As we welcome summer, the weather seems to be playing tricks on us. The recent spell of cold and wet days has left us all wondering if we skipped right past the sunny season. Despite the lack of summer warmth, we are thrilled to share some wonderful news and updates from Eldon.
Find out more here.
There has recently been an influx of convincing scams circulating the UK and with the development of Artificial Intelligence (AI) continuously progressing, so are the methods fraudsters use. It is important to stay alert and take preventative measures to help avoid these scams.
What can you do to avoid a scam?
Who to report a scam to?
HMRC have made improvements to their mobile phone app which could help individuals to find information and manage taxes, without needing to pick up the phone.
The app allows you to:
• Check your PAYE tax code – this ensures you are paying the correct amount of tax on your income.
• Claim a P800 repayment – if you have paid too much tax, you can claim the repayment through the app and receive the refund via BACS.
• Check your State Pension forecast – this shows the State Pension you could get when you reach State Pension age. You can also then check if there are any gaps in your National Insurance contribution record and the benefits of paying them.
• View your Self-Assessment – you can pay your bill through the app and add deadline reminders to your phone calendar.
• Track any forms and letters sent to HMRC.
• Claim Child Benefit and view your child benefit payment history.
The app is free, easy to use and is secure and can be downloaded from either the iOS App Store or the Android Google Play Store.
Once you have downloaded the app, you can either log-in if you already have a Government Gateway account or sign up.
There’s no requirement to use the app, so you can still use the Government Gateway online as normal or contact HMRC by phone on 0300 200 3300 or by post at:
Pay As You Earn and Self Assessment
HM Revenue and Customs
BX9 1AS
For working parents, there have been some recent changes to the benefits available from the Government, which are coming into force during the 2024/2025 tax year. Two of the main changes were announced in the Spring 2024 budget which affect Child Benefit, as well as the provisions for free childcare.
Child Benefit
Child Benefit is available if you’re responsible for bringing up a child under the age of 16 (or under 20 if they remain in approved education or training). An allowance is paid every 4 weeks which for the 2024/25 tax year is £25.60 per week for the first child and £16.95 per week for each additional child thereafter. This can only be paid to one of the parents, not both.
However, for those earning above £50,000 pa, this previously meant they would suffer the High Income Child Benefit Charge. This applied regardless of which parent was in receipt of the Child Benefit and the charge is incurred at a rate of 1% for each £100 earned over £50,000 pa. Therefore, when income was above £60,000 pa, the High Income Child Benefit Charge was applied in full and the full amount must be repaid.
As an example, a household, with two partners earning £50,000 pa each, would not incur the charge. However, a household with one partner earning £60,000 pa and the other earning £0 pa, would incur the full charge.
Since 6th April 2024, the threshold for the High Income Child Benefit Charge has increased to £60,000 pa and the charge is at a rate of 1% for each £200 earned above £60,000. Therefore, once earnings for an individual exceed £80,000 pa, the High Income Child Benefit Charge is applied in full and the full amount must be repaid.
Individuals who are liable to pay the High Income Child Benefit Charge are required to file a Self Assessment tax return to declare this and pay the charge, each January after the end of the tax year the charge applies.
Going forward there are further consultations planned to base the charge on ‘household income’, rather than the income of the highest earner in the household. These future changes are expected to be implemented by April 2026. There are no further details on how this will work at this time, however.
Childcare
Free childcare hours are now being expanded, and since 6th April 2024, those with 2 year old children have been entitled to 15 hours a week free. From September 2024, children aged 9 months will be entitled to 15 hours a week free, and from September 2025 all children from 9 months old will be eligible for 30 hours a week free childcare.
In order to qualify, both parents must be working and earning at least £9,518 pa but less than £100,000 pa, on an adjusted net income basis. This is income after certain deductions such as pension contributions and gift aid donations.
Eligible parents of 3 year old and 4 year old children already receive 30 hours a week free childcare, so this will not change for them.
For each of these benefits, with some careful planning, it is possible that you can still qualify for them both if you currently don’t due to income levels. As Financial Planners, we assist our clients with such planning where possible.
The 2024 Spring Budget announced the launch of British Savings Bonds.
British Savings Bonds are a savings account offered by National Savings & Investments (NS&I) and are intended to be priced mid-market in relation to similar products with the aim of savings being “invested back into supporting the UK”.
