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Financial Planning

Warning – How to Avoid Financial Scams in 2020

By | Financial Planning | No Comments

It’s no secret that financial scams are becoming more sophisticated in 2020. Earlier in February, The Guardian ran a story about how one unfortunate retired couple who were conned out of £43,000, and who are still struggling to gain compensation (their banks are claiming the couple were negligent). In this particular case, the couple received a call from a scammer who claimed to be a bank fraud investigator insisting that their savings could be stolen. They instructed the couple to phone their bank using the number on their bank card. However, as the couple did so, the scammer was able to cleverly keep the line open and divert them to a fake call centre.

We sometimes encounter sad stories such as these, or “near misses” which could have resulted in financial disaster. So what can you do to protect your family finances against malicious activity? We offer this short guide to help.

 

#1 Be careful on public WiFi

It has been estimated that at least 594 million people across the globe have been victims of cybercrime. Much of this can be attributed to the rise of public WiFi, which most of us admittedly use due to its convenience (especially when abroad). However, many of these networks are unsecure and fail to have adequate encryption measures in place, allowing hackers to intercept your sensitive data if you log into your mobile banking or make an online purchase.

One way you can avoid this danger is simply to conduct these kinds of activities on your trusted mobile network, and not on public WiFi. Another option, however, especially if you have no access to data, is to connect using a secure virtual private network (VPN), which encrypts the connection to and from your mobile device, creating a secure “tunnel”.

 

#2 Beware of unsolicited calls

We frequently speak to people who have received suspicious calls about their savings or pension. This is particularly common amongst senior citizens, who are deemed by scammers to be more vulnerable and in possession of greater sums of wealth than younger people.

The first important thing to note is that since early 2019 there has been a UK ban on pension cold calling. So, if you receive a call about your pension from someone you do not know, it is a good idea to consider ending the conversation and notifying your financial adviser. This ban does not stop such calls from happening, of course, so it’s important to always be vigilant.

You could also insist on something in writing from the caller. In other words, tell unsolicited callers: “I never follow instructions from unannounced calls. Write to me so I have something to refer to.” If the person on the phone pushes you because the matter is “urgent” or because “utmost secrecy is required”, then take this to be a red flag.

 

#3 Paper shredding

Without thinking, many of us throw away receipts which contain details of our credit card or debit card number. This is often where identity theft starts, so it would be prudent to invest in a paper shredder. Also, keep a regular eye on your bank statements or mobile banking (using a secure connection) to monitor any suspicious activity.

 

#4 Keep software up to date

Many of us are also quite lax when it comes to updating our security and antivirus software for PCs and mobile devices. Be careful not to get into the habit of simply pressing the “later” button when an important app or firewall program prompts you for an update. Many scammers can exploit open holes within these protective layers of security, so it’s important to keep them closed.

 

#5 Browse carefully

The internet is a fantastic way to manage your wealth and finances, using online investment platforms and mobile banking. Be careful, nonetheless, to check carefully which websites you visit and ensure they are secure. One simple way to do this is to check the website address in your browser to make sure it starts with “HTTPS” (not HTTP), which helps to encrypt the connection between your computer/device and the website.

Also, be aware when using email, text and other messaging services such as WhatsApp. If an unknown company sends you a message with a link (e.g. to your Amazon or iTunes account), think twice before clicking on it. Quite often these are fraudulent links to fake websites, dressed up to look like the real thing.

Exercise caution with friends and family as social media profiles and email accounts can sometimes be hacked and send these kinds of messages. If you receive a message about a new sales offer, for instance, consider typing the web address separately into a trusted search engine to find it, rather than simply clicking on a link which might take you somewhere unsafe.

This content is for information purposes only. It does not constitute investment advice or financial advice. To receive bespoke, regulated advice regarding your own financial affairs, please get in touch to speak to one of our independent financial planners here at FAS.

 

A Short Guide to Funding Long Term Care

By | Financial Planning

The demographic map of the UK is changing. Most of us are now living longer; in 2017 those aged 85+ were 1.35m in number, and this figure could reach 2m by 2031. Although this is wonderful news in many ways (more time with our loved ones!), it also brings significant challenges when it comes to financial planning.

