We are saddened by the passing of Her Majesty The Queen who was a much loved and respected figure across the globe.
She was inspirational and lived a life dedicated to public service. Our thoughts are with the Royal Family at this difficult time.
Once further details of the state funeral have been announced, we will let you know how this impacts our normal working arrangements.
The Consumer Price Index (CPI) rose by 5.4% in the 12 months to December 2021. This is the highest CPI 12-month inflation rate recorded in the National Statistical data series since it began in January 1997, and it was last higher in the historical modelled data series in March 1992, when it stood at 7.1%.
Inflation has been creeping above the Bank of England’s 2.0% target since May 2021, with significant increases in October, November and now December. But what are the main contributors to this figure?
Transport
Movements in transport costs have mainly been caused by the increase in the price of motor fuels. Fuel prices reduced over the 12-month period to February 2021 but have since increased to much higher levels. The average petrol price stood at 145.8p per litre in December 2021, compared with 114.1p per litre a year earlier.
The price increase of second hand cars has also been a factor, with a cumulative increase in used car prices of 28.0% since January 2021 compared with 7.3% over the same period in the previous year. This has mainly been driven by increased demand after lockdown and the global shortage of semi-conductor chips affecting new car production, which has steered consumers to the used car market.
Energy
This comes off the back of downward prices for energy and gas over much of 2020 and the first quarter of 2021, reflecting the reduction in the energy price cap at the time. This fall was reversed in April 2021 with rises of over 50% in energy costs, as gas prices hit record highs as the world emerged from lockdown.
The energy price cap is set to rise significantly again in April 2022 due to continued volatility of wholesale energy prices.
Looking ahead
We cannot be sure how much further inflation will rise, but the Bank of England has now raised the base interest rate to 0.5% to combat this, the second increase in as many months.
We will continue to monitor both inflation and interest rates and what this means for clients.
In light of the additional pressures some individuals and business are facing due to the impacts of COVID-19, HMRC has announced that they will be waiving late filing and late payment penalties on Self Assessment tax returns for one month.
Lucy Frazer, Financial Secretary to the Treasury commented:
“We recognise that Omicron is putting people under pressure, so we are giving millions of people more breathing space to manage their tax affairs. Waiving late filing and payment penalties will help ease financial burdens and protect livelihoods as we navigate the months ahead.”
In a usual tax year, the deadline to file and pay any tax due is 31st January, however the introduction of these penalty waivers means:
Despite the penalties being waived, interest will accrue on unpaid tax from 1st February 2022 as normal, so it is still better to pay on time if possible.
With only a few more doors to open on your advent calendar, Christmas is just around the corner!
Office Hours
The office will close on Christmas Eve at lunchtime, reopening again on Tuesday 4th January 2022. If you have any urgent queries over the period, please email them to enquiries@eldonfinancial.co.uk and we will ensure you receive a response.
From everyone at Eldon, we would like to wish you the very best for Christmas and the New Year and we look forward to seeing you in 2022.
As announced in the Autumn budget, any capital gains tax liability arising on the sale of UK residential property will now need to be paid within 60 days of the date of completion of a sale. This became effective immediately and applies to completions taking place on or after 27th October 2021.
Previously if buy-to-let property owners and second homeowners were to sell a residential property that resulted in capital gains tax (CGT) being due, this needed to be reported and paid to HMRC within 30 days of sale.
The 30-day deadline was a drastic change when brought in on 6 April 2020, as previously you simply reported the gain within the relevant Self Assessment return, with tax due by 31 January following the end of that tax year.
This change therefore gives a much better timescale to gather all the required information and complete any forms for HMRC’s reporting requirements. Particularly as such things can only be calculated once the sale has been completed and fees incurred for instance.
Reporting a Gain
For those with accountants, they should be able to take care of any reporting requirements, as agent on someone’s behalf.
To report a gain yourself, you would need to register on the Government Gateway for capital gains tax. This provides the facility to report and pay any capital gains tax. Please note, late filing penalties apply if a gain is not reported within the 60-day time frame.
You would also need to report the gain on the relevant Self Assessment, as would have been the case previously. After this, any under/over payments of capital gains tax will be settled, ensuring the overall capital gains tax position for the year is correct.
This week, Eldon welcomed Tom Babbé as a new addition to our paraplanning team.
