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By Balance team, Feb 7 2017 08:32AM

How close to the line did you leave your tax return this year? A few minutes before midnight on 31st January? Or did you file it months ago? Either way, it’s been taken care of for another year.


So, are you going to do the same thing next year or get yourself a bit more organised and less stressed this time around?


Whether you’re self-employed or you manage a limited company, preparing for your self-assessment or company tax return is never a pleasant task. But, once you have filed your tax return, it is actually a good idea to start planning for the next one. Not only will you feel more organised, but the earlier you plan ahead, the easier it will be to put aside enough funds to pay for any tax liabilities.


We’ve reviewed the main areas you need to consider, which could help you plan for your next tax return and any hefty tax bills from HMRC:


Have you saved enough to pay your tax bill?

This is especially important if you are self-employed because many people do not save enough money in advance to pay for their tax bill. To prevent a shock when the HMRC letter lands in the post, we recommend setting up a separate savings account where you can put aside enough funds and keep this topped up throughout the year to avoid a direct hit to your bank account. Many high-street banks will offer a savings account when you sign up to a business bank account which can be handy, although the interest rate tends to be very low so you won’t gain much interest from your pot of money unless you hunt around for a better account.


Regular savings accounts

You could look at a Regular Savings Account if you want to set aside tax every month. These types of account tend to pay a higher rate of interest, sometimes as much as 5% interest on your savings. But they can have fairly rigid terms and conditions, so you will usually need to feed money into your account each month or there could be a maximum balance that they’ll pay that interest rate on.


Another option is to look at a Fixed-Rate Savings Account where the interest rate is guaranteed for a set time-period. If you already know how much your tax bill is going to be, you could put the money in a fixed rate account due to expire before 31st January 2018. If you have sold a business or incurred a large gain during the year, you will probably have a good idea about what you will owe. The catch with this type of account is the fact you won’t be able to withdraw any money during the set period. Plus, if the Bank of England’s base rate rises, you won’t benefit from an increased interest rate.


Getting everyone aligned

If you have someone that looks after your personal financial planning and someone else preparing your tax return, make sure everyone is singing from the same hymn sheet several months before the return is due. If you didn’t already know, we are always happy to send consolidated tax statements and details of what you have paid into or drawn out of your pensions and investments to our clients’ tax advisers or accountants. We are also happy to join you in a tax planning meeting with your accountant if that is helpful. If you need us to do that for you, just ask.


Tax year end planning

There may be some actions you want to take before the end of this tax year (5th April 2017). Have you thought about making any extra pension contributions? Do you want to try and mitigate tax while you can? Are you using all of your allowances? Conversations about this type of tax planning can often be part of our financial planning advice and overlap with what you might discuss with your accountant.


If we can help with your tax planning and helping you feel organised for next 31st January, please get in touch and speak to one of our financial planners.




By Balance team, Jan 30 2017 12:08PM

Increase to the Financial Services Compensation Scheme - FSCS

From the 30th January 2017, the level of protection offered by the Financial Services Compensation Scheme (FSCS), will be increasing from £75,000 to £85,000.


What does this mean?

As a customer of a financial services company, you will have a higher level of protection if you ever need to claim against the FSCS. This could include claiming against a firm if it stops trading. FSCS also protects you in relation to your deposits, insurance policies, home finance, and if you’re a customer of an investment business.


For more details, visit the FSCS website or talk to one of our team – get in touch.



By Balance team, Jan 20 2017 09:00AM

This week, Prime Minister Theresa May hit the headlines when she revealed more details surrounding the plan for the UK to leave the EU. For months, the media have been speculating on the type of ‘Brexit’ we would be facing. A hotly debated subject, it is now clear that the UK will be leaving the single market, but how could our departure affect you, your business and your finances?


Tariff-free or Customs Duties?

If you run a business, which solely trades with other British companies, it is worth discussing how they will be affected. Despite the PM’s aim to maintain a tariff-free trade with the EU, we do not know whether this will be accepted. Therefore, a business that imports or exports with EU countries could be affected by leaving the single market if the UK has to leave the customs union; this will more than likely see a change to tariffs and customs duties. At this stage, we are unsure (as are the economists arguing this same point) as to whether higher tariffs could be offset by a depreciated exchange rate.


