Tag: Financial Review

A SSAS could be the answer to cash flow needs

SSAS – what it is and can you transfer to one today?

A SSAS is a small, self-administered pension schemes (SSAS) for up to 12 members. 

Right now you can transfer any existing pension into a SSAS, where the combined funds can be used to borrow money, up to 50% of the fund value (if needed) to buy back premises owned by the company, releasing funds to clear other debts or to finance projects (e.g. new business opportunities that have arisen out of the current situation as businesses adapt to new areas). With many companies using the loanback facility to get access to extra funds for pressing cash flow needs. 

This loanback facility that is incorporated into all SSAS has been responsible for a dramatic increase in SASS activity over the past few weeks.

According to The Whitehall Group, one of the leading SSAS providers, reported SSAS registrations increasing eightfold in just the first ten days of April 2020, compared to figures for January earlier this year. 

It’s the loanback facility that is so appealing

With borrowing rates for a SSAS at incredibly low levels, companies who have assets or properties in their SSAS are utilising them as security to borrow against, as they realise much needed cash flow for their companies. 

With more and more business owners realising that their own SSAS could provide a low-cost lifeline to keep their businesses afloat during the Covid-19 economic crisis. 

How your SASS could save your business

SSAS can work for your business in many different ways. It can provide loan finance back to the business of up to 50% of the total amount of the net market value of the business SSAS scheme’s assets, as well as 50% of the total amount of cash held.

That kind of cash injection, borrowed against rock-bottom interest rates, is providing the financial lifeline that many businesses so desperately need. With the number of loans reported having quadrupled in April, compared to January’s activity. 

A word of caution

This sudden increase in SSAS activity is a reversal of recent year’s trends, which saw the popularity of SSAS schemes decline, as they are not regulated under the Financial Conduct Authority rules and protections. 

As such a SSAS should be considered carefully and regard should be paid to the wider aspects of the scheme. Your SSAS shouldn’t just been viewed as a low cost route to answering any current and pressing borrowing needs. In fact, any loans made in a SSAS scheme should always be to ensure that the company doesn’t just survive, but also goes onto grow in the future. 

There is also an obligation by the trustees of the SSAS scheme that they do not risk pension money that is intended for retirement. Therefore proper consideration should always be given to determining if the loanback is a good investment for the pension scheme to make. 

Done properly it could be a cash flow lifeline

Although loanbacks are currently a very enticing selling point, any SSAS must be executed properly, or it runs the risk of its members losing out. HM Revenue & Customs have stated that any loans made to the sponsoring employer will qualify as an authorised payment if their key stipulations are adhered to, including:

  • A five year minimum term
  • Interest rates must be at least 1% above the current base rate
  • The loans must not exceed 50% of the SSAS’ net assets.

It’s important that trustees follow procedure and document the loanback correctly. Failure to ensure that the correct securities are in place could mean that the loan will not qualify as a loan. Instead it becomes viewed as an unauthorised payment and will incur tax charges. 

If you are in any doubts regarding the trustees obligations, or how to administer the loanback correctly talk to professional financial advisers like us, to ensure you don’t fall into any of the many pitfalls that can await unsuspecting trustees.

If you need the SSAS lifeline – act now 

The world seems full of endless financial delays during this Covid-19 downturn. Banks are taking longer to process loan applications, charging increased interest rates and asking for personal guarantees.

However applying to switch an existing pension to SSAS, or to set a SSAS up from scratch also takes time. HMRC have to accept and register a new SSAS before any money can be transferred or paid in. So the sooner you start the process, the sooner you can take advantage of the unique facilities of your SSAS. 

Remember – we’re always happy to help

As always, were here to help, whenever you need us. If you do have any further questions regarding anything I’ve raised in this blog, then please get in touch with us at Bridgewater Financial Services, where we will be delighted to help guide you through your individual options and strategies.

The 2020 Budget and what it means for you

Rishi Sunak delivered not only his first budget, after finding himself in the position of Chancellor of the Exchequer, but it’s also the Government’s first budget since winning the General Election and leaving the EU. All alongside the growing threat from coronavirus.

Hailed by the Chancellor as “the budget of a Government that gets things done” and widely seen as a change of direction from the traditional fiscal approach of established Conservatism.  

So now the dust has settled, what does it all mean for us? 

Important points for high earners
SAVINGS: In the Finance Bill 2020 the government will set the 0% band for the starting rate of savings income. This means that the rate will remain at the current value of £5,000 for the whole of the UK for 2020 – 2021. 

