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By Balance team, Apr 27 2017 12:12PM

How recently has your property been valued? Do you know how your home will affect your inheritance tax liabilities? There’s been a lot of talk recently in the news in relation to trusts, care home fees and of course probate fees. A huge increase to probate fees was controversially introduced and then swiftly withdrawn, but has the idea been forgotten or will we see it in another guise after the General Election? These factors are very important when it comes to planning the future of your estate and your legacy. Estate planning is one of those areas people often fall behind on, simply because life moves very fast. Reviewing an estate plan regularly gives you the opportunity to make vital changes, which could reduce future tax liabilities for your loved ones.


Here are our top tips for you to consider when it comes to effective estate planning:


1. Lasting Power of Attorney allows control of your estate

Many professionals consider this to be more important than a Will, and this is why we have made this point number one. Regardless of the value of your estate, if something were to happen to you or your spouse and they lost the ability to make decisions for themselves, a Lasting Power of Attorney gives you the ability to make decisions on their behalf – to manage them and their affairs. There are two types of Lasting Power of Attorney: Property and Financial Affairs, and Health and Welfare. There’s little point putting plans in place without the certainty you can act, should your loved one no longer have the capacity to make important decisions.


2. Wills help to avoid probate fees and family disputes

If you have children, you need a Will, especially if you have children from a previous marriage. Even if you don’t have children, having a Will makes life a lot easier for your loved ones when you pass away. The grieving process is terrible enough, so why add estate worries to their stress? Without a Will, family disputes are very likely and, if the estate goes to probate, sometimes years can go by without any resolution. Plus, probate costs can run into thousands, eroding your hard-earned wealth. Avoid future family crises - make sure your Will is up-to-date and reflects all of your assets, property and possessions. Talk to one of our financial planners for more details.


3. Trusts and inheritance Tax (IHT) – reduce the effect of your legacy

Now you have secured your property and assets with a Will and a Lasting Power of Attorney, it’s time to check how your estate will be taxed. This April 2017, a ‘main residence’ allowance of £100,000 was added to the 'nil-rate’ band for inheritance tax (where the family home passes to a direct descendant on death). This means that tax won’t apply on estates under £425,000 where a direct descendent has inherited the main home of the deceased. Over this threshold, there is a 40% tax charge.


Taking steps to reduce your exposure to inheritance tax ranges from simple to sometimes very complex solutions and it really depends on your situation and what you are trying to achieve as to what will work best for you. Gifting to your family, using trusts, and using special exemptions, all of these could help you preserve a greater legacy for your loved ones. Speak to one of our financial planners for advice on this.


If you would like advice on estate planning or inheritance tax, please get in touch and speak to one of our financial planners.



By Balance team, Apr 20 2017 06:35PM

On Tuesday 18th April, Prime Minister Theresa May announced there will be a snap general election on 8 June 2017. The reasons behind this decision include wanting stability, strong leadership and a sense of certainty, as the UK leaves the EU. The PM’s controversial announcement has been met with great debate and some opposition, but how will the forthcoming general election affect you and your investments?


Market volatility

On announcement of the general election, the FTSE 100 slumped by 2.5%, which is the biggest drop since last June. In terms of stocks, it is estimated that £46bn was wiped off some of the largest companies in the UK – the “worst day since Brexit”. This was largely caused by the pound, which spiked on Tuesday to a record six-month high against the US dollar ($1.29, an increase of 2.37%), placing great pressure on the UK stock market. The pound also soared against the Euro, hitting a four-month high. In reaction to the soaring pound, Deutsche Bank advised that it will be raising its sterling forecast. The rising pound is due to confidence in the market; the perception that the Government is likely to win the majority leading to a period of political stability. Forex traders are not particularly worried about the June election, but equity investors are wary, mainly due to general geopolitical stress across global stock markets.


Investment opportunities?

Possibly. However, the right approach to the churning political tide in the UK is to ensure you have a robust, long-term financial plan in place when it comes to your investments. Yes, in the short-term, there may be opportunities, but investors are urged to look beyond the political noise and focus on their savings strategies. Short-term trading will incur transaction fees, which may result in losses to the investor if there is a sudden reaction in the market. Of course, all investments have a degree of risk, so it is important that your investment strategy meets your needs and you have a solid financial buffer in place.


