Monthly Archives: March 2018

Now and Then by Dave Goetsch
March 2018

Dave Goetsch, Executive Producer of  The Big Bang Theory, reflects on his investment experience in the recent market downturn and contrasts his new perspective with memories of the 2008-2009 financial crisis.

Seeing all the recent headlines about the sudden downturn in the stock market has transported me back to February of 2009, when I was close to despair.  It’s striking how different I feel now.  In February 2009, the stock market was down around 50% from its high, and everyone seemed to feel like the sky was falling.  I was familiar with this state of panic because my relationship to the financial markets was that I didn’t trust them.  They were always going up and down in ways no one could predict, and I couldn’t trust those folks who said that they could anticipate what was going to happen.  So when the market went down, I went down with it—sinking into a depression, knowing there was nothing I could do.

What a difference nine years make.  I haven’t changed because the stock market rebounded.  I changed because I learned that there was a different way to think about investing.  I was right not to trust those people who thought they could predict what was going to happen in the markets, but I was wrong in thinking that there was nothing to do.  I’ve learned that I can have a great investment experience if I just accept a few simple truths.

I have to understand the uncertainty of the market.  The stock market, as measured by the S&P 500 Index, has returned about 10% per year over the last 90 years,1 but there are very few individual years in which it has ever actually returned that amount.  In fact, how many of those 90 years do you think the S&P 500 was up more than 20% or down more than 20% for that year?  The answer is 40.  Astounding, right?  I wish somebody had explained that to me decades ago.  Then I would have known to look at stock market returns in terms of decades—not years, months, days, or hours.  I would understand that so many of those articles and cable news pieces are just noise, designed to keep an audience obsessed and unsettled.

I haven’t changed because the stock market rebounded.  I changed because I learned that there was a different way to think about investing.

In order to be a long-term investor, you have to have a long time horizon.  This can be hard to remember when you’re being assaulted by noise, but if you can stay strong, the results are stunning.  By results, I don’t mean the investment returns, which hopefully are good.  The return I’m talking about is how I feel every day.  I worry less—not just about the future, but also about the present.  Of course, I know that there are no guarantees when it comes to investing, but I feel like I’m going to be okay.  I have a plan.  There’s no way I could’ve done this without a financial adviser.  I needed someone who could not just talk me through what my asset allocation should be, but also help me work through how I felt about investing and what exactly I could do to change my perspective.  I was a mess nine years ago.  Now, my outlook is totally different.  The markets haven’t changed; they still go up and down.  The difference is, I don’t anymore.

If you’d like to discuss your investment strategy, please get in touch with us.

1. S&P data © 2018 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved.


The Chancellor’s first Spring Statement
March 2018

Mr Hammond made clear some while ago that he wanted his Spring Statement to be a short financial briefing rather than a mini-Budget, complete with rabbit-out-of-hat announcements.

Although his speech ran to 25 minutes, rather than the 15-20 that had been promised, the Chancellor stuck to a no-frills script.

Click here to view our Spring Statement Summary

There were no new tax measures and no spending changes.  The Office for Budget Responsibility (OBR) trimmed its projections for government borrowing, but Mr Hammond simply banked the savings for his Autumn Budget.  Spending will be subject to a detailed review in 2019.

While the Chancellor appeared to say little, his statement was followed by the publication of a range of documents covering areas including:

  • English business rates – The next revaluation of business property in England will be brought forward one year to 2021, with three-yearly revaluations thereafter.
  • Entrepreneur’s relief – A consultation paper was published on how to give entrepreneurs’ relief in circumstances where it would otherwise be lost because of a new share issue.
  • VAT threshold – The government issued a call for evidence on restructuring the VAT registration threshold to offer more incentives for small businesses to grow.  There is some evidence that businesses deliberately limit growth to avoid crossing the existing £85,000 threshold (which has been frozen for the next two years).
  • Tax and the digital economy – There were several papers examining taxation issues surrounding the digital economy, including VAT and income tax leakage through internet trading platforms.
  • Self-funded work-related training – A consultation paper was published examining how to extend the existing tax relief framework to self-funded work-related training by employees and the self-employed.

Many of these documents will eventually result in legislation, but that doesn’t mean no tax changes in the interim.  The impact of last November’s Budget (and some earlier measures) will soon be felt with the start of the new tax year.

Please get in touch with us if you’d like to discuss any aspects of the Spring Statement and how they might affect you.

Tax Tables 2018/19
March 2018

Click here to view our tax tables for the 2018/19 tax year, updated with announcements made in the Spring Statement on 13th March.  We hope you will find them useful and interesting.

Please get in touch if you would like a discussion with us about your tax or general financial situation.

Reminders for the new tax year
March 2018

The start of the new tax year on 6 April marks several changes to tax and related matters that could make you richer… or poorer.

The absence of a Spring Budget doesn’t mean that the usual raft of changes at the start of the new tax year have disappeared.  Most of the important changes were announced in the Autumn Budget, in November 2017.  However, Scotland has also recently approved a new set of income tax rates and bands.

