We have held off writing this piece pending developments in the ongoing conflict in Ukraine. It now seems clear that an early cessation of the conflict is unlikely and hence we wanted to reassure you in respect of the impact on your financial planning arrangements.

World stock markets remain particularly volatile. Under rules that were introduced in 2018, you may receive a notification from us that the value of your portfolio has fallen by 10% or more since your last quarterly valuation. Many clients received such letters in the early stages of the covid crisis so you may be familiar with this. Whilst such an event is unwelcome, many of you will have experienced market downturns before now and know that the best course of action is to sit tight and wait for the value of your portfolio to recover. One of the main reasons that we show performance graphs in our review meetings is to demonstrate that market falls are not unusual, that recovery follows, and the long-term trend has been upwards.

The unknown in any market downturn is how long a recovery may take to materialise and we cannot begin to forecast this in respect of the Ukraine conflict or any other downturn. However, we aim to mitigate the risks of such downturns by means of our financial planning incorporating cashflow modelling. The following planning mechanisms are common to all Financial Plans that we create and will vary simply with personal circumstances:

• We recommend that all our clients hold a reserve of accessible cash savings that feels comfortable in all foreseeable circumstances. This means that if some form of emergency arises there should be enough in savings to cover that need if investments markets happen to be down.

• For larger cashflow needs, we always ask clients what major expenditure plans there may be over the next few years and then plan to have that cash available in advance. Again, this avoids the need to sell investments at an inopportune time.

• Where regular withdrawals are being taken these are usually set at a level whereby they can continue regardless of market downturns. The sustainable withdrawal level that we recommend is a long-term average that takes account of such events.

Using these mechanisms means that in the vast majority of circumstances clients can rest easy during a market downturn. But if you remain concerned you can consider the following steps:

• Defer any expenditure if possible until markets recover and then take a withdrawal from your investments.
• Reduce or stop withdrawals from investments, using cash reserves in the interim until recovery.
• Take a withdrawal from your investments in the full knowledge that the value will not be as high as it was a few months ago.

Of course, if you are considering further investment then investing when markets are low can be a benefit. Those making regular contributions to their investment and pension portfolios will be buying more units for each contribution made.

Financial markets across the world have reacted in a volatile manner to the situation in Ukraine and markets will likely remain volatile as the situation develops due to the uncertainty.

You may feel concerned about your investments given the news emerging from Ukraine, and this is entirely understandable. If you are feeling concerned it is important to remember the following:

• Investing in a well-diversified investment portfolio means that the natural movement of markets is a normal part of investing. Investment values rise and fall in the short term, but in the long term, the trajectory of markets has been positive.
• Long term history has shown that markets do eventually recover, no matter what challenges the global economy has faced.
• It is important to try to keep calm throughout periods of volatility and not make any sudden changes to your investments. Remember, as the old investment saying goes, it is time in the market – not timing the market – which is key to long term returns.

We will continue to monitor events very closely and, if you are a client, we will be in touch should we feel any action is needed before our next meeting.

However, if you have any personal concerns please do get in touch – we are happy to talk this through with you and reassure you that your plans are still on track.

With the end of the current tax year fast approaching, it’s worth considering the various allowances available to individuals and keeping track of the use of these. Such allowances will ‘reset’ from the beginning of the next tax year; 6^th April 2022.

Below, we have outlined some of the key considerations and the current rules:

ISA Allowance

This is the maximum amount that can be invested into ISA wrappers each tax year, currently at £20,000 pa. It can be split across a Stocks & Shares ISA, Cash ISA, Lifetime ISA (maximum of £4,000 pa), and/or an Innovative Finance ISA, as long as you keep within the overall limit and don’t contribute to more than one of each type.

Money held within an ISA is free from Income and Capital Gains Tax, and withdrawals can be made tax-free.

Pension Allowance

Your Annual Allowance is the most you can save in pensions in a tax year with tax relief applying before incurring a tax charge. The standard Annual Allowance is £40,000 pa, although separate limits may apply that can reduce this.

The maximum you can contribute to a pension and qualify for Income Tax relief is the higher of 100% of your relevant UK earnings or £3,600 gross, subject to your Annual Allowance. Income Tax relief can only be received until age 75.

Capital Gains Tax (CGT) Annual Exempt Amount

Each year, individuals have an Annual Exempt Amount for Capital Gains Tax, above which tax will be payable on gains. By gain, we mean the ‘profit’ that is made on the disposal of certain assets. The exemption can be managed within an individual’s planning to help minimise CGT liability.

The annual exempt amount for 2021/22 is £12,300 and is frozen at this level until April 2026.

Inheritance Tax Gifting Exemptions

Individuals can make use of their annual gifting exemption, currently £3,000 pa, by gifting this amount and having it fall immediately outside of their estate for Inheritance Tax purposes. Any unused amount can be carried forward to the next tax year, but no further.

Depending on their level of income and expenditure, individuals may also be able to make use of the ‘gifts out of surplus income’ exemption. Certain requirements must be met to use this, but if used successfully the gifts will also become immediately free of Inheritance Tax.

Summary

We manage the above allowances and exemptions within our clients’ wider financial planning, as part of our ongoing service. This ensures they are making good use of their resources over time.

If you would like any more information on the above, please do not hesitate to contact a member of our team.

On September 1, the Trust Registration Service (TRS) finally opened for the registration of non-taxable trusts.

Previously, only trusts that have UK tax to pay had to register for the TRS but all UK express trusts, including non-taxable trusts are now required to register with HMRC, unless they are specifically excluded.

Express trusts are usually created by a written deed and include the majority of trust plans used for estate and inheritance tax planning.

Non-taxable trusts have approximately 12 months to register from the date the Trust Registration Service went live. The TRS Service will ask trustees to register the identity of trust beneficiaries and in certain circumstances, details of the trust assets.

September 2022 may feel like a long way off now, but if you are a trustee of a trust, it is important to consider whether you will need to register. If you need any guidance, please contact us and we would be pleased to help.