Foreign Workers and Subsidies

If you, or a supplier, has a workforce originating from EU countries, this may be affected by visa and immigration changes. Some economists are suggesting the following industry areas could be seriously ‘hurt’ if the UK reduces the number of foreign workers – these include healthcare, retail and agriculture. Theresa May has also indicated that clarity will be given to farmers and universities in terms of how they will manage without the current EU subsidies. It is worth calculating well in advance the possible effects this could have on your business (and on any partners or suppliers), and prepare financially for any potential changes to your outgoings or income.


International Trade Deals

Theresa May is seeking more freedom to trade with international partners. Therefore, if you are exporting or importing outside of the EU, this could lead to the emergence of different trade deals. Historically, trade deals often move very slowly as heads of state negotiate terms. It would be wise to start monitoring the progress of any potential deals, once they start to surface. There could be businesses that benefit from new international trade deals, but due to the level of uncertainty that will undoubtedly affect the financial landscape in the interim, we strongly advise undertaking a full review of your current circumstances. Check whether your business is robust enough to withstand any dramatic changes. If you have any property, assets or investments in EU countries (whether personal or commercial), you may also need to seek professional advice.


Prepare for Market Volatility

Overall, any significant change in the political landscape tends to have a direct and often volatile effect on the pound; sterling has both soared and plunged this week. At this stage, without a defined set of outcomes, it is hard to predict how the market will react post-Brexit.

As we transit from one chapter of our economy to another, it is worth seeing the opportunities for you to secure your future and that of your business. Brexit could lead to greater trade within the UK, so it might be worth exploring different options, especially if you are relying on suppliers from EU countries.


Whether you’re running a business or retired, with such economic uncertainty afoot, it is a good time to make sure you have a robust financial buffer in place should you need it. We are fast approaching the end of the tax year so it is a good time to check on ISAs and other savings products. If you have a portfolio of investments, we would strongly advise seeking expert advice to make sure you have a diverse set of fund options – if you need a review, talk to one of our financial planners.


If you need financial advice on any aspect of our article, please get in touch and speak to one of our financial planners.



By Balance team, Jan 18 2017 01:40PM

Is it your big day this year? Or, maybe you’re preparing for your son or daughter to get married? It doesn’t matter whether it’s a first, second (or third!) marriage, there are a few things to consider from a financial perspective when you’re preparing to be wed. We’ve pulled together a short guide to financial issues when you get married.


Wedding Stats

• £27,000 – the average cost of a wedding in the UK

• 62% of couples cover at least half of their wedding costs themselves

• 35% of couples admit to exceeding their wedding budget

(Source: Financial Times online)


Savings

Getting married is one of the most expensive events in most people’s lives. Unless you want to skimp on the canapés, undress the venue, or scale down your day, it’s well worth carrying out a full financial review to make sure your money is in the right place, at the right time for your wedding. You will want to make sure there’s enough to pay for it all, with a healthy budget for extras and upgrades that you might not be able to resist.


The longer you have time to plan, the better your savings strategy will be as you will have more options available. The last thing you want is to be ‘bridled’ by debt after your big day.


If you’re dipping into your savings accounts, you will probably want to use your non-ISA money first, and then your cash ISAs. This is because your cash ISAs grow tax-free so they are more valuable to you than ordinary savings.


The same goes for investments. If you are drawing money out of an investment plan, we will usually recommend using your non-ISA investments first. However, investment plans can be structured differently so it’s worthwhile checking or speaking to a financial planning adviser before you do anything.


Whether you are using savings or investments to fund the big day, check whether you will be subject to any surrender or exit penalties. You will often find them applied to fixed-rate savings accounts, and also investments from particular companies. These can be substantial, so ask the question before you do anything.


Savings and investments after marriage

Once you’re married, you will have the opportunity to move money between you with no tax consequences. Why would you do that? To take advantage of the different tax allowances or rates of tax that apply to you both. The more wealth you have, the more you have to gain from doing this.


It’s worth considering transfer your cash savings into your partner’s account if they have a lower tax rate than yours, so together you pay less tax on the interest you earn. With investments the same is true, particularly if they generate a substantial income.


Consider whether your home should be re-registered into joint names, and also think about any other properties you own. Buy-to-lets or rental properties may be better placed in one partner’s name, or in joint names for tax reasons. This can be complex, so speak to an expert first.


But sharing finances isn’t for everyone. If you are on your second marriage (or even if you’re not) you may choose to keep your finances separate, especially if there is some sort of financial foothold in place from the previous marriage. Talk to us for advice on making the most of your savings in this situation.