First of all, it implies that people’s retirement funds will need to stretch further compared to previous generations. In 1980, for instance, an Englishman aged 65 had a 1/1000 chance of reaching 100 years old. Today (nearly 40 years later), those odds have shrunk to around 1/100.

This increased longevity is likely to put additional strain on the already overstretched State Pension and is one of the reasons why most employers are no longer offering employees Defined Benefit pensions (which pay a guaranteed lifetime income in retirement). Careful financial planning will, therefore, be needed more than ever to ensure we have the income we need in our later years.

Secondly, increasing life expectancy is also projected to accompany an increase in health problems amongst older people. In particular, research shows that the number of retired people with diabetes, depression, cancer and dementia is likely to at least double by 2035. Many of these conditions require some level of professional care, which come at a significant cost.

Given these trends, projections and figures, it is little wonder that at FAS we are often asked about what people can do to prepare for the possible costs of their future long-term care. In this short guide, we’ll be sharing some of our thoughts on this important subject. If you want to discuss your care strategy with one of our experienced financial planners, please do give us a call.

The Cost of Care

In 2019-20, the precise amount you pay for care depends on a range of factors including:

    Where you live in the country.
    The level of care you need (e.g. 24/7 intensive or temporary and residential).
    The quality of the care home in question.
    Your financial situation.

At the moment, there are around 400,000 people living in care homes across the UK; a figure which is set to rise to 1.2m by 2040. Residential care costs can vary greatly, but typically range from £600-£900 per week. Indeed, some people face annual care costs exceeding £50,000.

Ways to Fund it

£50,000 and similar figures are clearly eye-watering for most people to look at. After all, just 3-years in residential care could cost £150,000; enough to wipe out a significant portion of an Estate, and by extension a family’s Inheritance. How, then, can you prepare your finances for this large, yet unpredictable cost in the future?

In 2019-20, those possessing less than £23,250 in assets are entitled to financial support from their local council, to help cover the fees. If you (or a dependent, child or spouse/partner) continue living at home whilst you receive care, then the value of your house is not normally counted within the means-test determining whether you are eligible for council support.

We do not recommend that you deliberately deprive yourself of assets in order to try and get around this system. Not only does this leave you financially vulnerable, but the council is also likely to detect such deprivation strategies and calculate your care fees as if you still owned the home/assets you have sold or given away.

What, then, are some of the other options you can consider with your financial planner when it comes to creating a strategy for long-term care funding?

Own Income & Family

Some people are in the fortunate position where their siblings, children or other loved ones can contribute towards the costs of their care. This, combined with your own pension income as well as other savings and investments, could be enough to meet your care costs.

Property

Many people are cash-poor but asset-rich by owning a property. In such circumstances, downsizing or Equity Release could be an option to access funds needed to cover care costs. These are hugely important financial decisions with far-reaching implications for your financial plan, so we recommend that you speak with a financial planner about any decision or strategy involving using your property to fund your long-term care costs. It might be that other, more appealing options are available to you.

Care/Immediate Needs Annuity

With the help of an experienced financial planner, it is possible to find a good insurance plan which can help you meet your care costs. These plans usually involve paying a company a one-off lump sum in exchange for a guaranteed lifetime income (tax-free), which would be paid directly to your care home. The amount you pay for the annuity will vary depending on factors such as your age and health.

Invitation

Many commentators have described the UK’s care system as in a state of “crisis”, and many people are understandably worried about how they will cover these possible future costs. However, at FAS we can help you can assess your options with a clear mind and with the best information available.

This content is for information purposes only.

5 Key Ways A Financial Planner Adds Value

By | Financial Planning

As Financial Planners here at FAS, we understand the value of financial planning which we offer to our clients. However, that value isn’t always easy to explain to those unfamiliar with it.

After all, financial planning isn’t particularly tangible; you can’t “see” or “feel” it like you can with retail products, such as a new car. However, financial planning, when done properly, solves many key problems which many of us experience:

    How will I ensure my family is financially secure if I suddenly passed away?
    Am I paying more tax than I need to, and are there ways to free up more of my income?
    How can I be sure that I am fully complying with the various rules about my taxes?
    Can I ensure a meaningful inheritance for my loved ones at the end of my life?
    Is it possible to secure a comfortable, secure retirement income? If so, how?

