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Key Tax and Pension Changes from the Autumn Statement

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Last week Jeremy Hunt unveiled his Autumn Statement aimed at tackling inflation and stabilising UK finances. The Chancellor detailed issues such as tax, government spending and energy as part of his plan to navigate the impending recession.

Your Ellis Bates team are busy reviewing your situation given these changes and you will be discussing the implications and actions with your Financial Adviser in your next review.

If you are not currently a client with Ellis Bates and feel now is the time to discuss your tax allowance maximisation, your new CGT position and pension planning in light of these changes, please do not hesitate to book a chat as we are here to help.

Pension Changes

  • State pension triple lock has been retained meaning the state pension will rise by 10.1% in April 2023. Those on the new state pension will receive £203.85 per week (up from £185.15)
  • Pension Annual Allowance (100% of earnings or £40,000) and Pension Lifetime Allowance (£1,073,100) have both been frozen until April 2026.

Your Ellis Bates Financial Adviser will work with you to determine if you need to consider alternative ways to save towards your retirement in light of these changes at your next review.

Income Tax Changes

  • From 6th April 2023, the 45% Additional Rate of Income Tax threshold will be brought down to £125,140 (from its current rate of £150,000)
  • Income tax allowances will be frozen until April 2028 – Personal allowance will remain at £12,570 and the threshold for a higher rate of income tax (40%) will remain at £50,270

National Insurance thresholds will remain frozen until April 2028.

Inheritance Tax

The nil rate band will remain at £325,000, the residence nil-rate remains at £175,000, and the residence nil-rate band taper will still start at £2 million.

Capital Gains Tax Changes

In April 2023 Capital Gains Tax (CGT) annual exempt amount will be reduced from £12,300 to £6,000. It will be reduced further to £3,000 from April 2024

Your Ellis Bates team are busy reviewing your situation given these changes in CGT and will be in touch over the coming weeks.

There will be no change to the rate of Capital Gains Tax:

Tax Band Tax rate for Property Sale  Tax rate for other Asset
Basic Rate 18% 10%
Higher Rate 28% 20%

Stamp Duty

There will be no immediate change to Stamp Duty Land Tax (SDLT), the increases which were implemented on 23rd September 2022 (SDLT nil-rate threshold was increased from £125,000 to £250,000. The nil-rate threshold paid by first-time buyers was increased from £300,000 to £425,000) will remain until March 2025, after which the allowances will revert to their previous levels.

Are you a business owner?

If you are a business owner, a number of changes and support systems were announced:

  • Business Rates multipliers will be frozen in 2023-24 at 49.9p (small business multiplier) and 51.2p (standard multiplier)
  • A Transitional Relief scheme will be implemented to support and help up to 700,000 properties adapt to their new bills from April 2023
  • The Retail, Hospitality and Leisure relief scheme is being extended and increased from 50% to 75% for 2023-24, offering up to £110,000 per business
  • Supporting Small Business From 1st April 2023, the Supporting Small Business (SSB) scheme will cap bill increases at £50 per month (£600 per year) for the next 3 years. This will affect an estimated 80,000 properties.
  • Improvement Relief will now be introduced from April 2024 (originally intended for 2023)
  • Dividend Allowance will be reduced from £2,000 to £1,000 and reduced further, to £500, in April 2024.
  • Entrepreneurs Relief (Business Asset Disposal Relief) remains at 10% CGT if you sell all or part of your business (or its assets) on the profits you’ve made, up to £10m in total.

If you would otherwise pay higher rate CGT (20 per cent), this means you can save up to £1m in your lifetime through entrepreneurs’ relief.

If you are a business owner and an Ellis Bates client, your dedicated Financial Adviser will discuss these changes and how they may affect you and the actions needed in your next annual review meeting.

Stay updated: we update our Financial Advice hub with the latest financial news and insights, so hit the link to stay informed and up to date

If you do not currently receive financial advice from Ellis Bates, please Book a Chat to discuss this raft of tax changes and how we can help.

Sources: https://www.which.co.uk/news/article/capital-gains-and-dividends-tax-changes-in-the-2022-autumn-statement-ac6kT0e7yZ4X

The United Nations 17 Sustainable Development Goals

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We discuss The United Nations 17 Sustainable Development Goals and how we align our investment portfolios to one or more of these, whilst breaking these down into environmental issues, social issues and governance issues.