PENSIONS: The two tapered annual allowance thresholds for pensions will both rise by £90,000. From 6 April 2020 the minimum tapered annual allowance will decrease to £4,000 (down from £10,000). From 2020 onwards the threshold at which an individual is assessed for taper will be £200,000, with the point at which your annual allowance begins to reduce being £240,000. 

Important points for business owners
CAPITAL GAINS TAX: The Finance Bill 2020 will reduce the lifetime limit on gains that are currently eligible for Entrepreneur’s Relief, down from £10 Million to £1 Million for all qualifying disposals made on or after 11 March 2020. 

CORPORATION TAX RATES: The Corporation Tax main rate from April 2020 will stay the same at 19%; with this rate being set in legislation in the Finance Bill 2020.   

ENTREPRENEURS’ RELIEF:  Entrepreneurs’ relief is viewed by the Chancellor as ‘expensive, ineffective and unfair’ with three quarters of the relieve going to just 5,000 people. Which is why Rishi Sunakstated that he wishes to make changes to entrepreneurs’ tax relief, rather than abolish it altogether, as he said that he ‘did not want to discourage genuine entrepreneurs’. As such, he is reducing the lifetime limit for relief from £10m to £1m.  

This reform is set to save around £6bn over the next five years, with around 80% of small businesses going unaffected.

Important points for non-residents purchasing UK property through companies
The 2019 Finance Act legislated that non-UK resident companies that operate a UK property business, or have other property income will now be charged Corporation Tax on property income or profits, rather than these charges being levied as Income Tax. Following the budget, the Finance Bill 2020 will ensure that these measures and changes are smoothly implemented and that the transition of the taxation of UK property profits from Income Tax to Corporation Tax delivers a more equal playing field for UK and non-UK resident companies alike.  

Non-UK RESIDENT STAMP DUTY: As promised in the 2018 Budget, and following a consultation, there will be a change in Stamp Duty Land Tax surcharge on non-UK residents purchasing residential property in England and Northern Ireland. The Finance Bill 2020-21 will introduce a 2% surcharge to take effect from 1 April 2021. 

For the avoidance of doubt, if contracts are exchanged before 11 March 2020 but complete or are substantially performed after 1 April 2021, then transitional rules may also apply. 

Other general but important points
INDIVIDUAL SAVINGS ACCOUNTS (ISA) & JUNIOR ISA’s: The adult annual ISA subscription limit for 2020 – 2021 will remain unchanged at £20,000. Where there will be an increase to £9,000 in the annual subscription limit for Junior ISAs. Both of these measures will apply to the whole of the UK. 

CHILD TRUST FUNDS: The chancellor announced an increase to £9,000 in the annual subscription limit for Child Trust Funds for 2020-21. This measure will apply to the whole of the UK. 

LIFETIME ALLOWANCE FOR PENSIONS: The on going Consumer Price Index (CPI) increase in the lifetime allowance for pensions will increase in line with CPI, rising to £1,073,100 for the tax year 2020 to 2021.  

PERSONAL TAX: The personal tax allowance remains at £12,500. Whilst the threshold for National Insurance contributions will rise from £8,632 to £9,500. This should remove 500,000 of the workforce from NI tax eligibility.  

VAT ON SANITARY PRODUCTS: The 5% VAT levied on women’s sanitary products will be scrapped. 

PLASTIC PACKAGING TAX: A £200 per tonne charge will be levied on all manufacturers and importers on any packaging made of less than 30% of recycled plastic. 

VAT ON DIGITAL PUBLISHING: The chancellor will abolish all VAT on digital publications including books, newspapers, magazines and academic journals from 1 December. 

Alcohol, Tobacco and Fuel
ALCOHOL: All duties on spirits, beer, cider and wine have been frozen. 

TOBACCO: Tobacco taxes will continue to rise by 2% above the rate of retail price inflation. This will add 27 pence to a pack of 20 cigarettes and 14 pence to a packet of cigars. 

FUEL: Fuel duty has been frozen for the 10th consecutive year. 

Any questions? Please get in touch
As always, were here to help, whenever you need us.

If you do have any questions regarding anything that the chancellor has changed or mentioned in his budget, or any points I’ve raised in this blog, then please get in touch with us at Bridgewater Financial Services, where we will be delighted to help guide you through your individual options and strategies.

 

 

 

The CORVID 19 GOLD RUSH

Please be mindful of my recent blog on the bandwagon effect http://bridgewaterfs.co.uk/2019/12/13/2019-election/well now seems the perfect time to re-stress some of the principles that I mentioned in the blog. Especially given the very real panic that Corvid 19 is causing both in the real world as well as the financial markets.