These are all very important questions which can keep us awake at night. Moreover, the answers are not always clear to people. Take the world of pensions, for instance. There are numerous rules about the State Pension, Workplace Pensions and Personal Pensions which often change over time (e.g. due to Government policy).

Once you start peering into this world, it can sometimes feel intimidating, but speaking to someone who understands the landscape can really help. At FAS, we believe there are at least five ways a good Financial Planner can add real value:

Helping to Clarify your Goals

Have you ever set out to achieve a goal, only to later realise it was unrealistic? Perhaps you thought you could teach yourself Mandarin Chinese fluently within a year, for instance, and quickly realised that it would realistically take more time and investment to get there?

Without the help of a professional Financial Planner, it is easy to make a similar mistake with your finances and wealth. However, the danger is that the costs can be much higher. This is because it is often many years later when people realise that their original retirement goals were unrealistic. With a Financial Planner, however, you can plot your intended course much more clearly and with far better information at your disposal.

At FAS, we will be completely honest with you and explain why we feel you are aiming too high or low with your retirement goals whilst outlining the reasons why. Then we will propose strategies that are achievable, allowing for different possible future scenarios.

Pointing out Blind Spots

It can be easy to think that you have “covered all of your bases” in your financial plan and yet miss out something important which could later cost you dearly.

Take British people who live overseas (Expats) as an example. Many people living abroad believe that they will not have to pay Inheritance Tax when they die due to their residential status, yet the reality is that most people will have to pay Inheritance Tax on their UK assets.

Mistakes like these can come as a nasty surprise later. So it does pay to consult a professional about your financial plan, helping to ensure that you have not missed out anything important.

Getting Better Deals

There are many areas of financial planning where it is possible to pay more than you need to. Take investment management fees as an example.

You might have an investment portfolio which you feel is performing well. Yet if you are paying excessively high fees which eat into your investment returns, then over many decades these could, effectively, represent a “loss” of tens of thousands of pounds.

We will help you to review your portfolio, scan the wider market and help you find the best deal for your needs and goals. Even a slight reduction on your investment management fees, for instance, could make a huge difference to your standard of living later on in retirement.

Minimise Threats

Did you know that in 2018 many people were scammed out of their pensions by fraudsters, costing each victim an average of £91,000? Whilst having a decent Financial Planner on standby is not iron-clad protection against receiving a malicious cold call, a trusted financial planner can help you discuss any unsolicited offers and avoid making costly mistakes with your money.

Simplify Everything

As mentioned above, many areas of financial planning are deeply complicated (such as pensions). A good Financial Planner will help to bring clarity to the world of Inheritance Tax, Income Tax, National Insurance, ISAs, Annual Allowances and more to help ensure you understand it. Moreover, this person can also help you bring different parts of your wealth together. This can not only make things more tax-efficient but can also simplify everything.

For instance, perhaps you are nearing retirement and have over a dozen pension pots scattered around due to a long, successful career in different lines of work. For many people, it can help immensely to consult a Financial Planner who can help consolidate all of these separate pots into a central pot, making everything much easier for you to manage.

Final Thoughts

There are many other benefits to a Financial Planner in addition to the above. For example, this person can help you to manage the emotional rollercoaster of investing. After all, your investments are likely to experience a lot of volatility and it can be tempting to act impulsively.

A Financial Planner can also help you to delineate the areas of your finances and wealth where you can exert control, and where you cannot. They can then help you to focus your energies on the former, allowing you to better relax and enjoy more peace of mind.

If you are interested in speaking to us here at FAS about your financial plan, then we’d be delighted to hear from you!

What Place Should an Inheritance Take Within Your Financial Plan?

By | Financial Planning

Inheritance can be a thorny topic, which we often dread discussing with family. As a result, many people put the conversation off until their parents or grandparents actually die. By which point, deciding what to do with your inheritance can feel somewhat overwhelming, on top of the emotional turmoil and grief you are likely to experience.

In light of this, whilst it might be a difficult conversation, it can be a good idea to think about having it now (well ahead of time) if this is possible. It can save a lot of pressure for yourself later, as well as avoiding potential family fall outs.

