock together, even when the funds are spread around different accounts and investment products. That way you will get a better feel for your overall portfolio.

Revisit your Insurance

Although good insurance cover is an essential part of strong financial planning, the wrong product can end up costing you a great deal of unnecessary expense.

Now’s the time to review your insurance plans. Check what each plan covers and how much it costs. Any changes in your circumstances since you took the cover out may require a different plan and could even lower your premium.

Look into your Will and LPA

More than half of UK adults, including many in their 50’s and 60’s, don’t currently have a Will in place. If you’re amongst that number, then I would suggest that writing one should be high up your list of financial things to do in 2018.

The same can be said regarding Lasting Power of Attorney (LPA), as incapacity can strike without warning. Getting LPA sorted before it’s too late will save your family and your estate considerable costs and lengthy delays.

Putting a Will and a LPA in place is nowhere near as difficult or costly as many people think. We have contacts with a number of specialist law firms across the UK who can assist you in preparing both.

If you do already have a Will or LPA, then take the time to review it. Checking that it is up to date and that it reflects your current wishes.

We’re here to help the new Financial You

I hope that this blog goes someway to starting the new financial year off on the right foot and helps keep you focused and moving towards your goals for 2018.

If there is something specific you would like to talk to us about regarding your plans, then please get in touch. We’d be delighted to help.

Wishing you all a Happy and Prosperous 2018.

A little insight into the great investment question

Can we really beat the Markets?

Over the years, and because of the vast sums of money involved, top investment companies,
governments, national banks and academics have carefully studied the investment markets.
Consequently there is a vast body of research out there that carefully looks at investment
strategies, as well as the markets in general. So I’ve taken the trouble to sift through the
mountains of information, hints, tips, guides and strategies in order to produce this Top Ten
Tips of perceived wisdom.

1 Embrace Market Pricing – it know the worth of a stock

In 2016 there were 82.7 million trades every day across the world’s exchanges. That’s an
incredible £280Billion worth of activity, each done on the back of new information. The market
reacts to these trades like an enormous information processing machine, which in turn sets
the current price. As no one knows what the next trade or piece of information will be, the
future price is always uncertain. But in this uncertainty, the market price is always the best
indicator of a stocks actual value. To go against this would mean pitting yourself against the
collective wisdom of the marketplace.

2 Trying to outguess the market isn’t a sensible strategy

Whilst there is never a guarantee that any investment strategy will be successful, assuming
that you can identify mispriced stocks and take advantage of the low price is flying in the face
perceived wisdom. Research proves time and again, that market pricing works against
individuals and even mutual funds that attempt to outguess the market.

3 Past performance is no indicator of future positions

Whilst it may seem a prudent investment to select funds based upon track record, research
shows that there is strong evidence to avoid investing on this criterion alone. Think about how
much the world has changed in the past year or so, combined with how unsettled things still
are. Previous returns are from a different economic and political situation and may not be able
to be repeated.

Some fund managers may also be better than others, but past performance alone is not a
reliable indicator of future results, with some impressive past returns possibly being just down
to luck. The understandable assumption that past performance will continue unabated often
proves incorrect and can leave investors both puzzled and disappointed.
4 Play the long game and let the markets do the work

If you are intending to use the financial markets as a wealth creator, then the good news is
that the capital markets have always rewarded the long-term investor.

The markets are a manifestation of capitalism at work in the world’s economy. The great
news for investors is that historically, free markets provide a long-term return that offsets
inflation. You can see this in the growth in the performance of a £1 investment in UK small
cap stocks and value stocks over the past 50 years. A pound invested in the whole market in
1956 would be worth £1,000 in 2016; compared to £4,012 for value stocks and £7,643 for
small cap stocks.

5 Have a look at the woods as a whole, not just the trees

Academic research suggests that, instead of viewing the market opportunity in terms of
individual stocks and bonds, we should approach the market in a way that allows us to have a
broader view and identify investment ‘factors that have linked characteristics. Factors are
defined as any aspect of an investment that is backed by robust data, both over time and
across the market.

