Eldon

On Friday 30th September, the Eldon team completed their ’20 Miles for 20 Years’ challenge, with a 20-mile hike around Ullswater Way.

The purpose was to celebrate 20 years of the firm’s existence, with the funds raised being directed into our Charitable Fund with the County Durham Community Foundation (the Foundation). Funds will then be applied to the Foundation’s Poverty Hurts Appeal – a cause close to our hearts and homes. More information about the Appeal is available here.

Against near-extreme weather, the team completed the challenge within 9 hours – a great feat for a route that can typically take up to 12 hours!

We are just shy of our target of £2,500, excluding any Gift Aid claimed on donations. Eldon will be matching the donations received, up to our overall target, and the Foundation will also match 50% of the funds that are directed to the Appeal. This is an effective tripling of donations.

We would like to thank all who have supported us with such a great cause, that is as important as ever in the current climate. Here’s to more charitable events to come!

Thank you!

New Chancellor, Kwasi Kwarteng, announced a sweeping package of tax cuts in his mini-budget last week – the biggest the UK has seen in the last half-century. Below we have outlined the main measures.

• Basic rate income tax is set to reduce from 20% to 19% from 6^th April 2023. This is the first cut to income tax in 15 years and is the lowest the basic rate has ever dropped to in the modern income tax system.

• The additional rate of income tax (45%), for those earning over £150,000, is set to be abolished from 6^th April 2023. This means that all earnings over the higher rate threshold (currently £50,270) will be taxed at 40%.

• The 1.25 percentage point increase in National Insurance Contributions has now been reversed, effective from 6^th November 2022.

• The planned rise in corporation tax has also been scrapped, keeping this at the current 19% rather than the proposed 25%.

• Stamp Duty Land Tax has been cut, with the threshold after which tax is paid rising from £125,000 to £250,000. For first-time buyers this has risen from £300,000 to £425,000. The maximum value of a property on which first-time buyers’ relief can be claimed is set to increase from £500,000 to £625,000.

The Government has coined the package its Growth Plan, with the intention being to tackle energy costs to bring down inflation, back businesses, and help households. An ambitious target of reaching a 2.5% trend rate of growth has been set, forming the focus of the plan. As can be expected, the announcement has so far received mixed reviews.

If you have any queries, please contact a member of the team.

As a mark of respect for Queen Elizabeth II, we will be closing our office on Monday 19^th September for the funeral.

We will reopen at 9am on Tuesday 20^th September

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.

With the cost of living crisis taking hold and energy/fuel bills increasing significantly, many individuals have been forced to make cut-backs where possible. One such area appears to be pension savings, to help provide more disposable income on a monthly basis. Whilst this may be temporary, and reductions minor, we need to consider the longer-term impact.

In a recent study, one in twenty UK adults confirmed that they had stopped their monthly workplace pension contributions in response to rising cost pressures. A further 6% of the 2,000 respondents to the survey by pension provider, Canada Life, said they were considering pausing pension savings now, with a further 9% considering doing so in future.

Canada Life’s modelling found that a 40-year-old earning £50,000 per year, who paused pension contributions of 8% for one year would have around £15,000 less in their pension by retirement at age 67. In giving up this potential £15,000, they would have only saved contributions of £4,000 gross over the year (£2,720 net, assuming an income tax and National Insurance saving on the contributions).

A further consideration is that with most workplace pension schemes, contributions are matched to a certain level by the employer. Therefore, a reduction in employee pension contributions may also mean a reduction in employer contributions, compounding the long-term implications.

However, it is important to remember that these are unprecedented times, with the energy price cap increasing almost 80% in September 2022. A temporary reduction in pension contributions may therefore be necessary for some people to help meet monthly outgoings.

What individuals should keep an eye on is that longer-term retirement savings aren’t forgotten about following any reduction in contributions. Doing so could lead to an increasing number of individuals being unable to meet their retirement goals, potentially having to work longer than planned, or forgoing their intended lifestyle in retirement.