Having a clear grasp of what is coming to you can be immensely helpful for your financial planning. However, it’s important to be realistic. Millennials in particular (i.e. those born between 1981 and 1996) tend to have very inaccurate expectations about how much wealth they will one day inherit from their parents, anticipating a sum of around £130,000. In all likelihood, however, the median inheritance currently stands at £11,000.

The place of an inheritance in financial planning

Of course, some fortunate people will inherit more, and £11,000 is certainly nothing to turn your nose up at. This sum could make a huge difference to your family. However, it’s important to keep your potential, future inheritance in perspective. There are many events out of your control which might affect how much you eventually receive.

For instance:

Unforeseen taxes/debts. Your parents or grandparents might have promised you tens of thousands of pounds one day. However, it is very difficult for you to know the full nature of their wealth or financial situation. They could be facing an inheritance tax bill or debt repayment which eats into the value of your inheritance, when it comes to dealing with the Estate. This can happen even if parents appear financially astute.

The cost of care. Your parents or grandparents might be very healthy now, but sadly none of us know what will happen in the future. Dementia, Alzheimers and Parkinsons affect thousands of people in the UK, often leading to them needing around-the-clock professional care. The fees for these services can be very high and can easily reduce the value of an Estate, which would have otherwise been passed on as an inheritance. Care Home fees, for instance, can cost over £30,000 per year which residents are expected to pay themselves, if they have over £23,250 in capital assets.

Remarriage. In reality, it is quite common for people to remarry later in life. This might occur following divorce, or perhaps bereavement of a husband or wife. Regardless of how it might happen, this could affect your inheritance since, by default, the Estate will be distributed according to the Rules of Intestacy, if there is no Will in place stating what should happen in the event of death. In this instance, if the Estate is valued at less than £250,000, then the surviving husband or wife will receive everything.

What are the implications of all this? Well it basically means that for most people, an inheritance should take on a “supplementary” role rather than “primary” pillar within your financial plan. In other words, if one day you do receive the inheritance you hope for, then it will be a welcome addition to your finances and wealth. If it does not arrive in the form, timing or manner in which you might expect, then your financial plan will not be affected or ruined as a result.

Ways to use inheritance money

So, what are some options for your inheritance money, should it come your way?

1. Settle debts. If you have any debts weighing heavily on your mind or monthly bank balance, then it may be a sensible idea to consider paying these off or reducing them. For instance, clearing £200 in monthly debt repayments could free up a lot of breathing space, allowing you to place more funds elsewhere in order to build up your assets (e.g. saving into a pension).

2. Emergency funds. If you do not already have 3-6 months’ worth of living expenses saved as an emergency fund, then it can be a good idea to commit some of your inheritance money towards building up this safety net. This will give your family peace of mind and financial stability in the unfortunate event of either you or your partner losing a job or needing to suddenly cover an expensive bill (e.g. a replacement boiler).

3. Pay off the mortgage. If one of your main financial goals is to live mortgage-free as soon as possible, then paying off your mortgage (either as a lump sum or regular mortgage overpayments) could be an attractive option. Be careful to check your mortgage lender’s terms, as there can often be charges for repaying your mortgage debt over certain thresholds.

4. Invest some of it. If you deposit a substantial inheritance into an ordinary savings account, then in today’s low interest rate environment, it is likely to start losing its value over time, due to inflation. However, investing it in a pension fund or a Stocks & Shares ISA could be a way to help the money grow over time.

5. Enjoy it. Perhaps you are in the fortunate position where you are already well on track to achieving your financial goals and could instead put the money towards something more luxurious – maybe you would prefer to treat your family to an lovely holiday or buy a new car. If so, then enjoy!

Inheritance Tax: How to Reduce the Bill

By | Financial Planning

Many families stand to lose more money to the Government through Inheritance Tax (IHT) than they really should. In 2016, £585 million was spent unnecessarily on IHT by British taxpayers. With IHT receipts expected to reach an all-time high in 2018, it seems unlikely that this trend will reverse in 2019.

Certainly, everyone should pay their fair share to society, but why should your loved ones lose out needlessly? At FAS we can help you to put sensible measures in place ahead of time to ensure that you, one day, leave a meaningful legacy to your family.