Specifically I want to address the recent activity in the Gold Market that has seen prices soar, as investors move assets into the perceived safety of this form of asset. 

Why it’s not the right time to buy gold

The price of gold has just halted as investors who were in for the longer term are taking their profits now. However with the traditional jumping onto the gold bandwagon in times of market volatility, for the normal investor there probably won’t be any killings to be made.

There is in fact, a real danger that you’ll be jumping to gold at or near to the top of the market. Meaning that unless you’re investing vast amounts into gold, there maybe little return to be made. Plus you have the very real concern of the journey back down, as the price of gold more properly reflects its place in the grand scheme, once the markets recover – and recover they will.

 

It might be the right time to consider selling

If you’re currently in the gold market and have been prior to the Corvid 19 prompted Gold Rush, then you may well be in a position where selling your investment could result in a higher than expected return. Especially as those desperate to hop onto the bandwagon are still keen to buy your gold at the current inflated market price.

 

Markets are in it for the long term

You should be too.

There have been many triggers for a run on the gold market over the past few decades. Investors get spooked as they know that the markets hate uncertainty; and pandemic viruses spread uncertainty as fast as they spread panic.

The tourist industry suffers, large-scale events get cancelled and the crossing of borders with people and goods becomes difficult or impossible.

All of this has the effect of depressing the markets and causing many of the larger investors to opt out of their usual activities. Hence they buy gold, or other ‘safe’ commodities, and sit the storm out.

They know that the storm will blow itself out, because it always does. They also know that when they get their timing right and return to the investment markets, they’ll be able to buy back in at an advantageous price. With this rush back to the investment markets driving values back to the levels they were prior to abandoned them to buy gold in the first place.

 

Ask any comedian and they’ll tell you it’s all about timing

However, abandoning the investment market in favour of the gilt-edged bandwagon could mean that the joke’s on you.

There really is no need to panic or react, as the markets always return to normal, once whatever it is that it making them jumpy passes.

Trust the past, because the one thing history has taught us over and over again, is that these things blow themselves out. Just like they did when SARS (2003), Swine Flu (2009) and Ebola (2014) caused similar panic selling.

In fact, the only time to ever change your direction of portfolio, is when your end destination changes, not because of any temporary bumps in the road.

 

A calming influence over troubled waters

As always, were here to help, whenever you need us. If you do have any further questions regarding anything I’ve raised in this blog, then please get in touch with us at Bridgewater Financial Services, where we will be delighted to help guide you through your individual options and strategies.

Post Brexit transition and financial services in the EU

Now that we have officially left the European Union and entered a process of “transition”, a few of our ex-pat clients have been asking me what effect this now has; and how will it impact beyond 31 December 2020.

How will Financial Services and investment opportunities change post 2020?

Dealing with the longer-term question is easy, although it’s also a little unsatisfactory, as the simple answer is that nobody know for sure what the financial and investment landscape will look like post 2020’s trade negotiations with the EU.

Popular opinion is that it would be political suicide to hand control of the jewel in the crown (our financial services industry) over to the EU, or to let the EU impact, change or restrict it in any significant way. That would be bad for the UK, the EU and the world economy in general. The feeling is that we’ll be left with something that looks largely like what exists today.

What is the immediate impact on Bridgewater Financial Services dealing with our EU clients?

Well the simple answer is ‘nothing’. There has, and there will be, no change to our ability to full service and advise our clients throughout the European Union. We are currently pass-ported, via the Financial Services Authority, to help and advise new and existing clients in most EU jurisdictions.

In terms of the UK we are, and will remain, integrated with the European Union with regards to regulation, distribution and classification of all investment funds.

With the Irish UCITS funds remaining fully available in all of their current locations. 

As far as Bridgewater Financial Services is concerned, we will continue to go about our usual business and deal with our EU clients up to 31 December 2020 without any change whatsoever. At the start of 2021 we will either carry on dealing direct with our EU clients, or we will do so via an EU company. It all rather depends upon the outcome of the trade negotiations that will take place throughout the year. 

Once we have a realistic indication of what the outcome of those negotiations is likely to be, we will advise all of our existing clients on how we will go about providing continuation of service and advice. 

Rest assured that we will continue to provide our advice and services in as seamlessly as possibly. Our clients in the European Union are extremely important to us and we understand how important we are to them too. Which is why we will continue to be providing unfettered access to our advice and services well into 2021 and beyond.

Is there anything you should be doing?

Again, the general answer to that question is ‘no’. If there is an individual case that we feel needs examining, we will contact you direct and advice you on the opportunities or concerns we have identified. 

