This Budget was always going to be a tricky balancing act for Chancellor Rishi Sunak.
After a year of unprecedented public spending, he had to decide how much longer to extend the nation’s safety net against the realisation that the country needs to begin paying back some of the vast national debt it has accrued.
While there were many announcements, largely leaked in advance, he also delayed some big decisions on tax until a future date, preferring instead to instigate a series of consultations on March 23 which are likely to influence the longer-term tax strategy.
Thanks to the Chancellor’s continued stimulus package and a return of consumer spending, the Government is forecasting an increase next year in GDP growth of 7.3% – the highest for 74 years.
This dramatic rebound would follow a 4% increase in GDP during 2021, downgraded from last November’s forecast of 5.4%. Growth is then expected to be more restrained at 1.7% in 2023, 1.6% in 2024 and 1.7% in 2025.
Other key announcements included:
Corporation Tax will increase from the current 19% to 25% in April 2023 on profits above £250,000. The rate will remain at 19% for 1.5million companies whose profits are less than £50,000. One possible option to negate the impact could be to increase company pension contributions.
Inheritance tax thresholds, pensions lifetime allowances and annual capital gains tax exemptions to be frozen at 2020-2021 levels until 2025-26. We have been advising clients more than ever on lifetime allowances in the last year and these freezes further highlight the need to plan and look at ways of protecting pensions.
The Stamp Duty holiday has been extended to the end of June 2021 with no tax on sales of less than £500,000. This relief will then be reduced to the first £250,000 until the end of September before returning to its pre-pandemic level of £125,000 from October.
Tax-free personal allowance to be frozen at £12,570 from April 2021 to 2026. Higher rate income tax threshold to be frozen at £50,270 from April 2021 levels to 2026. The so-called ‘fiscal drag’ is less of an issue as long as inflation rates stay low, but will become an issue for many people if inflation starts to climb. Having said this, The Office for Budget Responsibility, has disclosed that this policy will bring 1.3million more people into paying income tax and one million more into paying at the higher rate.
Furlough extended until the end of September with the Government committing to continuing to pay 80% of the salaries for the hours employees are unable to work.
There was very little regarding our post-Brexit strategy other than confirmation that eight free ports will be created, offering low-tax zones, including one at the Port of Liverpool. This could prove to be an exciting development if, as the Chancellor hopes, it “unlocks billions” in investment, trade and jobs.
Similarly, hopeful is the Government’s new tax “super deduction” policy, running initially for two years and likely to boost businesses in sectors such as manufacturing and construction. Under the scheme, companies investing in qualifying new plant and machinery assets will benefit from a 130 per cent first-year capital allowance.
National Savings & Investments (NC&I), the Government-backed scheme which also offers Premium Bonds, will be offering a new green savings bond, giving all UK savers the opportunity to invest in projects aimed at helping the country become a net-zero economy.
In summary, fears ahead of the Budget of a potential raid on the wealth of middle-class Britons have not been realised, but the burden of tax on individuals will gradually increase over time.
The Chancellor has remained true to the Conservative Party’s manifesto pledge to not increase the rates of Income tax, VAT and National Insurance, but he has signposted the ways in which he will begin the long journey of re-balancing the books in these unprecedented times.
And Finally…
I am delighted to say that the team at Phillip Bates & Co Financial Services have started to hold a small number of face-to-face meetings at our Neston office as the vaccination programme rolls out at pace.
We look forward to this trend continuing over the coming weeks as the social measures wind down and the UK opens up again.
In the meantime, we will continue to ‘meet’ with our clients in the way that best suits them and meets their requirements.
Inflation: An Update
/0 Comments/in News /by EdwardLambMany of you will be continuing to read news reports detailing concerns about the potential impact of inflation on the UK and global economies.
Consumer price inflation in the UK rose to its highest level in almost three years in June – hitting 2.5% against a forecast of 2.2%. Fuel prices and second-hand car sales were two of the main factors for this.
It is a similar story in the United States where inflation has just hit a 13-year high of 5.4%.
However, both the Bank of England and the US Federal Reserve continue to strike a relatively relaxed tone regarding the likely longer-term impact of inflation.
This was outlined in a briefing call I was on with representatives of the Bank of England last week while, over in the States, Jay Powell, Chairman of the Fed, commented: “Inflation has increased notably and will likely remain elevated in coming months before moderating.”
While we track closely the inflationary trends both at home and further afield, the plans we develop with clients are rooted in the need to preserve the value of your money over the longer term.
Planning for the Future
/0 Comments/in News /by EdwardLambOne of the areas where we have been most busy during the pandemic has been around future planning.