Here are some practical ways we can help you to reduce your IHT liability:

The Nil Rate Band & Additional Threshold

A new rule was introduced on 6 April 2017 which has had an important impact on IHT planning. It is something to consider if you have direct descendants.

To quickly recap, in 2019-20 Inheritance Tax (IHT) is levied at 40% on the value of your Estate over £325,000. This threshold is called the Nil Rate Band (NRB).

Your “Estate” includes assets such as your property, cars and personal possessions.

So, if your Estate is valued at £475,000 when you die, then £325,000 would be free of IHT. The rest of it – i.e. £150,000 – would likely be taxed at 40%, which means an IHT bill of £60,000.

Since 6 April 2017, however, an Additional Threshold (AT) has been in place which can reduce your tax bill. This new threshold allows you to pass on an extra £150,000 in 2019-20 to direct descendants (e.g. children or grandchildren) in the form of your residential property.

Let’s see how this would affect the example above. Suppose this person’s £475,000 Estate consists entirely of their home. Assuming they pass this property onto a direct descendant, the whole Estate would likely be free from Inheritance Tax. This is because it would fall under the combined thresholds (i.e. £325,000 NRB + £150,000 AT = £475,000 allowance).

Spouse / Civil Partner Benefits

Each person has their own Nil Rate Band and Additional Threshold. That means you have your own NRB and AT, and if you are married then your spouse does too (the same applies in civil partnerships).

When you combine these allowances together it means that you can effectively double the amount you can pass on to beneficiaries, Tax-free, via an Inheritance:

Person A: £325,000 NRB + £150,000 = £475,000
Person B: £325,000 NRB + £150,000 = £475,000

Total Tax-free allowance (2019-20) = £950,000

So, if you and your spouse / civil partner own a £900,000 home and pass it to your children when you die, then you should be able to do so, Tax-free, assuming everything is in order, and the remainder of your Estate is less than £50,000.

Remember, your unused allowances pass on to your spouse if you die before them. You do not need to both die at the same time to combine your NRB and AT allowances!

Bear in mind that you cannot combine your IHT allowances in this way if you and your partner are unmarried, or not in a civil partnership. This is the case even if you have lived together for a long time and have children.

Pension Planning

Pensions are primarily intended to provide you with an income when you retire. However, they can also be an important part of your IHT strategy.

Remember we mentioned that your “Estate” comprises assets such as your property, cars and personal possessions? Pensions are notably absent from that list.

That’s because your pension does not form part of your Estate for IHT purposes. So, if you have a £750,000 house and a £300,000 pension pot when you die, the former might be liable to Inheritance Tax. The latter will likely not be.

You can pass on your pension pot to your beneficiaries, Tax-free, if you die before the age of 75. If you die after that age then the pot still does not face IHT. However, your beneficiaries will have to add any money they receive from your pension to their income. That means that they could face a higher Income Tax bill.

With some careful financial planning, you can therefore potentially pass on more of your wealth to your loved ones via your pension pot(s). Please note that you cannot do this with Final Salary pensions or Defined Benefit pensions.

Making Gifts

The IHT rules in 2019-20 allow you to give away up to £3,000 per year, Tax-free. Think about that. Over five years that amounts to £15,000. Over fifteen years it totals £45,000.

You could ignore this allowance but consider that £45,000 taxed at 40% IHT amounts to £18,000 that could have otherwise gone to your family. So gift-making is not a strategy to dismiss lightly.

We can help you understand the current allowances and how they impact on you and your family. One annual exemption that is often missed is for wedding gifts. Here, you can give up to £5,000 (Tax-free) to your child for their wedding day (£2,500 for a grandchild or great-grandchild).

Other Options

The above examples are just a handful of tactics to consider when thinking about Estate planning for your beneficiaries. Other options which might be appropriate for you include using Trusts and taking out a Life Insurance policy.

The rules surrounding Inheritance Tax are quite complicated and are subject to change. You could easily miss an important consideration if you try doing everything yourself, especially if you have a large complex estate.

Please do get in touch if you wish to discuss any aspect of the above in more detail.

Financial Planning for 2019: What to Expect & Do

By | Financial Planning

With 2018 now over and January ushering in a season of New Year’s resolutions, now is a great time to become aware of some important financial announcements for the months ahead.