If you are still uneasy regarding the future impact of trade negotiations on your investments and portfolios, then please get in touch with us at Bridgwater Financial Services and we will be delighted to help and advise.

But do rest assured that there are no immediate changes coming. We understand that uncertainty, but there really is no need to panic or worry. 

We will keep you fully informed of any changes, once they become clear. In the meantime, as we always say, the best form of action in uncertain investment markets is to simply wait and see.

Changes in Capital Gains Tax and your home!

Selling a property? Then read on about the changes in CGT coming your way.

This year, on 6 April 2020, HRMC are proposing some changes that could significantly increase the Capital Gains Tax (CGT) paid on the disposal of any residential property. 

That, along with a decrease in the time you have to pay CGT, should generate a one-off additional increase in CGT paid to the Government by around £7bn.

Changes in CGT on your main home

If, like the majority of residential sales, you have occupied the property throughout the period of your ownership as your main residence, then there will be no CGT due on the sale. 

However, if you did once occupy the property as your main residence, but have since moved out and let the property, or kept the property of any other reason, then these changes may well affect you. 

Even getting divorced, separated or working away could see your traditional entitlement to full CGT relief significantly diminished. 

Put simply, if any of the above scenarios apply to you, then you will likely face a larger CGT bill if you transfer or sell your property on or after 6 April 2020.

Letting relief 

Since 1980 the valuable tax break that is Letting Relief that was applied to any property that was your main residence, allowed any private gain that remained after Private Residence relief, to be further reduced by up to £40,000. 

Not only is this £40,000 exempt of CGT, if you qualify, but it is also available to each owner of the property. Meaning that a property could deliver a massive £80,000 CGT exemption for a property owning couple.

The bad news here is that for any disposals made on or after 6 April 2020, HMRC is looking to limit the availability of Letting Relief, by restricting it to those landlords who share occupancy with their tenant. Unfortunately for everyone else, it looks as though letting relief will no longer apply.

If you’ve already moved out, then the clock is ticking

In most cases Final-Period Exemption allows you to have moved out of the disposed of property in the last 18 months and still avoid CGT, even if you now live elsewhere. 

However, from 6 April 2020, this will be reduced to just 9 months before CGT becomes applicable.

Those with a disability, or who have moved to a care home, will still be able to claim private residence relief for the last 3 years of ownership.

A decrease in the time to pay

As HMRC take away with one hand, they would also prefer that you paid a little quicker with the other. 

As CGT is included in your self-assessment due on 31 January, following the year of the disposal of the property, this means that HMRC can be waiting for up to 10 to 22 months after the date of the sale.

HMRC believe that they far are better placed to look after that lump sum than you are. |

So after 6 April 2020 you’ll have just 30 days from the date of completion to clear any CGT liability. All this will be done via a residential Property return and the tax will be treated as a payment on account of the CGT tax due for that year.

So what can you do? What are the opportunities?

Well obviously the single most important thing you can do is to be aware of the changes coming. So the very fact that you are reading this sentence should provide you with some sense of calm. 

Other practical things you may want to consider are:

• Speaking to a knowledgeable financial advisor, who understands these matters

• If you are letting out your old main residence, then workout how much additional tax would be payable if you were to sell after 5 April 2020

• If you have multiple properties and are considering selling or gifting, then consider which properties you should focus upon under the lens of CGT

• Consider disposing of property assets before 5 April 2020, if your tax position suits that choice

• If you individually own a property and you have a spouse or civil partner, then consider transferring ownership into joint names prior to any disposal. This can allow you to take advantage of both of your annual allowances and lower any potential CGT.

A bridge over troubled waters

Although this isn’t the start to the new decade that many private landlords want, there are always actions you can take to mitigate the impact upon your own finances. 

So talk to an expert today.

As always, were here to help, whenever you need us. If you do have any further questions regarding the new CGT regulations, then please get in touch with us at Bridgewater Financial Services, where we will be delighted to help guide you through your individual options and strategies.

20-20 vision for your finances

Happy 2020!

We’ve just stepped into a new decade and all the surprises that brings. But as we set off on the next chapter, I always think that the exciting thing is the uncertainty. Yes we know some things are definitely going to happen, like most of our New Year’s resolutions will fall by the wayside, the UK will leave the EU and that we’ll all get older and hopefully a little wiser. 

However when it comes to the markets, we can’t know for sure how they are likely to impact our personal finances. Having said that, we do have the next best thing available to us; our ability to review and amend!