In Equity Markets the key factors would be size (small cap vs large cap), price (value vs
growth, momentum(the surge effect seen in rising markets)) and profitability (high vs low).
In the Fixed Income Market the factors would be term and credit quality.
If you decide upon a factor-based approach, then your returns will not be based upon which
stocks, bonds or market areas will outperform in the future. Your goal would be to hold a well-
diversified portfolio that emphasizes higher expected returns, controlled costs and a low

6 Fish in the wider oceans

Most people seem to only invest in their country’s stock market. In the UK this might mean
that they only ever pick UK stocks and mutual funds, yet still consider their portfolio to be
diversified. However, this limiting of the investment into one market can lead to problems with
possible implications to risk and return.

If you think about the uncertainty in the UK as we negotiate Brexit, then you may begin to
understand why diversifying out of the UK could be worth considering. Research suggests
that a global diversified portfolio should be structured to hold multiple asset classes, that
represent different market areas across the world.

7 Try to avoid bandwagons

It’s because we never know which market segments will outperform expectations that it’s
considered a good idea to hold a globally diversified portfolio, so that we ensure we are well
positioned to enjoy returns wherever they occur. As there is a strong case to support the
notion that investors should rely upon portfolio structure, rather than tempting market
movements, or the sudden rush towards a particular investment.

8 Keep your emotions out of your investments

If your strategy is to be in it for the long-term, then don’t let your emotions take over. A good
example of the dangers of letting your emotions rule can be seen in the 2008–2009 global
market downturn. Fear drove some investors to sell up and get out of the market.
Unfortunately for them, as the rebound began, they had already locked in their losses and
had to sit and witness the market’s climb back.

Understandably people can find separating their emotions from their investments a difficult
thing to do. As by their very nature markets go up and down, investors can find themselves
on a psychological rollercoaster. However an emotional reaction to any current market
condition may lead to a poor investment decision. Staying disciplined and sticking to your
strategy is crucial for long-term success.

9 Don’t believe all that you read in the papers

Newspapers don’t sell and television news isn’t watched unless there is some emotion and
sensation around what is being reported. Don’t let market commentary challenge your overall
investment strategy.

If headlines start to unsettle you, try to maintain your longterm perspective. Sustaining a
growing portfolio and increasing your wealth has no shortcuts. It requires a solid investment
approach, a long-term perspective, and the discipline to stick to your strategy.

10 Stick to your plan – focus on staying on course

Always focus on the elements of your investment strategy that you can control and try to
avoid reacting to fluctuations in the markets. Work with your adviser to create and maintain a
long-term investment plan, based on market principles and informed financial research. Make
sure your plan continues to be tailored to your needs and goals. Structure your portfolio along
the dimensions of expected returns. Diversify globally and stay disciplined throughout the
various market conditions you will face.


As always this blog is written to enlighten and inspire you to consider the options available to
you. It is not meant to be financial advice. For that you are very welcome to contact us for a
free initial consultation.

The Chancellor’s Autumn Budget 2017

The Rt Hon Philip Hammond MP

Following a turbulent few months across The Palace of Westminster, with a call for more spending and a more aggressive approach to growing the economy, the Chancellor’s budget was largely seen as a business as usual approach, albeit within the ever-present shadow of Brexit.

So now that Philip Hammond has had his day in Parliament, let’s see what kind of impact it’s going to have on yours.

Well firstly, there were no significant announcements regarding tax or pension changes. Nor was there anything that set the markets alight, or sent them into free-fall. In fact this market apathy was manifested in the non-movement of the FTSE 100, Benchmark 10 year Government bond or guilt and with the pound largely static during the Chancellors hour-long delivery.

What the Budget might mean for you


Your personal income tax allowance is set to rise to £11,850 for the fiscal year 2018-19 throughout the UK apart from Scotland. As Scotland will set its own personal tax threshold, should it choose to, in the Scottish budget due on 14 December.

The higher rate of income tax in the UK will rise to £46,350 for the fiscal year of 2018-19. Again with the exception of Scotland, who may address this in their impending budget.


