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After a year of lockdown measures, our gardens and outdoor spaces have become far more important. In fact, more than half of people say they get a good deal of pleasure from their garden. With spring arriving, now is the perfect time to invest in yours.

Our latest guide aims to help you get the most out of your garden, whether you love entertaining outdoors, want a space to relax, or even grow your own vegetables. Did you know almost four in ten people already grow some of their own food?

Gardening doesn’t just provide you with a beautiful extension to your home, it can help you remain active and improve wellbeing too. Whether you’re a beginner, or a budding Alan Titchmarsh, you should find something in the guide to help get the most out of your garden this summer and beyond.

Download 10 ways to make the most of your garden in 2021 to read more.

We hope you find some useful tips and inspiration for your garden.

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

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

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

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

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

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

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

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

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

3. “Don’t watch the market closely.”

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Is the common saying “money can’t buy happiness” true? Research suggests that it isn’t, and that the opportunities financial security brings can deliver happiness and improve wellbeing.

This latest study refutes often cited research, which claims money could buy happiness but only up to a point. A 2010 paper written by psychologist Daniel Kahneman and economist Angus Deaton found happiness and income were only linked up to $75,000 per year. Up to this point, life satisfaction increased in line with income, but plateaued once earnings exceeded $75,000. The paper concluded that: yes, money can improve satisfaction, but it can’t improve emotional wellbeing.

Now, however, a newly published paper is disputing this.

New research finds money can buy happiness

While the 2010 paper utilised surveys, the new one uses data collected from an iPhone app called “Track Your Happiness”. At random intervals, the app will ask users about their activities and feelings. App developer Matthew Killingsworth has based research on these findings, which are now published in the Proceedings of the National Academy of Sciences.

The title “Experienced wellbeing rises with income, even above $75,000 per year” sums up the findings.

The paper states: “Higher incomes may still have potential to improve people’s day-to-day wellbeing, rather than having already reached a plateau for many people in wealthy countries. […] There is no evidence of an income threshold at which experienced and evaluative wellbeing diverged, suggesting that higher incomes are associated with both feeling better day-to-day and being more satisfied with life overall.”

In fact, while there is a slight dip in both experienced wellbeing and life satisfaction around $100,000, there is a general upwards trend, even as annual income reaches $500,000 per year, the first figure shows. The second figure highlights that as positive feelings rise, so, too, negative feelings fall in line with income.

Source: Proceedings of the National Academy of Sciences

So, if money does buy happiness, should you focus on increasing your income and the amount in the bank?

Value of assets vs value to your life

One of the things both research papers don’t examine is why wellbeing increases as income rises.

You may get some satisfaction from watching the balance of your savings account rise, but it’s often not the number itself that improves wellbeing. Rather, it’s the security and stability it provides. Knowing that you have a safety net to fall back on, for example, can deliver a huge boost to how confident you are about the future and allow you to enjoy the present.

A rise in income can allow you to devote more of your disposable income to the things you enjoy and help you take steps towards long-term goals. However, if you need to spend more time commuting and sitting in traffic every day, so you don’t have the freedom to enjoy the additional income, would it still improve your day-to-day happiness? Some may find they feel less satisfied with life despite having more money.

While the research provides an interesting insight, focusing on what’s important to you and how your income can help you achieve this is just as important, on an individual level, as your salary.

An increase in wellbeing doesn’t have to be tied directly to your income. A five-figure sum in savings and investments can help you prepare for unexpected life events, but that doesn’t mean you can’t achieve the same sense of security without this. A financial protection product, such as life insurance or income protection, that aligns with your priorities may deliver the same sense of wellbeing.

The process of financial planning helps you understand what your goals and concerns are, and then creates a long-term financial plan that addresses them. It’s about making your assets and income work in a way that reflects your priorities, whether that’s spending more time with family, exploring the world, or taking early retirement.

Rather than solely looking at the value of your assets, looking at how they can add value to your life can help you get the most out of them.

Please get in touch if you’d like to speak to a financial planner about how you can use assets to improve your quality of life.

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

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

1. Putting off paying into a pension

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

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

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

2. Opting out of a workplace pension

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

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

3. Making only the minimum contribution

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

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

4. Sticking with a default pension fund

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

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

5. Not checking pension performance

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

6. Losing track of old pensions

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

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

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

7. Assuming State Pension will be enough

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

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

8. Relying on an inheritance

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

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

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

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

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

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

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

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

1. Avoid last-minute decisions

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

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

2. No worries about delays

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

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

3. Spread your contributions across the year

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

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

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

4. Benefit from interest and the compounding effect

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

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

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

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

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

6. Take the opportunity to set goals

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

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

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

It’s been six years since Pension Freedoms were introduced. They gave retirees more choice in how they accessed their pension, and increased the need to make important decisions about how and when to do so. Unfortunately, it’s also made pensions an attractive target for fraudsters.

