In periods of uncertainty, such as those of recent times, the importance of estate planning is ever highlighted. Careful financial planning can be undone by the absence of a Will, or indeed the execution of and outdated one.

For many people, there has been a surge in requests for Will writing, putting in place Powers of Attorney, and other succession planning measures. An issue that has arisen, however, is that such planning involves the witnessing of signatures which has, understandably of late, proven somewhat problematic. As such, some firms have taken to witness the signing of Wills through windows, and even meeting in car parks to do so – socially distanced of course!

Of course, having your affairs in order should be a priority for most, if not all, even without the presence of events such as the Coronavirus; times like these simply reinforce the need. We recommend that all clients have in place provisions for Wills and Powers of Attorney as a minimum, with these as a cornerstone of holistic financial planning.

If you would like further information on how Eldon can assist you in your own succession planning, please do feel free to get in touch with a member of the team.

Further to the previous article on this topic, further guidance has been released from HMRC, now that the new legislation is in force.

From the start of this tax year, any Capital Gains Tax (CGT) that is due from the sale of a residential property must be declared and paid within 30 days of the sale.

Individuals must calculate the gain themselves (although they can use an accountant to help with this). If tax is due (after taking into account the annual exempt amount), the sale must be declared and tax paid using HMRC’s online portal here.

To use the portal, individuals must be registered to use the Government Gateway and will need their Gateway ID and passcode. If anyone has issues using this system, they should contact HMRC on 0300 200 3300.

The following information is required, so we suggest having it to hand prior to starting this process:

• property address and postcode
• date you got the property
• date you exchanged contracts when you were selling or disposing of the property
• date you stopped being the property’s owner (completion date)
• value of the property when you got it
• value of the property when you sold or disposed of it
• costs of buying, selling or making improvements to the property
• details of any tax reliefs, allowances or exemptions you are entitled to claim
• property type, if you’re non-UK resident

 
Agents, such as accountants, can also declare the Capital Gains Tax on behalf of individuals. Should this be a preferable option, it would be advisable to speak with your accountant regarding this.

Our enforced working from home meant that Jan Davies, our Administrator, retired from Eldon by ‘slipping quietly out the back door’ rather than leaving with our planned celebrations. Nevertheless, we all recognised her 5 years’ loyal service by raising a glass and eating cake in her honour!

Jan’s career spanned 44 years and before joining Eldon she had retired from Cleveland Constabulary where she worked on the front line, helping to keep drugs off our streets.

Her early career was in banking and financial services, so she quickly became a valuable member of our team, with a particular skill, from her investigative days, of spotting discrepancies and errors and working to benefit our clients.

Jan and her husband are looking forward to travelling the UK in their mobile home and she plans to become more involved with her local community, trying new activities and taking up opportunities.

All of us at Eldon wish her health and happiness in retirement.

Many things remain uncertain across the world at present due to the Coronavirus outbreak and financial uncertainty is a core concern for many. Following sharp falls, investment markets continue to be volatile in both directions on a daily basis. Many people are simply not able to continue with their usual employment and the loss of this income can place a strain on a person’s finances; across all demographics.

The power of good personal financial planning really does come into its own during these difficult times.

The element of our service our clients tell us they value most is how we bring their money and their lives together so that they blend together neatly whatever their personal circumstances.

We can model various scenarios for clients, showing them the effect of any changes to their financial circumstances. We can discuss reactions and steps that could be taken to help combat these ‘What If’ situations and provide reassurance at a time it is most needed.

Naturally, careful management of investments is an integral part of any financial planning and managing risk and return in a portfolio is part of what we do. Our clients tell us the peace of mind that comes with knowing their investments are in the right place for them is huge. Their finances are designed to meet their needs, and when investments take a downturn, as they do, our planning means the falls are of a level that they can tolerate; both financially and emotionally.

Such planning begins not just months but years before these events occur and reviewing a client’s affairs on a regular basis allows this to be refined and adaptations made.

We also see that, through inter-generational financial planning, we can help the whole family remain secure in challenging periods of their lives.

The success of financial planning allows our clients to concentrate on the truly important things in life at this time; knowing their finances are set-up in the best way possible for them.

If you would like further information on how Eldon can help you structure your finances effectively, please don’t hesitate to get in touch with a member of the team.

During this time when change is inevitable and fast-moving, here at Eldon we are keen to ensure we maintain open and transparent communication with our clients and our team.

We take our commitment to our clients seriously. Our investment in secure technology and stringent continuity plans has enabled us to be very well prepared, and as such we have been able to continue to hold our client meetings on a remote basis. Clients who have used this alternative have given positive feedback about our ability to continue to meet with them even during these unprecedented times.

Our team’s safety is paramount and we made the decision before the Prime Minister’s announcement to have all-but-one colleague work from home; post is being processed and our office remains open.

We do not anticipate having to close the business at any stage; our remote meetings have been very successful and we would anticipate being able to offer this service for as long as it is necessary.