While it is clearly integral to all of the long-term planning that we carry out on behalf of clients, there is no question that the seismic events of the last 18 months have led a good number of you to reflect on your work, life and family priorities.
We always tell our clients that our primary objective is not to help you save money – it is about enabling you to achieve your financial objectives both pre and post retirement.
During recent months, we have definitely noticed an uptick in clients wanting to move home, extend their current properties and purchase second homes in the UK and abroad (including as a holiday let to provide an additional income stream).
There have also been plenty of discussions around retirement options with several clients wanting to investigate potential options to either bring forward their retirement or sale of business or, in some cases, to move from full-time to part-time work.
During the crisis, the majority of us have spent more time at home, taken up new hobbies and interests and been able to reflect on the things which are most important to us. It’s also reminded us all of our own mortality which has led to an increase in the number of conversations about inheritance tax planning, wills and Lasting Power of Attorney documents.
The last year and a half has shown more than anything the importance of having a long-term, robust and diversified financial plan, which ensures that our clients weather once-in-a-generation events like the pandemic in the best possible shape.
This means that the kind of conversations outlined above take place from a position of strength and are aligned with the longer-term objectives that are built into every client’s individual plan.
It’s Great to Be Back
/0 Comments/in News /by EdwardLambIt is now just over two weeks since the team at Phillip Bates Financial Services returned to the office.
We have enjoyed being back in Neston and from the number of face-to-face meetings we’ve had since returning, it is safe to say that many of you are too!
While we may be back in our offices, we continue to take a sensible and cautious approach. We kindly ask that our clients continue to wear a face mask when arriving at reception and that we then take a decision together as to whether to remove them for our meeting. This is intended to provide reassurance for both clients and our own staff.
We are also delighted to welcome on board Laura Rees. Laura is a skilled and experienced paraplanner and a great addition to our team.
Recovery fuels inflation concerns
/0 Comments/in News /by EdwardLambThere has been a lot of positive economic data circulating over recent days.
The pound touched a three-year high as reports showed that British manufacturing grew at its fastest rate in almost 30 years, while house prices have risen at their fastest pace for almost seven years.
Alongside this, we have seen far less volatility in the markets than was the case a few months ago with increasing confidence in the UK’s roadmap out of the Coronavirus pandemic.
Over in the United States, it’s a similar story with consumer prices jumping by 4.2% in the year to April – the biggest increase in almost 13 years.
Other stories to emerge include Travis Perkins, the UK’s biggest builders’ merchant, raising the price of some of its products by between 5 and 15%, while many restaurants have also been increasing the cost of eating out as one of the worst-hit sectors seeks to recover lost ground.
All of which inevitably leads to concerns that we may be heading for a period of higher inflation.
Only time will tell, but my instinct and that of many other commentators is that there may well be a steady increase in inflation over the next 18 months or so as we continue to emerge from this most extraordinary period in all of our lives.
But any upcoming inflation is likely to be temporary and there should not be a need to use interest rates to control any upward pressures.
The Bank of England view is that inflationary pressure may prove lower than some may expect with the strong possibility that the economy will cool after the initial post-lockdown surge in spending.
Of course, for some investors, inflation can have benefits, particularly for holders of assets including houses and some commodities such as gold.
We are currently reflecting some of the changing economic and financial circumstances in our client portfolio review letters.
While we are pleased with how well portfolios have held up, we are also signposting that there may be a need to consider a few different options to ensure that our clients are best able to mitigate any inflationary challenges and threat of rising interest rates.
As chartered financial advisers, you would expect us to track closely the ebbs and flows of the financial markets and to try to read the road ahead.
But our responsibility to our clients is to ensure that they have the strongest, most robust, long-term and diversified plan which will, over a period of time, enable them to achieve or exceed their financial objectives.
Helen named in prestigious UK guide
/0 Comments/in News /by EdwardLambWe are delighted to report that Helen Brown has made it into her industry’s most prestigious guide.
Helen, a chartered financial planner, is listed in VouchedFor’s 2021 Top Rated Financial Adviser Guide, produced in conjunction with The Times newspaper.
Helen is one of only a select band to receive more than 130 positive reviews from her clients across the whole of the UK. In order to qualify for inclusion, you must have a minimum of 10 positive reviews per year.
All advisers must also undergo extensive checks prior to listing and be authorised by the Financial Conduct Authority.
Helen, who has been with Phillip Bates & Co Financial Services for over 11 years, said: “I’m very proud to have been included in The Times Top Rated Financial Adviser Guide every year it has been published since published in 2014.