In recent weeks, the lack of Pension Freedom safeguards, causing some retirees to fall victim to scams, has made headlines. Speaking to FT Adviser, Stephen Timms, chairman of the Work and Pension Committee, said the lack of safeguards has been “life-ruining” for some.

According to the Financial Conduct Authority, over £30 million was lost to pension scammers between 2017 and 2020. The amount that individuals lost varied, but one victim lost £500,000. In many cases, the money lost is irrecoverable, so getting hit by a scam could have a devastating impact on your retirement plans and quality of life. It’s thought that the number of reported scams is only the tip of the iceberg.

As one of the largest assets many people have, it’s easy to see why scammers are targeting pensions. The lack of awareness around how pensions work and the ways they can be accessed are also valuable for scammers, as they can capitalise on people’s ignorance. Understanding how you can access your pension can help you reduce the risk of falling victim to a scam.

The importance of keeping track of your pensions

While it might be years before you can access your pension, it’s important to keep track of it. It can help you better understand your retirement provisions and means you’ll be better informed if you are targeted by scammers. Despite the importance of pension for long-term security, it’s something many are overlooking.

According to Unbiased research, one in five Brits don’t know how much they have saved in their pension. Not understanding your pension and it’s worth can provide scammers with an opportunity to exploit you. It can also mean you aren’t as cautious when making decisions or discussing your pension as you would be with other assets.

It’s also important to note when you can access your pension. Many scammers will claim they can “unlock” your pension early using loopholes. However, your pension is not accessible until you’re 55, rising to 57 in 2028. Being able to access your savings early may seem like a tempting offer, but it’s a red flag that you should keep in mind.

There are rare circumstances when you may be able to access your pension early, such as following a terminal diagnosis. In these cases, however, you should speak directly to your pension provider.

How can you access your pension?

As well as knowing when you can access your pension, understanding the different options can mean you’re able to spot a scam.

  • Take lump sums: You can take lump sums out of your pension as and when you need to. You can take a 25% lump sum tax-free if you choose to. However, you should fully understand the long-term impact of withdrawing a lump sum before proceeding. In some cases, scammers have persuaded retirees to make withdrawals to move the cash into attractive sounding investment opportunities. Always carefully weigh up investments and consider how they might fit into your plans. 
  • Purchase an annuity: Purchasing an annuity provides you with a guaranteed income for life. You’d use some or all of your pension savings to purchase the product, which will then deliver a regular income you can rely on. If you’re worried about security, an annuity can provide financial stability. As with any financial decision, don’t rush and be sure you’re dealing with a trusted provider. 
  • Take a flexible income: Using flexi-access drawdown allows you to withdraw a flexible income from your pension. If your income needs will change throughout retirement, this can be valuable. It can also mean you become a target for scammers, as you would be able to make significant withdrawals.

You don’t just have to pick one option – you can mix the different options to create a pension income that suits you.

Remember, you don’t have to access your pension once you reach pension age. You can choose to leave it where it is until you’re ready to take an income from it. Your pension will usually remain invested.

5 pension scam warning signs

  1. You’re contacted out of the blue – There is a ban on pension cold-calling. If you receive unsolicited contact, be cautious and always verify who you’re talking to using the Financial Conduct Authority register.
  2. It’s a limited time offer – Scammers will try to put pressure on you to make a quick decision, so you don’t have time to think your options through. A time-limited offer or pressure to make a snap decision are warning signs.
  3. Phrases such as “loophole” and “pension liberation” – Fraudsters may claim to give you early access to your pension by making use of loopholes. As mentioned above, this isn’t possible.
  4. Unusual or complicated investments – You should ensure you understand your investments and that they’re easy to locate. If you’re being offered unusual investment opportunities, like overseas property or forestry, take a step back.
  5. The offer seems to be too good to be true – Sadly, if high or guaranteed investment returns are on offer, it’s a sign of a scam. If something sounds too good to be true, it probably is.

If you’ve been approached about a pension or investment opportunity that you’re not sure about, please get in touch. We’ll help you understand what is on offer – another pair of eyes can make all the difference if you’re being targeted by a scammer.