First time buys will not have to pay Stamp Duty on properties up to a value of £300,000, which would also see those buying properties up to £500,000 paying no stamp duty on the first £300,000. A move that should benefit 95% of first time buyers


The pensions lifetime allowance will rise in line with the consumer price index to £1.03Million. One highlight for pensions is that there will be no changes in the pensions funding limits, with the annual allowance remaining at £40,000 and not tapered until adjusted income exceeds £150,000.


The Junior ISA limit is set to rise to £4,260. Whilst the overall ISA limit will stay at £20,000 of which £4,000 can be paid into a LISA (for those eligible).


There will be a £400 increase in the capital gains tax allowance, seeing the threshold rise to £11,700.


The nil band rate for inheritance tax will remain at £325,000 until April 2021, with the residence nil rate band increasing from £100,000 to £125,000. Which means that, in the future, couples can leave assets up to £900,000 to future generations free of inheritance tax liability.


Although no specific details were announced, there is a planned consultation, to be published in 2018, which will consider the simplification and fairness of trust taxation.


The UK Stock Market was largely indifferent to the Chancellors speech. In fact, when he stood up to speak the FTSE100 was trading at 7,448 and when he sat down an hour later, it was largely unchanged.

The real movement in the market came about through the changes in Stamp Duty. With large house builders witnessing their shares drop between 1% and 3%. Possibly reflecting some disappointment in the detail of the chancellors £44 Billion Housing Package, along with the lack of an extension to the popular Help to Buy scheme, compounded with an investigation into the speed at which permitted land banks see the building of new homes taking place.

In true Stock Market traditions, where the tide goes out for one group, in it comes for another.
With the increase in the Stamp Duty it is widely believed that we will see a reinvigoration of the housing market, as well as the driving up of house prices. All this leads to higher profits for Estate Agents and, as a consequence of that, national chains saw an increase in the value of their share price.


The downgrade in the UK’s GDP growth forecast for the next three to four years, along with the rest of the budget, went through without any real reaction from the currency markets. With Sterling ending the budget in much the same place as it started against the Euro and Dollar.


All in all, the Chancellor delivered a steady budget, without any radical changes to the landscape. As always, if you have any questions regarding a specific area of the budget, or your own personal circumstances, then please don’t hesitate to get in touch, where we will be happy to help you in any way.

Making sense of Capital Gains Tax and your Property 2017 – 2018

Capital Gains Tax (CGT) is a complex area to dip into, so here I’ve tried to give a brief
explanation for the normal situations that many of us face, broken down into the following

When you don’t have to pay Capital Gains Tax
When you are eligible to pay Capital Gains Tax
How much you will have to pay?
What if you have a second residential property?
Letting relief and Capital Gains Tax
Capital Gains Tax on inherited homes
Capital Gains Tax on gifted homes
Capital Gains Tax Liabilities for UK Non-Residents
Capital Gains Tax on investments
Claiming Entrepreneurs’ Relief against Capital Gains Tax

As always, our advice is to seek clarification on any issues from your Financial Adviser.

When you don’t have to pay Capital Gains Tax.

If you are selling your own home (main place of residence) then the good news is, that it’s
very unlikely that you will need to pay CGT as you will benefit from 'Private Residence Relief'.
If however you are selling a home that you currently rent out, or you are selling a second
home, then CGT may become applicable. That said, there are a number of ways you may be
able to reduce your CGT bill through letting relief or by nominating which of your homes you
wish to be viewed as tax-free.

When you are eligible to pay Capital Gains Tax.

Although not an exclusive list, below are the most common scenarios that activate CGT on a
property sale:

• It is not your main place of residence
• You have developed your home. For example you may have converted part of it into flats
• You have sold part of your garden, where your total plot, including the area you are selling,
is more than half a hectare (1.2 acres)
• You exclusively make use of part of your home for business
• You let out all or part of your home. This doesn’t include having a lodger. To count someone
as a lodger you need to be living in the property too, or they are classed as a tenant
• You moved out of your property 18 months ago
• You bought the property for the purpose of renovating it and selling it on

How much you will have to pay?