This is where effective financial planning is key, taking into account short-term needs and balancing these with longer-term goals and objectives.

For those with invested pensions, it is crucial to understand exactly how your funds are invested. This can be particularly important as you move closer to retirement, as your plans for accessing benefits will impact the level of investment risk that is suitable.

The introduction of Pension Freedoms legislation in 2015 means that you no longer have to use your pension to purchase an annuity (a guaranteed income for life). In addition to annuity, a range of other access options are available. For instance, you are now able to draw flexible income/capital payments from a pension, leaving the remainder invested, under the flexi-access drawdown option.

Some providers offer ‘lifestyle’ investment funds which are designed to reduce in risk as you approach your selected retirement date. These are typically aimed at those targeting an annuity purchase or full lump sum withdrawal at retirement, to try and reduce investment volatility and large swings in value leading up to this. This is usually done by switching from higher risk assets such as equity (stocks & shares) investment to holding more in fixed-interest securities (e.g. gilts/Government bonds).

Lifestyle funds are not suitable for all investors. However, they can often be the default investment approach for a pension arrangement. For those looking to defer pension access at retirement, or access their benefits in stages, lowering the level of risk may not be appropriate. For instance, if there is no intention to ever access the funds, a higher level of risk might be suitable to aim for a higher long-term return.

Recent performance of some lifestyle funds highlights the risk of investing in this type of fund where there is no real need to do so. As interest rates are on the rise, gilt prices have typically fallen. This has skewed the performance of some funds that are weighted heavily in fixed-interest securities, with some experiencing large falls despite intending to be low-risk. Whilst this is less than ideal for those who are aiming to reduce the risk of their portfolio near retirement, it is unnecessary and counterproductive for those who have no need to lower the risk level. The position is worse for those who have a need to take a high level of risk to meet their objectives.  

In short, your investment choices will be specific to your personal circumstances and long-term objectives; it can be difficult to try and fit these into a ‘one size fits all’, lifestyle approach.

In assessing an individual’s risk profile, we consider risk based on three elements:

• Your tolerance – essentially, how you feel about risk.
• Your capacity – how much risk you can afford to take.
• Your need – the level of risk you need to take to try and meet your objectives.

Each of the above will impact the level of risk that is suitable, which is personal to an individual and subject to change as needs and goals develop over time. As such, it is important that the risk level of a portfolio and the suitability of this are kept under regular review, which is a key part of our ongoing service.

If you would like to discuss any of the above further, please don’t hesitate to contact a member of the team.

*Please note that the above should not be taken as advice and is intended for information purposes only. We would always recommend speaking with a financial adviser about your pension options/planning before taking any action.

From 6^th July 2022, the level at which people start making National Insurance contributions (NICs) rose from £9,880 to £12,570.

According to the Treasury, the threshold change means that 70% of UK workers will pay less in NICs, even after accounting for the 1.25% increase through the Health and Social Care Levy which came into effect on 6 April 2022.

The threshold rise was previously planned for the end of parliament, but the former Chancellor brought forward these plans amid the rising cost of living.

If you would like to check how the National Insurance contribution changes will affect you, you can use HMRC’s calculation tool.

If you would like to discuss these changes, please do not hesitate to contact a member of our team.

This year marks Eldon’s twentieth birthday, the big 2-0! You may have seen in the Summer Newsletter that the Eldon team will be celebrating by completing a beautiful (but tough) 20-mile walk around Ullswater on Friday 30^th September.

Donations that the team receives will be directed into our Charitable Fund with the County Durham Community Foundation. Our Fund is to be used to support local charities through the provision of grants, focusing on those that provide financial education, financial planning, and debt management solutions.

If you would like to offer your support, you can find donation details on our CDCF Enthuse page.

Any donations would be greatly appreciated!

If you would like any more information on the above, or our work with the County Durham Community Foundation, please don’t hesitate to contact a member of the team.