Please contact us if you’d like to discuss your pension options and what it means for retirement. If you believe you’ve been targeted by a scam, you should report it to ActionFraud.

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

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

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

Winter is behind us and it’s that time of the year when people give their homes a spring clean. But don’t just focus on tidying up your material possessions – take some time to clean up your finances too. It could help get you on track for the coming tax year, as well as boost your savings.

Here are ten financial tasks you can use to spruce up your finances:

1. Refresh your household budget

Even if your finances are comfortable, reviewing your budget at regular intervals can be valuable. Over the last year, your finances may have changed significantly. Perhaps you’ve switched job, taken on a mortgage, or are devoting more of your disposable income to a hobby. Giving your budget a refresh can help make sure it reflects your current circumstances. Covid-19 is also likely to have affected your budget in the last 12 months. While some have seen their income drop due to being furloughed, others have saved more due to spending less. In fact, spending stalled at around 90% the level that would have been expected in the absence of a pandemic, according to the Institute for Fiscal Studies.

2. Go through your bank statements

Combing through your bank statements can seem like a tedious task but you could discover significant savings. Keep an eye out for subscriptions you’re no longer using, protection for products you don’t have anymore, and other things you can cut out. While you’re doing this, it’s also worth researching how regular items, such as electricity or the internet, may have changed over time. If a deal has come to an end, you may find you could cut outgoings by switching to a competitor. Comparison platforms make it easier than ever to find out if you could save by switching. 

3. Check your tax code and allowances

With a new tax year starting in April, spring is the ideal time to review your tax liability. When was the last time you checked your tax code on your payslip? An error could mean you’re paying more tax than necessary. It’s also important to check you’re making use of tax allowances. Money Saving Expert, for example, estimates that 2.4 million qualifying couples are missing out on a tax break because they’re not making use of the Marriage Allowance.

4. Search the market for a home for your savings

When your money is held in a cash account, it will usually benefit from interest. While interest rates are low, it’s still important to search the market to find an account that offers you a competitive rate. It helps your money to go further and can help reduce the impact of inflation over the long term. Keep your financial plan in mind too. While a fixed-term ISA where your money is locked away for a defined period may offer the best interest rate, restrictions may mean it’s not the right option for your goals.

5. Don’t forget about your debts

While weighing up interest on savings, you should do the same with debts. Whether it’s a loan or a credit card, the interest rate on debts affects how much borrowing costs you. Reviewing this can help create a budget and identify where savings can be made. Depending on your credit score and financial position, you may be able to switch to a low-interest or even transfer your current balance to a 0% interest credit card to make savings. Not only could it cut your outgoings, but you may also be able to pay off the debt sooner.

6. Check your mortgage

A mortgage is often one of the largest debts we take on, but it can slip your mind when reviewing other types of borrowing. If your deal has ended or comes to an end soon, you should search for a new mortgage deal. Usually, at the end of a deal, you’ll be moved on to your lender’s standard variable rate (SVR), which is typically higher than alternatives. Previous research has indicated that a quarter of mortgage holders are paying the SVR, potentially adding £4,000 of additional interest to payments each year.

7. Read your protection policies

If you have financial protection in place, take some time to read through your policies and check they’re still suitable for you. If you don’t have any protection in place, now is a good time to think if life insurance, critical illness cover, income protection or other protection that could improve your financial security. A report from Schroders Personal Wealth suggests that when it comes to managing finances, many Brits are falling behind in preparing for the unexpected. This is despite 43% of people saying that ensuring their family had enough money if anything happened to them was important for financial peace of mind.

8. Assess your pension performance

Retirement might be decades away or you might already be taking an income from your pension but reviewing retirement savings can help make sure you’re on track. Looking at investment performance is important. However, keep in mind that volatility is part of investing and should play a role in your investment strategy. Focus on your long-term goals and whether you’re taking steps to reach them, from contribution levels to managing withdrawals.

9. Set out your goals

When we create a financial plan, it’s built around aspirations. This helps ensure your finances are ordered in a way that reflects long-term goals. Taking some time to think about whether your goals have changed at all in the last year can identify if any adjustments need to be made.

10. Book a meeting with us

Finally, regular reviews with your financial planner can ensure everything is on track. Please contact us to arrange a meeting. 