Living together

These days, most couples are already sharing a property (unless you’re the old-fashioned types!). However, whether you jointly own your home or you’re thinking of buying a new house before or after you wed, then make sure you have everything covered including who will own what percentage of the property (some partners invest more and feel they have more than a 50/50 stake – if this is an issue then we suggest you arrange a pre-nuptial agreement before you get married!).


Tax

They say there are two certainties in life: death and taxes! However, did you know that when you marry, any gifting between you and your partner is tax-free? Plus, any property or possessions left to your other half will also be tax-free after you pass away resulting in your surviving partner receiving a tax-free allowance. On a lighter note, have you heard about the Marriage Allowance? This is where you can transfer £1,100 of your Personal Allowance to your husband or wife if they have higher earnings than you, resulting in a tax reduction of up to £220 over the financial year.


Disaster planning

We’re not just talking ‘wedding cover’ here (although this is crucial, whether you’re keeping it low key or you’re planning a luxury wedding); we’re talking Life, Critical Illness and Income Protection. As a single person, you may already have some level of cover in place, but as your circumstances change, you will need to update your existing policies. Did you know that you may be eligible for better insurance premiums just by being married?


On the same note, most wills are invalidated when you get married, so make one of your first tasks after you get married to book an appointment with a lawyer. If you would like us to recommend a lawyer in your area just ask.


If you’re getting married this year and would like advice about how this affects your finances, or you feel that a full financial review would benefit you and your partner, please get in touch and speak to one of our financial planners.



By Balance team, Jan 11 2017 11:50AM

Have you made a New Year’s resolution to get on top of your finances? Perhaps you have a few targets in mind, or a goal that you would like to reach? This financial checklist is a good place to start, especially as we’re only a few months away from the end of the financial year:


1. Savings: If your savings have been put to the test over the festive period, it might be time to review any savings accounts, especially if you have a big event planned for this year like a wedding or a luxury holiday. Do you have an ISA (NISA)? Remember, the maximum amount you can deposit into your ISA for tax year 2016/2017 is £15,240. Moving forwards, for tax year 2017/2018, the limit will increase to £20,000. Plus, a new lifetime individual savings account (LISA) has been announced for those under the age of 40. For every £4 invested, the scheme will pay out a £1 bonus up to a maximum of £4,000 per year – however, the money must be used for either a house deposit or for retirement savings.

2. Investments: Many people enjoy managing their own investments – however, most of us are too time-poor to check how our stocks and shares are performing. This can result in a stagnant or under-performing investment strategy, leaving you hungry for better returns. Diversifying your investment strategy could bring you better results – talk to one of our financial advisers to find out more.

3. Pensions: Over the past 2 years, ‘pension freedoms’ have led to a change in how you can access your pension. No longer do you need to purchase an annuity, and the drawdown of pension income is no longer taxed at 55% but at the marginal income tax rate. What’s more, you can access your pension at the age of 55 (there is a current proposal that the age should rise to 57 by 2028). However, despite recent reforms, it’s more important than ever to have a robust plan in place ready for your retirement to ensure you have enough funds to see you through. Some of us have more than one pension plan; you may have a final salary pension, a private pension, or perhaps you have a frozen pension you’re not sure what to do with. End of year pension summaries are often sent out around this time of year, so check your statement to see whether your pension(s) will enable you to have a comfortable retirement. If you’re unsure, then speak to one of our financial planner, who will be able to carry out a full pension review for you.

4. Estate planning: When was the last time you calculated the true value of your estate including your property and assets combined? Do you know how to calculate the value? This can be difficult if you have a complicated portfolio of savings, investments, pensions, properties and possessions. If you do have a large estate, you may need to review how this could affect inheritance tax in the long-run. There are various ways you can manage your assets to become more tax efficient – for example, setting up trusts, which can negate the impact of inheritance tax liabilities for your children and any dependants. Get in touch with one of our expert financial planners for more details on effective estate planning.

5. Insurance and Protection: Review existing policies for Life, Critical Illness and Mortgage Protection – have any circumstances changed since you took the policies out? Remember to notify your insurer of any significant lifestyle changes which could affect your policies. Don’t take the risk - should the worst happen, any changes to your circumstances could affect whether your policies pay out when you need them the most.


If you would like advice on any aspect of our financial checklist, please get in touch to speak with one of our financial planners.



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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