The CGT rates for 2017 – 2018 state that when you sell a property, you are allowed to keep a
proportion of the profits tax-free. This is called your Capital Gains Tax Allowance.
In the 2017 – 2018 tax year, you can make a profit of £11,300 before you have to pay CGT.

With basic rate taxpayers paying 18% CGT on property sales over this profit allowance.
Whilst higher-rate and additional-rate taxpayers will have to pay 28%.

What if you have a second residential property?

As long as you haven’t bought your second home with the sole intention of selling it in order
to make a profit, and you use it, then you can nominate which of your two homes will be tax-
free. Just make sure you make the nomination before the two-year deadline from the time you
acquire your new home.

It’s worth noting that the property you nominate doesn’t have to be the one where you live
most of the time. So it makes sense to pick the one you expect to make the largest gain on
when you come to sell.

Civil partners and married couples can only nominate one main home between them, but
unmarried couples can each nominate different homes.

Letting relief and Capital Gains Tax.

Providing the property has been your main home at some point, and you have let out either
all or a part of your home, then you can claim tax relief in the form of Private Residence Relief
for the time it was your main residence, along with the last 18 months of ownership. You can
even claim if you weren't living in the property during those 18 months.

You may also be able to further reduce your capital gains tax bill by claiming Letting Relief.
However, you can't claim Private Residence Relief and Letting Relief for the same period.
The amount of letting relief you can claim will be the lowest of these three:

• £40,000
• The total you receive from the letting proportion of the home
• The total Private Residence Relief you get

Capital Gains Tax on inherited homes.

When someone leaves you their home in their will, you inherit the property at the market
value at the time of their death.

As there is no CGT payable on death, the value of the home is included in the estate and
inheritance tax may be payable instead.

If you sell the property without nominating it as your own home, you won’t be able to claim
Private Residence Relief, so there will be CGT to pay if the value has increase between the
date of death and the date of the sale.

Capital Gains Tax on gifted homes.

If the property is gifted to you during the owner’s lifetime (while they are still living there), this
is termed as a ‘gift with reservation’ and essentially means it still counts for inheritance tax
when the gift giver passes away.

So there will be CGT to pay when you sell the home if the value has increase between the
date of the gift and the date of the sale.

Capital Gains Tax Liabilities for UK Non-Residents.

Unfortunately, being an expat or non-resident in the UK no longer avoids CGT duties. Since
April 2015 British expats and non-residents are required to report the sale or disposal of
properties to HMRC. With the CGT being payable on gains made after 5 April 2015.

Please be aware that you must inform HMRC within 30 days after the ownership transfer
date, even if there is zero tax to pay.

Capital Gains Tax on investments.

Making regular investments is often seen as the smartest way to get into the stock market.
However it can present some challenges if you decide to partially sell your investments. If you
are completely liquidating your portfolio, then the CGT is straightforward – being the total
amount paid into the fund deducted from the proceeds of the final sale gives you the size of
your capital gain. With anything exceeding the £11,100 CGT limit becoming liable at your tax

It’s when you only liquidate part of your investments that things can become complicated. As
a rule of thumb, if you have bought units at a variety of prices over a period of time, then you
will need to work out the average price per share. You can then calculate your investment
against your gain. Again your financial adviser can help you with this.

Liquidating funds often allows investors to ‘Bed and ISA’. Where investments that are held
outside an ISA are sold and then the same investments are bought back within an ISA
avoiding CGT in the future.

Claiming Entrepreneurs’ Relief against Capital Gains Tax.

Business owners who are selling all or part of their business can claim Entrepreneurs’ Relief
(ER) on the sale and reduce their tax liability to 10% on all qualifying gains.

The main qualifications for ER, are if you dispose of any of the following:

• All or part of your business, including the business’s assets, once it has been closed
– either as a sole trader or business partner
• Shares or securities in a company where you have at least 5% of shares and voting
• Shares you got through an Enterprise Management Incentive (EMI) scheme after 5
April 2013
• Assets you lent to your business or personal company
Once again, this is not an exclusive list and further information can be found here

If you have any questions regarding Capital Gains Tax

As always, if you are in any doubts as to your current situation, or potential CGT obligations,
then you should consult a financial adviser. You are welcome to contact us where we
will be happy to help answer any questions you may have.