Whatever your long-term plans may be, now is the time to review how the last year or two has performed for you and to put yourself in the right position to take full advantage of the financial opportunities now available. A review of your Savings, Estate Planning, Insurance Covers, Investments and Pensions now will allow you to make any changes and tweaks in your finances in order to make sure that you reach the end of the 2020’s in the financial position that you set out to achieve.

Now’s the perfect time to inspect an ISA

If you don’t currently have an ISA in your portfolio, then can I suggest that you add one to your list of things to consider this year.

It’s a great tax-efficient way of approaching investments, as your returns are free of income and capital gains tax. 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). 

As the annual deadline for ISA’s is 5 April 2020, this means that you potentially have two bites of the cherry available to you throughout 2020. By that I mean that you can currently take advantage of the ISA Tax-free opportunity for the remaining of the tax year, plus you can then do the same again on 6 April 2020. Please don’t leave it too late though, as some providers take several working days to process new ISAs, so leaving things until the beginning of April may mean you miss the closing deadline.

Take a look at a LPA And Will

The chances are that you could be amongst over 50% of the UK adults, including many in their 50’s and 60’s, who don’t currently have a Will in place. If that’s the case, could I respectfully suggest that writing one really should be high on your financial agenda for 2020. 

Whilst you may already have a Will in place, or high on your ‘To Do’ list, can I also prompt you to consider Lasting Power of Attorney (LPA), as incapacity often strikes without warning. Which means that sorting out a LPA can save your estate and it’s beneficiaries considerable costs and avoid unnecessary and lengthy delays.

If this all sounds a bit daunting, please be assured that putting Will and a LPA in place is nowhere near as difficult or costly as many people think. If you are unsure regarding whom to approach to best sort these things out, then start by contacting us. We can easily arrange Wills and LPAs through our sister company Bridgewater Wealth Protection www.bridgewaterwp.com

If you do already have a Will or LPA, then please take this reminder as an opportunity to review it. Checking that it is up to date and that it reflects your current wishes.

Improve your Insurance

Even if you have insurance covers in place, now is an opportune time to review things. Our advice would be to just make sure that each plan covers you for everything you need and that the costs are correct. Your circumstances may well have changed since you took any cover out. If that’s the case, then it’s critical that you ensure you are covered for all you require and that there are no plans available that could provide better cover and possibly a lower premium too.

The wrong product can end up costing you a great deal of unnecessary expense and stress, so please take the time to review and compare cover options.

Investigate your Investments

After a bumpy year (The Queen’s words, not mine) in politics and the markets, now is an excellent time to take stock and to just check that your investment strategy is on course to achieve your goals. 

An excellent starting point would be the latest report regarding your mutual funds. There you can check to make sure that they still match your appetite for risk and that you are also happy with where your money is being invested.


A good tip, for when you consider your investments, especially when thinking about your exposure to risk, is to always include your pension, ISA’s funds and stocks together. Do this even when the funds are spread around different accounts and investment products, that way you will get a better feel for your overall portfolio.

Peer into your pension

Lastly and certainly not least, is your pension. 

Your pension is one of the most valuable assets you can have, yet it often gets overlooked; and I feel that more often than not, we don’t give pensions the attention that they deserve. 

Regular reviews of your Pension makes excellent financial sense, especially as legislation has changed massively in the last few years. So if you haven’t recently reviewed your pension position, then now would be a very good moment to do so.

During your review, ask yourself the following questions:

• Are the level of your contributions correct? Too little could leave you
wanting in retirement and too much could create problems with your
Reduced Lifetime Allowance
• Does the strategy still fit with your time horizon, changes in your current
situation or attitudes to your investment risk?
• Is your pension scheme up to date and able to take advantage of the new
pension freedoms, or is it an older scheme that can’t benefit?
• Does your pension fit with your retirement and estate planning?
• If your pension is a Final Salary Scheme, then with the increases in
transfer values, is it worth requesting a transfer value and restructuring
the pension?

Although this isn’t every question you should ask, they are certainly questions you should know the answers to, if you want to ensure that your pension is in the best place it can be.

We’re here to help whenever you need us

Although no one can see into the future, having a close look at your finances now is the difference between approaching 2020 with a clear financial strategy or setting yourself up for a cry of ‘I should have gone to Specsavers’ later in the year! 

I hope that this blog goes someway to starting the new financial year off on the right foot. If however there is something specific you would like to talk to us about regarding your plans, then please get in touch with us at Bridgewater Financial Services, where we will be delighted to help guide you through your individual options and strategies.

Wishing you all a Happy and Prosperous 2020.