Here is a list of the more important changes that take effect for 2018/19:

  • The personal allowance rises by £350 to £11,850. However, the allowance will still be phased out at £1 per £2 of income over £100,000, leaving an effective 60% (61.5% in Scotland) tax band for between £100,000 and £123,700.
  • The higher rate threshold will rise by £1,350 to £46,350.
  • Scotland will see several changes to income tax.  A new ‘starter rate’ of 19% applies to the first £2,000 of taxable income and an ‘intermediate rate’ of 21% applies to taxable income between £12,150 and £31,580.  The higher rate threshold will increase by £430 to £43,430 and the higher rate will rise by 1% to 41%.
  • National Insurance thresholds rise, with the starting point for Class 1 (employers and employees) and Class 4 (self-employed) becoming £8,424 a year.  For employees and the self employed the upper limit for full rate contributions will also rise in line with the non-Scottish higher rate threshold (to £46,350).
  • The dividend allowance will fall from £5,000 a year to £2,000 a year, reducing a higher rate taxpayer’s net income by up to £975.
  • Company car scale rates will generally rise by 2% for petrol vehicles and 3% for diesels.  The proportionate increase in tax can be more than those numbers suggest.  For example, on a BMW 320d the charge rises from 24% to 27%, increasing the tax payable by one-eighth.
  • The pension lifetime allowance will increase for the first time since 2010, albeit only by £30,000 to £1,030,000.
  • Pension automatic enrolment minimum contributions will rise.  In most instances that will mean a doubling for employers and a 150% increase for employees.

The number of changes, both positive and negative, can make April pay checks a puzzle if you are an employee.  This is one reason why the start of the tax year is a good time to talk to your financial adviser.  Click here to get in touch with us.

The value of tax reliefs depends on your individual circumstances.
Tax laws can change.
The Financial Conduct Authority does not regulate tax advice.

HMRC counts the cost of tax reliefs
March 2018

HMRC has published its annual assessment of the cost of tax reliefs.

Every January HMRC publishes a table of ‘Estimated costs of principal tax reliefs’.  Any Chancellor facing a budget deficit is bound to run his eyes down the list to see where the money is not coming in.  After that assessment, they may well ponder whether some tweaking could benefit the Exchequer’s coffers without causing too much of a political outcry.

This year’s list has a familiar look to it in terms of the most expensive reliefs.   At a cost of over £101 billion the largest factor by far is the personal allowance.  The next three largest are equally untouchable for a Chancellor – national insurance contribution (NIC) thresholds and the capital gains tax exemption for main residences.  Fifth largest is income tax relief for pension schemes, costing an estimated £24 billion in 2017/18.

This is a curious figure because of the way in which Whitehall calculates it.  Their definition adds together income tax relief on employer and individual contributions and pension fund investments, then deducts tax charged on pensions in payment.  That deduction – which in effect relates to pension contributions made over many years – is estimated to be worth £13.4 billion for 2015/16.  Remove the deduction and the cost of pension income tax reliefs alone could be £38–£40 billion in this tax year, the equivalent of nearly 9p on basic rate tax.

Further down the list, the tenth entry is NIC relief for employer pension contributions.  This is forecast to cost £16.9 billion in 2017/18.  The government is virtually assured both income tax and NIC costs will increase substantially because of legislation raising automatic enrolment pension contributions by about 150% in 2018/19 and another 60% in 2019/20.

As the graph shows, the cost of pension reliefs has been rising anyway, despite government measures to rein them back with allowance cuts and other measures.  If you or your employer are contemplating pension contributions, perhaps as part of year end planning, it is worth remembering the HMRC’s list, and the temptation for any Chancellor to change pension relief.  Give us a call if you’d like to discuss your options.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax advice.

The new Spring Statement replaces the Budget
March 2018

There will be no Spring Budget this March, but that doesn’t mean the Chancellor is staying silent.

On 13 March, the Chancellor will present a Spring Statement to the House of Commons, not a Budget.  The next Budget should be in the autumn, probably November.  The rationale for the revised schedule is to give more time to develop legislation and avoid the situation of changes taking effect from 6 April, but not reaching the statute book until three months or more later.

This problem was made worse in 2017, when the snap election meant most of the March Budget measures were put on hold. Some that took effect from 6 April 2017 – such as the reduction in the money purchase annual allowance – were in a Finance Act that only received Royal Assent on 16 November.

Despite the new schedule, there seem to be plenty of people expecting a Spring Budget in March, perhaps because 2017 was an unusual year – with two budgets and three Finance Bills.  However, 2018 should be much quieter on the tax front (assuming there is not another surprise election).

Whilst there is no Budget, there may still be changes announced on 13 March that have immediate effect.  Few Chancellors can resist the opportunity when they are in the parliamentary spotlight.  Mr Hammond’s predecessor was a classic example, as some of George Osborne’s Autumn Statements were more like Budgets than the real thing.

If you are considering year end tax planning, then it could make sense to complete any transactions before 13 March.  If you need of assistance in that planning, you should contact us as soon as possible.

The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax advice.