If you do have any concerns or you would like to talk anything through, simply contact us as usual.

Here at Eldon, we are keen to ensure the health of our team, our clients and all their respective families and friends too. We are conscious that as active members of society we have many reliant upon us to provide reassurance and support in these times and we are keen to provide this in the most appropriate way for all.

We are very well prepared and have taken steps to ensure we can continue to provide our service through this time.

• We have the technology in place to hold remote meetings with clients and we are encouraging this as a preferred course of action for the safety of all
• We have been taking careful measures to ensure our office space is a clean and safe environment for everyone
• Over the coming days, we will reduce the number of colleagues physically in the office with an increasing number working from home

 
We do not anticipate having to close the business at any stage; our technology is good and very secure in the event our entire team needs to work from home.

If you do have any concerns or you would like to talk anything through, simply contact us as usual.

Current headlines are dominated by Coronavirus and the early announcements in the budget were no different, with £30bn in total announced to help try to curb the effects of the virus.

Looking past this, there were a few other key take-aways in the budget, which are summarised below:

Tapered Annual Allowance

The Tapered Annual Allowance has been a headache for many for a while and has often been something heavily criticised, there have been calls for it to be abolished. For those who were lucky enough to be caught by the Tapered Annual Allowance, a complex calculation takes place to assess total income for the year. First, the “threshold income” is assessed and if this above £110,000, then a calculation for “adjusted income” takes place.

If the adjusted income (which includes pension contributions) is above £150,000 for the year, the pension Annual Allowance is tapered away at a rate of £1 for every £2 of income above this level. If someone has pension input above their tapered annual allowance, with no carry forward of unused allowance available, an Annual Allowance tax charge is the result.

This has come in for strong criticism of late, especially as it has led to many Doctors and GPs not taking part in overtime, to prevent them incurring the annual allowance tax charge.

The announcement that the taper will increase by £90,000 was a welcome move. The calculation will remain the same, however the threshold income level will be £200,000 and the adjusted income level will be £240,000.

This should see that 98% of consultants and 96% of GPs are out of the taper altogether. Something which, given the current health crisis, will be very beneficial.

Junior ISAs

The Junior ISA allowance is set to more than double, from the current amount of £4,368 up to £9,000 pa. This is a significant increase of the allowance and if it remains at this level, in theory, parents could build a tax-free pot of £162,000 by using the allowance in full each year, by the time their child reaches age 18, assuming no growth and/or interest.

The standard ISA allowance for adults will remain at £20,000.

IHT

Many had been hoping for a simplification of the IHT regime, with recommendations for this having come from the report published by Office of Tax Simplification (OTS).

IHT was barely mentioned however, with no changes proposed during this Budget.

As a reminder however, the residence nil rate band will increase to £175,000 per person from 6th April 2020, or up to the value of an individual’s share in the main residence.

Income Tax

The income tax bands will remain unchanged for 2020/21 and the Personal Allowance will remain at £12,500. The income tax bands (after the Personal Allowance) are as follows:

Basic Rate (20%) – £1 to £37,500
Higher Rate (40%) – £37,501 to £150,000
Additional Rate (45%) – £150,001+

National Insurance

The threshold for paying Class 1 National Insurance (for employees) has been increased to £9,500, which will be a saving of £85 pa on average the Chancellor expects.

Other

Other key points noted in the budget are listed below:

• The lifetime limit on Entrepreneurs Relief has been slashed from £10m to £1m.
• Fuel Duty has been frozen for the 10th consecutive year.
• Duties on spirits, beer, cider and wine will be frozen.
• Economic growth is projected to be 1.1% for the year, revised downwards from the 1.4% predicted last year – although this does not take into account the impact of coronavirus and would still be the slowest growth the UK has had since 2009.
• Inflation is forecast to be 1.4% for the year – again this does not take into account coronavirus.
• £2.5bn has been pledged towards fixing potholes and roads being resurfaced over the next 5 years.
• The pension Lifetime Allowance (LTA) will increase to £1,073,100 from 6th April 2020 – this figure increases by CPI each year.
• CGT annual exempt amount is increased to £12,300.

Research from the World Economic Forum claims that the average UK retiree is likely to outlive their retirement savings by more than 10 years.

Men are expected to outlive their savings by 10.3 years on average, whereas women are forecast to be affected the most; outliving savings by 12.6 years.

It is clear that various pension schemes are under strain around the world and this places more responsibility on savers to prepare for their own retirement. However, the report shows that savings have not accelerated fast enough to cover the gap.

The UK government has aimed to reduce this gap by introducing workplace pensions for those earning above a minimum level, where it is compulsory for employers and employees to contribute. However, it is still possible for the employee to opt out of such schemes.

At Eldon, one of the major elements of our service is to ensure that our clients have sufficient funds throughout their life to cover expenditure requirements and meet their objectives. By using cashflow modelling software we can project forward our client’s circumstances allowing them to see in a clear, illustrative manner what their future position looks like. From here, our client can understand whether additional savings are required or even show where additional spending is affordable.