“Seeking financial advice for the first time can be a daunting experience for many, and we really do find that new clients value the reviews left by others and that they encourage them to make contact.
“This makes these reviews incredibly valuable, both for me personally and for potential clients who know that they need some help, but are unsure where to start. I’d like to say a huge thankyou to all clients who have taken the time to leave reviews for me. It is much appreciated.”
Helen added: “The best part of my job is helping clients to get the most out of their savings, enjoy a prosperous retirement and, in some cases, realise their dreams. What can be better than that?”
Helen works mainly with pensions and investments and has a long-standing specialism in “at retirement” work. This is a crucial part of financial planning as it involves arranging income for retirement in the most effective way for the individual.
Alan Mellor, Managing Director of Phillip Bates & Co Financial Services, said: “It is a tremendous achievement to be named in the VouchedFor guide once, let alone every year the guide has been published.
“Providing exceptional advice to our clients is central to everything we do at Phillip Bates & Co, giving them the peace of mind that they have a robust, long-term, diversified financial plan in place that will enable them to achieve their goals.”
Helen is one of three Chartered Financial Planners at Phillip Bates & Co Financial Services along with Alan Mellor and Margo Dorozik.
Commenting on the events of the last year, Alex Whitson, Managing Director of VouchedFor, said: “Financial advisers have stepped up for clients. Transitioning to deliver advice remotely, they’ve helped clients navigate concerns about job security, pensions and much more.
“Our guide sets out to give the millions of Britons who could benefit from advice, but have not yet sought it, confidence to engage.”
Budget 2021: Our Verdict
/0 Comments/in Uncategorised /by EdwardLambThis Budget was always going to be a tricky balancing act for Chancellor Rishi Sunak.
After a year of unprecedented public spending, he had to decide how much longer to extend the nation’s safety net against the realisation that the country needs to begin paying back some of the vast national debt it has accrued.
While there were many announcements, largely leaked in advance, he also delayed some big decisions on tax until a future date, preferring instead to instigate a series of consultations on March 23 which are likely to influence the longer-term tax strategy.
Thanks to the Chancellor’s continued stimulus package and a return of consumer spending, the Government is forecasting an increase next year in GDP growth of 7.3% – the highest for 74 years.
This dramatic rebound would follow a 4% increase in GDP during 2021, downgraded from last November’s forecast of 5.4%. Growth is then expected to be more restrained at 1.7% in 2023, 1.6% in 2024 and 1.7% in 2025.
Other key announcements included:
Corporation Tax will increase from the current 19% to 25% in April 2023 on profits above £250,000. The rate will remain at 19% for 1.5million companies whose profits are less than £50,000. One possible option to negate the impact could be to increase company pension contributions.
Inheritance tax thresholds, pensions lifetime allowances and annual capital gains tax exemptions to be frozen at 2020-2021 levels until 2025-26. We have been advising clients more than ever on lifetime allowances in the last year and these freezes further highlight the need to plan and look at ways of protecting pensions.
The Stamp Duty holiday has been extended to the end of June 2021 with no tax on sales of less than £500,000. This relief will then be reduced to the first £250,000 until the end of September before returning to its pre-pandemic level of £125,000 from October.
Tax-free personal allowance to be frozen at £12,570 from April 2021 to 2026. Higher rate income tax threshold to be frozen at £50,270 from April 2021 levels to 2026. The so-called ‘fiscal drag’ is less of an issue as long as inflation rates stay low, but will become an issue for many people if inflation starts to climb. Having said this, The Office for Budget Responsibility, has disclosed that this policy will bring 1.3million more people into paying income tax and one million more into paying at the higher rate.
Furlough extended until the end of September with the Government committing to continuing to pay 80% of the salaries for the hours employees are unable to work.
There was very little regarding our post-Brexit strategy other than confirmation that eight free ports will be created, offering low-tax zones, including one at the Port of Liverpool. This could prove to be an exciting development if, as the Chancellor hopes, it “unlocks billions” in investment, trade and jobs.
Similarly, hopeful is the Government’s new tax “super deduction” policy, running initially for two years and likely to boost businesses in sectors such as manufacturing and construction. Under the scheme, companies investing in qualifying new plant and machinery assets will benefit from a 130 per cent first-year capital allowance.
National Savings & Investments (NC&I), the Government-backed scheme which also offers Premium Bonds, will be offering a new green savings bond, giving all UK savers the opportunity to invest in projects aimed at helping the country become a net-zero economy.