The Rate Rise is here – but what does it mean?

Well we all new it was coming, but what now? What does the first interest rate rise for more than a decade mean for you?

Despite the fact that it’s a small increase from 0.25% to 0.5% it will have an immediate impact on UK households and businesses. On one hand it means higher costs for those with mortgages and other borrowings but on the other it’s better news for all those with savings.

Is it misery for Mortgages?

Mortgage rates will inevitably rise following the increase in base rate. The main group affected in the short term are those on a standard variable rate (currently average 4.6%), along with those who are on tracker mortgages, where rates are likely to raise this side of Christmas.
Although the scale of the rise is unlikely to push many people into hardship, as a 0.25% rise on a 25 year mortgage of £200,000 at a standard variable rate of 4.5 per cent means an extra payment of about £300 a year.

Is a Fixed-rate fantastic?

With The Bank of England announcing that further rate rises can be expected, brokers are anticipating a rush on fixed-rate deals of five years and over. Although over the last few months there have been a lot of fixed-rate product withdrawals and rate increases, as the banks anticipate the rush to a fixed-rate product.

Is it the right time to Remortgage?

Anyone looking to remortgage or move to a fixed rate can still access the historically low rates available in the market, with two year fixed-rate deals available at 1.09% or fixed for five years at 1.68% for those with a 40% deposit.
It is generally thought that borrowers should be encouraged by the comment accompanying the announcement by The Bank of England “The expectation at the moment is that the speed of future increase in rates is going to be relatively slower than we thought.”

Is it super for Savers?

For those living with near non-existent returns over the last few years, it would seem like welcome news. Although that depends upon whether the banks choose to pass this increase onto their customers. A move looking increasingly unlikely, as the link between base rate and savings rate appears to have been severed sometime ago. Following the announcement, the Nationwide says the “majority” of its savers will benefit from a rise, while Newcastle Building Society and Yorkshire Building Society pledged to pass on the full rate rise to all savers. So it’s not a clear rate rise for every saver in the UK. One to watch carefully!

Is it perfect for Pensions?

With annuity rates closely linked to movements in interest rates, according to experts, the rate rise is likely to be fed through resulting in higher income for pensioners.
Richard Eagling of Moneyfacts suggests “The interest rate rise is good news for those on the verge of retirement who may be looking to secure an income through an annuity, as it is likely to boost gilt yields, which underpin annuity rates.”

Is it time up for Transfer Offers?

The rise in the interest rate is more than likely to end the record high transfer offers currently available to members of defined benefit pension schemes. Head of Royal London, Sir Steve Webb says “The one group who may be concerned by today’s news are those planning to take a transfer from a final salary pension. Transfer values are likely to track down as interest rates rise. Anyone considering a transfer may wish to take impartial advice on the pros and cons of a transfer as a matter of urgency, as transfer values are unlikely to remain at today’s very high levels.”
So if you’ve been considering your potential transfer value now is the time to look at what the opportunity might be, before the rate rise causes an end to the current offers, that can be 30 or 40 times projected pension income.

Is it interesting for Investments?

The markets have already priced in the rate rise decision, so it is predicted that there will be little impact on stock prices in the short-term. With political uncertainties like Brexit still having an affect on company’s ability to make investment decisions.

Is the Rise repeatable?

It’s because the Bank of England is forecasting inflation falling below 3%, that many believe that further rate rises in 2018 are unlikely. On-going increases risk slowing or halting an already weak economy, currently experiencing the uncertainty of Brexit. So the feeling is that this rate rise is probably going to be an isolated incident, until Brexit is behind us and the economy is more stable.

Record High Transfer Values

Final Salary Pensions, Hurry Whilst Shocks Last!

Well here’s something that doesn’t happen that often. The turmoil in the financial markets is actually presenting an interesting opportunity – and even Brexit may have had a hand in generating this particular happy shock!