Wise investing

Due to the volatility in the market, it is more sensible than ever to diversify. This is a great way to manage risk, so we suggest diversification across different types of investments, by sector and geography. We also recommend new investments are drip-fed into investment markets, to manage your risks of investing when the markets are at a peak. Ultimately, wise investing relies on good risk management.


To conclude, we suggest investors take care and manage risk. Market volatility is set to continue until the UK political landscape becomes clearer after the June election results.


If you are worried about how the snap General Election in June may affect your investment strategy, then please get in touch and speak to one of our financial planners.



By Balance team, Apr 9 2017 06:00PM

There’s a lot of talk these days around ‘goal setting’, but what does this really mean from a personal perspective? Setting achievable goals doesn’t just apply to business – having clear objectives on what you would like to get out of life and how to plan your future are just as relevant as commercial goals. Otherwise, what are you working towards? From a lifestyle viewpoint, we have listed a few important questions for you to answer when you come to set your own personal goals.


1. Where are you right now?

This is the first step towards setting your goals. Are you enjoying your current lifestyle? Would you like greater comfort in terms of a better home, car, or more frequent holidays? Do you currently enjoy buying luxury food, household items and clothing? Are there things that you worry about? Assessing your current lifestyle and concerns will help you plan for the future and set relevant goals. Some people choose less in one area to gain more in another, e.g. a smaller house and more luxury holidays. This is purely an individual choice - but if you have a husband or wife, children or other dependants, then a compromise must be found. If you are currently paying an expensive mortgage, or for your children’s education, these are considerable outgoings in your present day-to-day life. What are you paying out for now that may possibly change in the future? To reflect further on this, see our Big Life Events page.


“The trouble with not having a goal is that you can spend your life running up and down the field and never score”

Bill Copeland



2. Where do you want to be in the future?

What do you want to achieve in your life? Is it a Ferrari and 5-star holidays, or more security and a few simple comforts? Think about what you would like to have in the future. This could be material in terms of possessions, or it might be more of a lifestyle change, e.g. you might decide you want to retire and write a novel. If you have young children, you could be planning to spend an amount on their future education. You might want to set a goal to pay off your mortgage quicker and become debt-free. You might have a burning desire to eat at the world’s top listed restaurants! Again, this is a purely personal choice that will only apply to your individual set of circumstances - your ‘needs’ and ‘wants’. Write a list of everything you would like to achieve in terms of personal gain, and the way you would like to live your life - these are your goals.


“By recording your dreams and goals on paper, you set in motion the process of becoming the person you most want to be. Put your future in good hands—your own.”

Mark Victor Hansen


3. Do you have any worries?

Now you have started to write an outline of where you are and where you would like to be, is there anything holding you back? This might be financial restraints, e.g. a high mortgage or the cost of educating a child. Or, you may have very sensitive, personal commitments, such as having a child with a disability or an aging parent with care needs. If you do have children, dependants or relatives with specific needs, then it is likely there will be a cost implication in terms of making sure they have access to a decent standard of care. Unfortunately, costs for care and care homes, as well as schools for special education will tend to increase if a child or adult has increasing needs. It is important to factor this into future plans, as well as how you will cope personally with such changes.


“Our goals can only be reached through a vehicle of a plan, in which we must fervently believe, and upon which we must vigorously act. There is no other route to success.”

Pablo Picasso


By painting a clear picture of your desired future, as well as identifying any constraints, will help you create an achievable list of goals. You are far more likely to reach lifestyle targets, once you have created a realistic vision to work towards. Once you have confirmed what you want to achieve in life, you can then apply a suitable financial strategy to help you get there.


If you would like any help with personal goal setting, or you would like to discuss any aspect of this article, then please get in touch and speak to one of our financial planners.


By Balance team, Apr 4 2017 06:11PM

National Insurance contributions for the self employed - the big u-turn

The biggest hoo-ha has been over the proposal to increase National Insurance contributions for the self-employed. Although Chancellor Philip Hammond announced on budget day that he woudl be increasing the main rate of Class 4 National Insurance contributions to 10% now and to 11% in 2019 this provoked such a reaction that he had to backtrack - for now.


The measure had been intended to close the gap between the National Insurance contributions made by the employed and self-employed. But that was considered unfair given that it was a breach of a manifesto promise, and that there is a fundamental difference between the stability of employment and uncertainty of self-employment.