FT Adviser Top 100

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We are delighted to confirm that Ellis Bates Financial Advisers have been included within FT Adviser’s Top 100 Financial Advisers again.

The judging criteria is based on a number of factors including assets under management, gross inflows throughout the year, client retention and the number of Chartered or certified Financial Planners.

There are currently around 5,500 Adviser firms in the UK so to be in the Top 100 is a fantastic achievement and we’d like to thank everyone for their contribution towards this.

“These standards are a decent indication of a firm trying to do the right thing by its customers. 

This year marks 10 years since the introduction of the Retail Distribution Review; seven years since pension freedoms came into force and six years since the Financial Advice Market Review highlighted serious issues that needed to be addressed.

And over that time, businesses have adapted to change, whether this be tax policy turning on a pin, dealing with the after-effects of the pandemic or embracing the digital transformation.

But finding the right balance between face-to-face advice and online services – as well as developing robust succession plans to future-proof the advice industry – could yet result in some significant changes to business models.” 

FT ADVISER, https://www.ftadviser.com/your-industry/2022/10/21/who-are-ftadviser-s-top-20-financial-advice-firms/ 

Can Rishi Help?

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Will the new Prime Minister’s appointment help calm the turbulent investment markets?

Read further on how we are balancing the short term volatility with delivering long term success

By Henry Geale, Portfolio Manager

As Rishi Sunak becomes the third UK Prime Minister in 8 weeks, once again the headlines are dominated by instability and turbulence on the economic and political front. The escalated frequency of these more extreme conditions, and the associated investment market volatility, have prompted questions as to how we deal with these types of events within our portfolios. There are a few points we think are noteworthy here.

Firstly, by remaining focused on the long-term opportunities, and not becoming too distracted with short-term events, we have a higher probability of capturing positive returns for clients throughout their investment term. That said, it is not a smooth ride and there will inevitably be periods of negative performance along the way. It is therefore a balancing act between managing the short-term risks we face and maintaining the long-term potential of the portfolios in order to deliver strong returns for clients. Investing is inherently a long-term activity (we recommend a minimum of five to ten years), and we are cognisant of letting shorter periods of market stress deviate a portfolio too much from where we feel the long-term opportunities are.

The above, however, does not mean we close our eyes and do nothing. Careful consideration is given to both long- and short-term factors, and which risks we do/do not want to take. We have commented as far back as 2019 around the potential for market volatility, and have gradually adjusted our portfolios accordingly. This, along with the desire to always have a globally diversified and balanced portfolio, means we do not have to panic in times of market stress. There are areas of protection built into the portfolios, such as high quality, shorter-dated bonds, which are less sensitive to rising interest rates and have provided some protection against the full extent of market moves this year. On the other hand, exposure to gilts (which have been one of the worst performing assets of 2022 despite their ‘safe haven’ status) is minimal in the portfolios, if held at all.

We also focus on what is happening within the companies we invest in, rather than factors outside our (or the fund managers’) control. A prime example is the state of UK politics; the impact of which can be mitigated by investing in a global, well-diversified portfolio. We engage with our fund managers to understand how they are dealing with the current economic climate and what they are hearing from their companies. The overwhelming feedback we receive is that the share price falls seen are more as a result of negative sentiment in markets (driven by ongoing geopolitical events), than they are reflective of the underlying operating performance of the businesses they invest in. A recent example from one of our fund managers is a company where the share price has fallen around 47% this year, to below pre-COVID levels. This is despite releasing strong results recently, where they delivered higher levels of sales, profits and cash flows. This sort of dislocation between share prices and business fundamentals is something we hear frequently when speaking to fund managers, and is why we do not overestimate the importance of being disciplined in times of market stress and avoiding the impulse to panic. We are acutely aware of the current extremes in the global economy and investment markets, and the likelihood that many of the previously accepted correlations and behaviours in markets would face some level of disconnect, amplified further by some of the current geopolitical situations. However, the focus is always on the quality of the underlying investments and their ability to withstand periods of market stress, while some less resilient businesses may not see through the current extremes. Market sentiment will be volatile for a more prolonged period, but the fundamentals of what you own and why become more important during these times, and should we feel that we need to make more radical changes to our portfolios (defensive or positive) then rest assured we will not hesitate to do so.

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