I’m talking about Final Salary Pension Schemes here. In a world of future uncertainties and undetermined risk, a final salary pension can be seen as something to hold onto at all cost. But just consider the following for a second. They are often inflexible and are not usually targeted to accurately meet individual members’ needs. Which can cause members to transfer out to access things like greater flexibility under the new freedoms to pensions introduced last year. Or they might want to access a cash lump sum, to reduce debt or to ensure their families benefit more greatly from the fund in the event of their death.

Recently we’ve seen more and more people transferring values, by which I mean the capital value of the benefits promised by a scheme (sometimes called the CETV or Cash Equivalent Transfer Value) at unusually high rates. By high rates, I’m mean as much as 40 times the annual pension income!

So why are values so high and will it last?

The conventional wisdom here is that values have been driven up significantly by recent reductions in the returns one can achieve with government bonds, brought about by the result of the Brexit vote, combined with The Bank of England’s attempt to prop up the economy. Which is great for anyone looking to take advantage of the CETV on their final salary pension. But like all good things, it is likely that it will be coming to an end soon, because when the bonds return to their normal range, we can expect to see transfer values to reduce too.

So if you’ve been thinking, it might be time to start doing!

Right now there is an unusual opportunity to extract some significant value from your pension. However the situation is predicted to return to normality soon, so now is the time to act.

Working out your transfer value

It’s important to understand that there are a variety of factors that different pension schemes use to calculate transfer values. These usually revolve around your age now and what your age will be when you are entitled to start drawing the benefit. They may also include the specifics of the escalation of benefits before and after retirement as well as any benefits your spouse or dependents are entitled to.

As a rule of thumb, the closer you are to your retirement, the higher the CETV multiple will be. Oddly, the further away you are, with more time for the assets to grow, the lower the present value is. The state of your schemes funding and security of your benefits will also have an impact on final figures, as will the scheme being underfunded in any way.

The best way to know exactly what your potential opportunity might be, is to request a CETV quotation from your pension provider.

You can look before you leap

The main advantage with a defined benefits scheme is the guaranteed income. As you lose these guarantees when you transfer, your future pension income will depend upon the returns you earn on the invested assets. That’s why, once you’ve received your CETV quotation, it’s vital to calculate the exact rate of return you need to ensure you would exceed the income you were set to receive on your final salary scheme. But right now, the high rate of the current CETV multiples mean that these required return rates can be as low as just one percentage point above inflation to make the move a sound choice.

You should also consider that when you transfer out of a final salary scheme, the investment risk moves from the pension provider over to you. So you must consider your attitude toward risk. This will be influenced by factors such as your financial situation, other assets and income sources you might have that you could fall back on if you need to, should returns be weaker than predicted.

Apart from the questions of risk and return, there maybe other things to consider. Your existing plan may have other non-financial benefits attached to it, which you may not wish to give up.

Having said all that, final salary schemes are well known for their restrictions and inflexibility. So transferring out may open up some new ways to access your pension pot and therefore open some new options for your retirement and inheritance tax planning too.

So what does everyone else do?

Generally we find that individuals with more wealth and other assets beside just their pensions, who are looking for greater flexibility and control over their retirement savings; or are planning to pass a substantial portion of their wealth to their children are more likely to opt to transfer out of a final salary scheme.

Whilst those with more limited assets, who prefer the security of the guaranteed income, tend keep to their final salary scheme.
Like everything in financial services, it’s your individual circumstances and aspirations along with where you are in terms of your timeline that will help determine what’s right for you.

One thing’s almost certain – this opportunity won’t last

If you are considering requesting a CETV quotation, I’d do it sooner rather than later. As the current high transfer values have been caused by the short-term market developments I covered earlier – and the situation is unlikely to last much longer. As when we see the increase in bond rates, we will most likely see the decrease in the multiples you can currently secure with your CETV.

If you would like some help deciding what’s best for you, then call us now for a free initial consultation. We would be delighted to go through your individual circumstances with you and help you decide on the best option for you.

For more information of our pension transfer advisory process, you can visit our sections on UK Pension Transfers and Expat Pension Transfers.