We recommend that you factor these into your financial planning. In light of this, here are some of the key highlights you should know about for 2019:

Help to Buy ISA

Set up by the government to help people get onto the property ladder, 2019 is the final year that it will be available. From the 30th November, the scheme will be shut down to new entrants.

To quickly recap what this ISA offers, it allows you to put aside £200 per month (tax-free) – with the government putting an additional 25% towards your property purchase when it is finalised.

With the imminent conclusion of this scheme, you may wish to consider discussing this with us soon, if you think the Help to Buy ISA might be for you. Of course, once it is gone then you might want to consider the Lifetime ISA as an alternative.

A Lifetime ISA allows you to save more towards a property (up to £4,000 per year) but there are fewer accounts on offer compared to the market for Help to Buy ISAs.

Help to Save

This little-known initiative was launched by the government in September 2018, and is certainly worth a look if you meet the eligibility criteria (e.g. Crown Servants and members of the Armed Forces). Essentially, this scheme allows you to put £1-£50 per month into a Help to Save account over four years. For each £1 you put in, the government will put in an extra 50p.

If you put aside £50 each month into this account for four years then not only would you have £2,400 saved. You would also have an extra £1,200 from the government.

Income Tax & Pay

The Personal Allowance is the threshold where after you start to pay the Basic Rate of Income Tax (20%). In 2018-19 this is currently £11,850, but from April 2019 this will rise to £12,500.

Moreover, at this time Higher Rate taxpayers will also soon be taxed at 40% on earnings over £50,000 (instead of £46,350). The minimum wage is also set to rise from £7.83 to £8.21.

Be aware that National Insurance contributions will also be rising to 12% on earnings between £46,350 to £50,000. Many Higher Rate taxpayers might find their Personal Allowance increase wiped out by this.

Pension contributions

Whilst many people are set to pay less Income Tax, those who are part of an Auto Enrolment Scheme might not see this reflected very much in their take-home pay from 6th April 2019.

From this date, the minimum employees must contribute towards their pension will be 5% instead of the current 3%. You can choose to opt out, of course. However, we urge you to think carefully before doing so as this money might be very useful for your retirement financial plan.

On the subject of pensions, recipients of the State Pension should also note that this will rise by 2.6% from April. This means the basic State Pension will go up to £129.20 and the flat-rate State Pension (i.e. for those who retired after April 2016) will go up to £168.20.

The Lifetime Allowance will also be rising from £1,030,000 to £1,055,000, in line with CPI inflation.

Rising railway fares

One unfortunate development for commuters in 2019 is the rise in rail fares by 3.1% from 2018. If you have an annual season ticket from Manchester to Liverpool, for instance, then this means you’ll likely be paying an extra £100.

Confronted with this situation, for young adults it’s worth keeping an eye out for developments on the proposed 26-30 Railcard. Similar to the 16-25 Railcard, the current proposal is that members would pay £30 in order to receive a third off certain rail fares for a 12-month period.

For people outside of these age brackets, you might consider the 60+ Senior Railcard if you have not already done so. There is also the Two Together Railcard if you travel as a couple, or the Family and Friends Railcard for those travelling with children aged 5-15.

Buy-to-let changes

If you are a landlord, then from 6th April 2019 you should be aware of a key change to the rules which might affect you (Higher Rate taxpayers should take special note).

In 2018-19, you can claim tax relief on 50% of your mortgage interest payments. However, in the upcoming financial year this will go down to 25%. By 2020-21 this will reduce completely to zero. For some people, this might push you up into the Higher Rate tax bracket.

Inheritance tax

From 6th April, although the standard Nil Rate Band (i.e. the threshold where afterwards your Estate faces a 40% inheritance tax bill) will not be going up, the overall threshold for your Estate may be higher if you own a residential property.

You will still be eligible to pass on up to £325,000, tax-free, yet you will also be able to pass on an extra £150,000, if your share of a property goes to your spouse or direct descendants. (An increase of £25,000).

Be aware, however, that if your Estate is worth over £2 million then this additional Residence Nil Rate Band allowance will go down by £1 for each £2 you are over the threshold.