The deadline for registering trusts on the new Trust Registration Service (TRS) of 1^st September 2022 is fast approaching and now under 2 months away.

As a reminder, the new rules, which were introduced on 6 October 2020, extended the scope of the TRS to UK (and some non-UK) trusts, regardless of whether or not the trustees have become liable to pay any tax. Following this, many trusts that are not liable to tax, nor expected to be in the future, have been caught under the new rules and must register.

In terms of registering the trust, there are two possible options to achieve this:

• The trustees can authorise an ‘agent’ to register the trust on their behalf – but, as per HMRC guidance, it’s only possible to register as an agent if the business operates as an accountancy service provider, or;
• The trustees can register the trust themselves, with one trustee designated as the ‘lead trustee’ for HMRC correspondence

 
It should be borne in mind that the registration process is relatively straightforward, particularly for non-taxable trusts, and the trustees may wish to consider carrying out the registration themselves, potentially with some support from their financial adviser, rather than pay a third party. Following registration, the trustees need to be aware of their ongoing requirements.

If the trust is liable to tax for any tax year, you must declare on the trust register that the details of the persons associated with the trust are accurate and up to date. You must do this whether there have been any changes or not.

If the trust is liable to Income Tax or Capital Gains Tax, you’ll also need to confirm on the trust’s Self Assessment return SA900 that you’ve either:

• updated the details on the trust register
• confirmed that there have been no changes to the trust on the trust register

 
If the trust is not liable to tax, HMRC do not need an annual declaration.

Once registered, third parties who deal with the trust, such as a financial planning firms like Eldon, will need to see proof of registration, as part of the standard money laundering and ID checks that take place. A downloadable PDF can be obtained through the TRS as evidence.

With rising inflation, you may have found yourself looking more closely at your household budget, prioritising where your hard-earned income and savings should be spent. Whether you are running a monthly deficit or surplus, budgeting is a crucial tool in understanding exactly where your money is going, helping you ensure it is working in the best way for you.

Below, we have compiled a number of tips to make the most of your own budgeting.

Start Simple

If the idea of budgeting sounds daunting, start with a simple spreadsheet of all of your known expenditure. This will include costs that are easy to ascertain – think utility and food bills. Once you have this, you can start to add costs that are trickier to determine, for instance personal grooming and holidays.

Using a spreadsheet will allow you to total up costs quickly and amend figures as your circumstances change. Your budget should be a working document that you consult and adapt regularly, maintaining its accuracy.

Work up to Including Everything

Eventually, your budget should include everything – from large to small expenses. This will help ensure it is an accurate reflection of your finances.

This also includes anything that a partner pays for, even if you keep your affairs separate, to show your expenditure as a household.

Don’t Forgot One-Off Costs

Remember to include discretionary expenditure, or at least an assumption for this. One-off costs (such as car insurance, building work, Christmas/birthday costs) should be accounted for so that the cash is available when such things crop up. Savings for this type of expenditure could also be held in a separate account to help limit overspending. This might also help you to fund things like car insurance on an annual rather than monthly basis, reducing the overall cost.

Save First, Spend Later

It might seem obvious to spend each month and save anything leftover. However, this can make saving optional. Alternatively, understanding how much you can afford to save each month means you can move this away from a main account to a separate savings account on the first of the month. Again, this helps prevent overspending.

Factor In Some Fun

Adding a little wiggle room for something fun, like a cinema trip or coffee with a friend, can make it easier to stick to your budget in other areas. Budgeting isn’t short-term; think of this like a cheat day for your finances.

Ask For Help

If you are just starting out with budgeting, it might be helpful to ask those around you to give you an idea of some of their costs. This can help you to start planning while you are figuring out your actual spending habits, for instance if you are just starting out on your own.

Of course, we are also happy to offer our clients a helping hand with their budgeting. If you have any questions on the above, or would like any more information, please contact one of the team.