Whether he returns to this issue remains to be seen. More likely he will seek to raise fund through another route which will be announced in the Autumn budget. We can also expect to see more measures in coming budgets which affect the self-employed, including steps to mandate more pension provision, as the self-employed currently fall outside of the auto-enrolment rules.


Pensions tax relief - the next target?

With a big hole in his budget from his u-turn, commentators are suggesting that pension tax-relief could be the next target.


The annual contribution allowance of £40,000 could easily be reduced. For those saving into personal pensions that's an obstacle but tax charges can be avoided through good planning. That's less easy for members of defined benefit pension schemes, where benefits accrue every year and there's little choice but to pay the tax charge.


There's also the possibility that the option to carry forward unused pension allowances may be scrapped, which is a valuable planning tool for many people, particularly after a windfall like an inheritance or selling a business.


And there's the option of a flat rate of tax relief being introduced which will hit higher and additional rate tax payers the most.


The message from this is that if you are thinking about boosting your pension fund, do it now while you still can.


Tax free dividend allowance reduced

The dividend allowance of £5,000 will be reduced from £5,000 to £2,000 with effect from April 2018. This is a measure clearly aimed at small business owners who use dividends as part of their remuneration strategy. But it also impact on those with investment funds or shares outside of ISAs or pensions that generate dividends of over £2,000 a year. That is going to include an awful lot of people.


Corporation tax cuts maintained

The chancellor confirmed his previous plans to reduce corporation tax from 20% to 19% from 2018/19 would go ahead.


If any of these changes affect you and you would like to discuss your situation with us, please get in touch with one of our financial planners.


Image copyright citywire.co.uk

By Balance team, Mar 29 2017 08:19PM

Today, Prime Minister Theresa May, handed over a formal letter to Brussels, triggering Article 50 of the Lisbon Treaty and starting the process of the UK leaving the European Union. Although it will take at least 2 years of formal negotiations, in this time of uncertainty and mixed feeling, we look at the implications for British businesses. A white paper entitled the ‘Great Repeal Bill’ is due out tomorrow, which will set out the intent to review and analyse EU laws. This could result in the creation of a vast number of new laws and the hiring of numerous experts and lawyers to ratify new legislation.


Effects on the economy

Generally, the global economy has been on the up, which will be an advantage for markets. In the UK, there has been a great deal of activity over the past financial year, which has stimulated growth in some areas. Manufacturing is experiencing a current high, exports are looking more promising due to the weaker pound, and wage growth is running slightly higher than inflation. Is this sustainable? Only time will tell. However, confidence in the UK has seen continued interest and buy-in from foreign investors, and we hope this will remain during the forthcoming months. For an indicator of how well the UK market is doing, we suggest keeping an eye on the numbers for average earnings and inflation.


How long will trade negotiations take?

Usually, it takes around 5 - 7 years to create a new trade deal. When it comes to negotiating new trade deals with our European partners, as we currently have free trade with the EU, we won’t need to start from scratch. The Government is hoping to negotiate new trade deals with EU members (which will be managed through the EU Commission), over the next 2 years. Some industry leaders have suggested it is more likely these trade deals will roll into the 2020s, as new terms are agreed and then ratified.


Tariffs, Customs and Regulation

Concerns over Brexit include the cost of tariffs once we leave the Customs Union and Single Market. It is also likely that there will be changes to health and safety, border and aviation agreements. However, we will still need to cooperate with EU countries in terms of their technology and we will need to abide by their customs terms. Some fear this will result in additional paperwork and border delays for, e.g. transporting goods and moving waste. Such issues could cause a jolt to the UK economy, but this is a worst-case scenario – at best, nobody knows until new agreements and legislation is in place. We should have a clearer view on this by September 2018.


EU employees

At this stage, it is still unclear what will happen to EU citizens living and working in the UK. It is thought that a ‘memorandum of understanding’ may be produced to assure EU citizens of their right to stay in the UK if they are employed by a UK business. If your workforce relies on a large number of EU citizens, then it is well worth evaluating any possible risk to your business and operations.


If you run or own a business, it is clear there will be some economic uncertainty ahead in the coming months. There may also be opportunities for businesses, once the new trade deals are in place. However, now is a good time to value your business and create a financial buffer in case of any market changes.


If you need financial advice on the possible implications of Brexit, please get in touch and speak to one of our financial planners.


Image credit: Daily Star.


Regular news and views from the Balance team. You'll find our thoughts about pensions, investments, ways to save tax, facts about finances and plenty more.

 

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