In summary, fears ahead of the Budget of a potential raid on the wealth of middle-class Britons have not been realised, but the burden of tax on individuals will gradually increase over time.
The Chancellor has remained true to the Conservative Party’s manifesto pledge to not increase the rates of Income tax, VAT and National Insurance, but he has signposted the ways in which he will begin the long journey of re-balancing the books in these unprecedented times.
And Finally…
I am delighted to say that the team at Phillip Bates & Co Financial Services have started to hold a small number of face-to-face meetings at our Neston office as the vaccination programme rolls out at pace.
We look forward to this trend continuing over the coming weeks as the social measures wind down and the UK opens up again.
In the meantime, we will continue to ‘meet’ with our clients in the way that best suits them and meets their requirements.
Caldy Cricket Club Centenary
/0 Comments/in News /by EdwardLambMany of you will know of my long-time involvement with Caldy Cricket Club.
I am therefore delighted that Phillip Bates & Co Financial Services is able to play an important role in helping the club celebrate its centenary this year.
We are sponsoring a range of commemorative kit, including playing shirts, polo shirts and caps.
The items will all carry a special black and gold badge – to be used only in 2021 in place of the traditional maroon and gold colours.
The commemorative badge has been designed by club member, Pete Hoppins, who is the former senior design director of global football apparel at Nike. He is also the designer of Liverpool FC’s latest kit.
Hoppins delved into Caldy’s history, taking inspiration for his design from some of the club’s old kits and badges.
The Value of Investments
/0 Comments/in News /by EdwardLambThe question I get asked more than most at the moment is: “Why are investment values going up when we are in a pandemic?”
It is a natural question to ask because most people would assume that during a crisis as severe as this one that values would take a hammering.
The reality is somewhat different. Thanks to various quantitative easing policies in the UK and elsewhere and major financial boosts such as President Biden’s $1.9 trillion stimulus package, a huge wall of money is created.
This wall of money finds its way into assets like shares and property, in turn forcing up values.
Shares have performed particularly well because they are the easiest tradable entity and they would appear to have the best prospects for the near future.
There is, however, a requirement for realism otherwise you simply end up with over valuation and the big risk of inflation with the resulting divide between winners and losers.
Financial ups and downs and volatility are a fact of life – exacerbated by major economic shocks caused by global events like this pandemic.
All of which highlights the critical importance of having a long-term financial plan which is robust enough to withstand the headwinds of the global economy.
The Value of Good Advice
/0 Comments/in News /by EdwardLambHere at Phillip Bates & Co Financial Services, we are normally too busy working on behalf of our clients to shout about our success stories.
However, I am particularly proud of the results we achieved for one client recently and which demonstrates the value of good advice.
I recently saw a client who had been offered the chance to sell his guaranteed annuity for a one-off cash sum. On the face of it, it appeared to be quite a tempting offer.
But on closer examination, it became apparent that it was far from a good deal. Had he chosen to give up his guaranteed annuity, he would have stood to have lost out on 8 x the amount being offered as a lump sum.
Guaranteed annuity rates were very popular in the 1970s and 80s, offering retirees a fixed income for life.
Budget 2021: A Preview
/0 Comments/in News /by EdwardLambChancellor Rishi Sunak will deliver his much-awaited Budget on March 3.
There would appear to be two major priorities for Mr Sunak.
Firstly, the Government has trailed that it intends to put in place a so called ‘endemic recovery plan’ which will entail further significant state spending to help tackle the now serious jobs crisis affecting Britain.
Alongside this, the Chancellor needs to start to signpost the means by which it also intends to recoup some of the vast sums that have already been spent combating the virus.
The need to continue with historic levels of spending from the public purse while, at the same time, starting to claw back money into the Treasury presents Mr Sunak with a tricky balancing act.
My view is that this Budget will start to outline some of ways in which he intends to raise money, but hold back on several measures until a later date.
On the table this time or in the near future will almost certainly be:
It is at times like these that many of our clients benefit from the Phillip Bates & Co Chartered Partnership combining the expertise of our accountancy and financial services businesses.
Together with Phil Bates and our respective teams, we work closely to ensure that clients receive the most considered and comprehensive advice to do with their businesses and their investments.
The Budget will also see a decision as to whether the Stamp Duty holiday will finish at the end of March as planned or be extended for a further period. My expectation is that the Chancellor will wish to see Stamp Duty normality resumed.
While the start of 2021 has continued to see some volatility in the markets, the rapid roll-out of the vaccination programme in the UK and elsewhere is the most positive news since the pandemic began and, hopefully, signals that the road to recovery can now be more clearly defined.