End of Year Tax Planning

By | Financial Planning

As 6th April approaches we inevitably face a transition into new rules within the UK’s tax regime. For those looking to optimise their tax position, what forward planning can you do?

New thresholds

In our previous article, we have already talked about how the Personal Allowance is set to rise from £11,850 in 2018-19 to £12,500 from 6th April 2019. This follows a general rise in the Personal Allowance over the past 5 years. In 2012-13, for instance, it stood at just over £8,000.

In practical terms, this means that Basic Rate taxpayers can expect to take home an extra £130 in 2019-20. Higher Rate taxpayers will also see the Higher Rate threshold rise to £50,000, which amounts to an additional £860 for 2019-20.

However, working age employees will also face a 12% National Insurance contribution on earnings between £46,350 and £50,000. For Higher Rate taxpayers, therefore, the rise in their threshold will be offset to some degree. From April 2020, both the Basic and Higher Rate thresholds will be frozen and then will rise with inflation from April 2021.

Please bear in mind that the above only applies in England, Wales and Northern Ireland. Residents in Scotland face different rules due to the devolution of tax policy.

Capital Gains

Another important change for the 2019-20 financial year is the planned rise in the Personal Allowance for Capital Gains Tax (CGT). From April 6th, the threshold will rise to £12,000 – allowing you generate £300 more in profits before you are liable to Capital Gains Tax.

Similarly to the Personal Allowance for Income Tax, this gradual rise in the Capital Gains Allowance follows a broad trend since 2014-15 when it stood at £11,000.

The important thing to remember with this aspect of taxation is that losses you make on sales can be offset against your capital gains for tax purposes.

Please remember also, that different CGT rates apply to different people, depending on the asset in question and your Income Tax bracket. For instance, Basic Rate taxpayers pay 18% on property capital gains whilst for Higher Rate taxpayers it is 28%.

Lettings Relief

The system governing Lettings Relief is also set to be changed. (This is the system which previously allowed you to let out and live in your home whilst avoiding CGT).

The new plans are not set fully in stone yet, and are expected to be implemented in 2020. However, the essential thrust of it seems to be that Lettings Relief will only be available if you are a landlord inhabiting your property with a lodger.

The final period relief will also be cut down from 18 months to 9 (unless you are in a care home or disabled, in which case the present period of 36 months should remain in place).

At the moment, the total Lettings Relief you can claim is the lowest of either:

• £40,000;
• The total you can claim for private residence relief;
• The amount you generate from letting out the relevant part of your home.

Bear all of this in mind if you are considering expanding your investment portfolio into property. We recommend consulting with us before making any important decisions in this area.

You should also consult if you previously lived in a property and then rented it out. It is possible that these new plans will present you with a higher CGT bill.

Personal savings

You have been allowed to grow your cash, tax-free, through interest on your savings since April 2016 when the Personal Savings Allowance was introduced.

Essentially, this means that you can earn up to £1,000 per year in interest without it being taxed on the Basic Rate (if you are a Basic Rate taxpayer). For Higher Rate earners you can earn up to £500 interest per year without tax, after which any interest will be taxed at 40%.

Be mindful that interest you earn on your savings can sometimes push you into a higher tax bracket. For instance, suppose in 2018-2019 your salary earned up to £46,350, therefore putting your income in the Basic Rate. Suppose also that the interest on your savings took you into the Higher Rate.

In this case, you would only be allowed a £500 personal savings allowance. This would mean that the rest of the interest would be taxed at 40%. If you think this might affect you, do also remember that the Higher Rate threshold will rise to £50,000 in 2019-2020.

This means that in an example like the above, you might not be tipped into the Higher Rate if the example were to occur in the 2019-20 tax year. If you are at all unsure about your own situation, please speak to us.

Allowances

If you are married and at least one of you was born before 6 April 1935, then you are likely eligible for the Married Couple’s Allowance. This is set to increase to £8,915.

Another important area of allowances to highlight is that spouses and civil partners will be able to transfer £1,250 of their Personal Savings Allowance to their spouse or civil partner, provided that neither of you pay above the Basic Rate of Income Tax after the transfer is complete.

The key takeaway here is that, if you can legitimately shift income from a Higher Rate Tax paying spouse/civil partner to one on the Basic Rate (or none), then it would be sensible to explore this in more depth.