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

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

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

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

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

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

Winners

Retail, leisure, and hospitality businesses

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

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

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

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

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

Businesses with staff on furlough

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

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

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

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

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

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

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

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

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

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

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

Homebuyers

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

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

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

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

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

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

People claiming Universal Credit

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

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

Businesses looking to invest

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

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

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

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

Drivers

The chancellor cancelled the planned increase in fuel duty.

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

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

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

Losers

Medium-sized and large businesses

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

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

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

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

Income Tax payers

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

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

Pension savers

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

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

Wealthier individuals and families

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

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

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

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

Get in touch

If you want to chat about how the 2021 Budget affects you, please get in touch.

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

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

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

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

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

The economic outlook

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

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

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

Covid-19 support measures

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

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

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

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

Personal finance

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

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

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

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

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

Business

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

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

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

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

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

Other important announcements include:

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

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

Housing

The chancellor announced two key measures for the property sector.

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

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

Culture

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

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

Fuel and alcohol duty

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

Infrastructure

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

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

Questions?

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

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

How many times have you heard or read about a particular stock that you should invest in? It can be tempting to follow exciting investment fads, but there are reasons why you shouldn’t.

From speaking to a friend that’s made a ‘good’ investment to reading the headline news, it can sometimes seem like you’ve missed an amazing opportunity by not piling all your investable assets into one particular company. It’s something we sometimes hear from clients too.

At the moment, Tesla is one of the companies that falls into the category. But others have in the past too, including Microsoft, Apple, and even Bitcoin.

Take a look at the recent stories about Tesla and it’s easy to see why this question comes up. The American electric vehicle company founded by Elon Musk has seen its share price soar. In 2020, the share price increased by 700% to become the world’s most valuable car company. Anyone would want to see their assets grow by that amount.

So, why shouldn’t you just pile all your money into Tesla? 

1. Has the share price reached its peak?

Tesla shares have benefitted from astronomical growth in 2020, a particularly impressive feat given the pandemic meant many car companies, and other firms, struggled. Yet, that doesn’t mean it will replicate the same level of growth, or even grow at all, in 2021, let alone in the next ten years.

One of the golden principles of investing is that past performance isn’t a reliable indicator of future performance. It can be tempting to jump on an investment when it’s done incredibly well, but there’s no guarantee that you’ll benefit.

Consistently predicting market movements is impossible, numerous factors need to be considered and some influences can be unexpected, as Covid-19 highlighted last year. When you’re focusing on a single share, it’s even more difficult.

Going back to Tesla, the difference in investor opinions highlights the challenges.

Backers of Tesla, dubbed Teslanaires, argue that the share prices will continue to rise as the firm pushes technology boundaries. However, critics note there is growing competition in the electric vehicle market, including from players with deep pockets, such as Apple.

Others say that Tesla shares are already overvalued. A research note from analysts at JP Morgan said: “Tesla shares are, in our view and by virtually every conventional metric, not only overvalued but dramatically so.”

So, who is right? Only time will tell but investing in stocks with the benefit of hindsight only can lead to a disappointing performance or selecting investments that don’t suit your goals and situation.

2. Sorting the ‘good’ from the ‘bad’

Another challenge to putting your money on a single stock is deciding which one to choose. For every Tesla, there are dozens of firms that see a fall in their value and some that collapse. It could mean that you receive a far lower amount back than you invested or even nothing at all.

It’s the investment version of putting all your money on a single number at the roulette table, it’s a significant gamble.

When you hear about stocks that you should invest in, whether from colleagues or the media, it’s a suggestion that’s usually made with the benefit of hindsight. It’s far easier to say that something is a ‘good’ investment after a rise than sorting the ‘good’ from the ‘bad’ without this benefit.

Acting after a huge rise means you end up paying a higher price for the shares. Of course, it could rise further, but as mentioned above, there’s no guarantee.

So, how should you invest?

For most investors, an investment strategy should mean building up a well-balanced portfolio that contains a range of assets that reflects their risk profile.

Within this portfolio, you may choose to invest in the likes of Tesla, but it should be balanced with assets from a range of firms, industries, locations and more. In this way, you’re not fully reliant on the performance of just one asset. The risk is spread across a range of assets, this helps to balance out the ups and downs of market movements.

Your goals and risk profile should be central to your investment decisions. For some investors, a conservative approach with an overall portfolio that is low-risk makes sense, for others, a higher-risk investment strategy is right for them. Financial planning can help you understand where investments fit into your lifestyle and goals.

Please contact us to discuss your investments, building a portfolio and how they can help you achieve your aspirations.

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.