Below is a short introduction from Tom:
I graduated from Newcastle University in 2021 with a Mathematics BSc degree and joined Eldon shortly after. Having worked in Financial Services before in my hometown of Guernsey, I knew that this was something I wanted to come back to after I had completed my time at university.
I was attracted to the focus on client relationships at Eldon and the family atmosphere within the company, making it a great place to work. Eldon is very supportive when it comes to studying towards qualifications which is something that I am looking forward to starting.
Aside from work, I am a keen baker and animal lover. You will either find me walking my yellow Labrador Phoebe around the tracks of County Durham or whipping up a Victoria Sponge. I am also an avid Newcastle United fan, so I spend most weekends watching football on the TV – which, more often than not, ends in tears.
On Wednesday 27th October, the Chancellor, Rishi Sunak, unveiled his plans for the Autumn budget including a proposed £150 billion post-Covid spending spree by 2024/25. He admitted that inflation is set to rise on average by 4% over the next year and taxes are also set to rise.
One of the biggest controversies is the cut to Air Passenger Duty despite the upcoming COP26 summit although the Chancellor claims that £30 billion has already been committed to greener measures since March 2021. The promise to increase Research and Development funding to £22 billion has been broken and now pushed back to 2026/27.
Some of the key points highlighted were:
The UK experienced rising levels of fraud throughout the coronavirus pandemic and it is estimated that more than £750m was stolen from consumers in the first six months of 2021. According to UK Finance, less than half of the money lost in these cases was refunded by banks.
Scams are becoming ever more sophisticated, and in previous years the largest losses have involved debit and credit cards. However, for the first time, authorised push payment (APP) fraud overtook this, which is where victims are duped into thinking they are paying a genuine organisation.
APP can involve large transactions, involving property purchases, but an increasingly common scam is where fraudsters pose as delivery companies, sending fake delivery text messages asking for payment to have a parcel redelivered.
What can you do to avoid a scam
Who to report a scam to?
Many savers will be aware of how low interest rates are at present and have been for several years now, with the most competitive rates on easy access savings accounts currently around 0.50% pa gross variable.
On the other hand, this has meant that rates on mortgages have been historically low. Many will remember rates typically being in double figures in the 1970s and 1980s, which for some would now seem hugely expensive.
We have now seen the launch of the cheapest mortgage in UK history by Platform, part of Co-op Bank, who are offering 0.79% fixed for 2 years. The average mortgage rate is also projected to fall to 1.6% in 2022. Between 2017 and 2019 the average was 2.1%, which reflects the downward trend.
With the combination of cheap mortgages and a housing shortage, it is thought that this could fuel an increase in house prices, despite the end of the stamp duty holiday at the end of this month.
Following the announcement by Boris Johnson on 7th September, we have outlined below points for consideration:
Social Care Plan
A new social care tax is set to be introduced across the UK to fund reforms to the care sector and NHS off the back of the Coronavirus. The intention is to implement a 1.25 percentage point increase in National Insurance from April 2022, for both employers and employees. From 2023, this is set to become a separate tax on earned income, in the same way as National Insurance, to be paid by all working adults, including those that are above State Pension age.
There is also set to be an increase of 1.25 percentage points in the rate of tax for dividends received from shares.
Overall, the aim is to raise funding in the range of £12bn pa, to be focussed primarily on health and social care in England, although Scotland, Wales and Northern Ireland are to receive £2.2bn of this amount in respect of their services.
Of the remaining funds, around £6bn has been earmarked for the NHS; just under £2bn is to go towards social care; and a portion will be spent on tax (paid by the NHS and the Department of Health and Social Care as employers). The remainder has not yet been allocated, pending a further announcement in the coming weeks.
Paying for Care
In respect of the funding for health and social care, this will see a number of reforms to the way in which people pay for adult social care in England. These include:
State Pension Increases
In conjunction, the Government has announced that it will suspend the ‘Triple Lock’ on State Pensions for one year.
Ordinarily, under this Lock the State Pension increases by the higher of the Consumer Price Index (CPI), average wage increase, and 2.5%, which means that it should increase by a minimum of 2.5% pa. However, following concerns that a post-pandemic rise in average earnings would see Pensions increase by 8% pa, the Lock has been temporarily suspended.
At present, the intention is to reinstate this after one year, after which the artificial boost to wages following the pandemic should have fallen out of the equation.
As always, if you have questions in respect of the issues raised in this article, please don’t hesitate to get in touch.