If you would like a better understanding of your financial affairs as a whole, please do get in touch with a member of the team and we will be more than happy to help.

Market volatility over the last week or so is a direct result of the global outbreak of the coronavirus, Covid-19. At this stage, we don’t know how long such volatility will continue as we cannot predict the full extent of the virus’ spread.

It is natural to feel concerned when the media is full of dramatic phrases and panic-inducing headlines, making market volatility seem much worse than it is. If you find yourself concerned about your investments, take a deep breath and consider these two key points about investment:

1. Investment volatility is a normal part of the investment journey

If, like all our clients, you have a well-diversified investment portfolio then the natural movement of markets is a normal part of investment. Investment values rise and fall and there is always a need to view investment over a longer term than panic allows us to. Once any event has passed, we would expect recovery as normal. The long term trajectory of investment markets has been positive, whatever the world has thrown at it.

Your planning is for tomorrow, not today.

2. Investment volatility should have no impact on your day-to-day living

All our clients’ finances are arranged in such a way that volatility in markets should have no impact on day-to-day living. This is one of the core values of our financial planning service. Your life should not be dictated by investment markets and don’t let the headlines lead you to think otherwise.

That is not to say the current situation is to be ignored. We continue to monitor events very closely and, if you are a client, we will be in touch should action be warranted before we meet again. However, if you have any personal concerns please don’t hesitate to contact us.

From April 2020, new rules for Capital Gains Tax (CGT) are set to come into place for landlords and those with additional properties in the UK, but are you aware of them?

CGT Timeframe

Currently, CGT is paid after submitting your Self Assessment tax return, no matter how the CGT is incurred. From April 2020 landlords (or those with an additional property) who sell and incur a CGT liability must pay the full amount of CGT owed within 30 days of the completion of the sale.

The rates of CGT will remain the same; for a residential property these are 18% for a basic rate tax payer and 28% for higher and additional rate tax payers. If however, for a basic rate, or even a non-tax payer, the gain is excessive enough to push an individual into higher rates of tax, then the portion of the gain that is within their basic rate band would be taxed at 18% and the remainder at 28%. The annual CGT exemption of £12,000 each can be applied still.

Therefore, people who are selling to realise profit must factor in the payment of CGT that will be owed shortly after completion, as failure to make the payment owed within the 30 days will lead to penalties.

A return must be completed and individuals must calculate whether any CGT is due, taking into account their annual exemption for the year and carrying forward unused losses. Individuals must also apply the correct CGT rate, either 18% or 28%, or a combination of both.

At the end of the tax year, a Self Assessment return must be completed, detailing total income and include the gain realised on the property. The true amount of CGT due will be ascertained and any repayments made or further CGT owed will be collected.

The 30 day period starts at the date of disposal. A return is not required where there is no CGT due, including where a gain is realised but is within the CGT exemption, or a loss has been realised.

At present, no detail has been provided by HMRC as to how to report this gain, but we will be monitoring this. Further detail is expected before the changes are implemented on 6th April 2020.

Private Residence Relief (PRR)

Currently, anyone who sells their main residence and lived in it throughout the period of ownership doesn’t have to pay CGT on any profits realised. To an extent, this relief applies to people who sell a rental property that used to be their former main residence. The relief is applied to the period the resided in the property as well as the final 18 months of ownership, regardless of whether the property is rented out or not in this final period. You therefore need to calculate what proportion of time the property was your main residence to obtain this relief.

The intention in doing so is to give you longer to sell a property after moving out before you are eligible to pay CGT. From April 2020, this 18 month period will be halved to 9 months.

Letting Relief

If you qualify for Private Residence Relief, at present you may also qualify for Letting Relief, meaning less, or no CGT is incurred. Letting relief only applies where, at some point during the period of ownership, the property has been let out as residential accommodation. The relief applies where:

• A gain will be realised and Private Residence Relief is available;
• Part or all of the property has been let out as residential accommodation during the period of ownership;
• A gain has arisen due to the property being let out (no longer being a main residence).

Under the new rules, the changes to this relief mean it would only apply to the period of time where the owner(s) occupied the property with the tenants at the same time.

The relief will still be applicable in some cases, but on the whole, it is expected that claims for this relief will be significantly fewer.

Summary

There are costs that can be deducted upon the sale of a property, such as Stamp Duty Land Tax paid on purchase, estate agent fees, solicitors fees, improvement costs made during the period of ownership. All of these will help to reduce the realised profit and thus, the potential CGT liability.

The liquidity should not be an issue, as after the sale investors should receive the proceeds. It would be prudent to therefore settle any CGT liabilities before deciding what to do with the capital.

As calculations must be made, individuals should tell their adviser or accountant immediately after the sale to ensure the calculation is undertaken correctly. It may even be beneficial to provide forewarning so that calculations can be prepared, with minor adjustments made upon the sale completion.