The account on offer is a 3-year fixed-term deal with an interest rate of 4.15% pa gross. As expected, in terms of competitiveness, you can achieve better interest rates on the open market at present, with the most competitive on a 3-year fixed-term account currently being 4.70% pa gross (as of 15th April 2024).
As the NS&I British Savings Bonds are not ISA accounts, any interest earned is paid gross, and hence, if you receive interest over your personal savings allowance (£500 for higher rate taxpayers and £1,000 for basic rate taxpayers) the excess will be taxed at your marginal rate of income tax. There are slightly different rules that apply to nil rate taxpayers and all interest received by additional rate taxpayers is taxable.
It is also important to note that as the interest rate is fixed for 3 years, you cannot withdraw your money within those 3 years, so you must ensure that you do not require the capital you place in one of these accounts until it has matured. It is therefore important to ensure an adequate accessible cash reserve is available for emergencies and short-term needs.
One benefit of holding your cash with NS&I is that it is backed by the Treasury and therefore your capital is fully protected. Savings deposited with most other banks and building societies are covered by the Financial Services Compensation Scheme (FSCS) but your capital is only protected up to £85,000 per person per institution.
You can deposit from £500 up to £1million in a British Savings Bond account, so for those seeking the simplicity of holding savings with one provider and can afford to tie up capital in the short term, the British Savings Bond may be of interest.
With the 2024/25 tax year fast approaching, it’s worth considering the various allowances available to individuals. Such allowances will ‘reset’ from the beginning of the new tax year; 6th April 2024.
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 an ISA each tax year and is currently £20,000. This allowance can be split across the following:
– Stocks & Shares ISA
– Cash ISA
– Lifetime ISA (maximum of £4,000 pa)
– Innovative Finance ISA
A new rule coming into force in the new tax year is that you are now able to contribute into multiple ISAs of the same type, as long as you keep within the overall limit.
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 maximum amount you can save into pensions each tax year and receive tax relief, before incurring a tax charge. The standard Annual Allowance is £60,000 pa, although separate limits may apply that can reduce this i.e. Tapered Annual Allowance.
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. This is however limited by the Annual Allowance. Income Tax relief can only be received until age 75.
Capital Gains Tax (CGT) Annual Exempt Amount
Every tax year, individuals have an Annual Exempt Amount for Capital Gains Tax. This is the amount that capital gains can be realised without tax implications. A gain is the ‘profit’ that is made on the disposal of certain assets.
The annual exempt amount for 2023/24 is £6,000, which is reducing to £3,000 for the 2024/25 tax year.
Inheritance Tax Gifting Exemptions
Every individual is entitled to an annual gifting exemption of £3,000 pa. This amount can be gifted and will immediately fall outside of their estate for the purposes of Inheritance Tax. Any unused amount can be carried forward to the next tax year, but no further.
Individuals can also take advantage of the ‘gifts out of surplus income’ exemption, which also immediately fall outside of their estate for inheritance tax purposes. Certain requirements must be met to be eligible.
Summary
Within our ongoing service, we manage the above allowances and exemptions within our clients’ wider financial planning. This ensures that they are making good use of their resources each tax year.
If you would like any more information on the above, please do not hesitate to contact a member of our team.
Earlier this month, we welcomed Laura to Eldon. Laura will be strengthening the administrative arm of our team.
Below is a short introduction from Laura:
“I moved back to the North 6 years ago after living in London for several years, where I worked in the city for a boutique VCT investment company. Since moving back, I have spent my time as an administrator within a FTSE 100 company specialising in Financial Planning & Wealth Management.
I joined Eldon in 2024 as I wanted to work for a firm that prides itself on putting clients first.
Outside of work, I am usually found running around after my two young children, attempting to perfect my sourdough bread, exploring nature, and watching the latest film on the big screen.”
We are thrilled to have Laura as part of the Eldon team.
There were no great surprises in the Spring Budget announced on Wednesday 6th March 2024. We’ll consider the impact for each of our clients at their planning meetings but for those who would like a general update, we’ve set out some of the key takeaways below:
National Insurance
Capital Gains Tax
High Income Child Benefit Tax Charge
Furnished Holiday Lettings
UK ISA
Business and Investment
Other Key Items
The Budget also confirmed that UK inflation is forecast to fall below 2% later this year (the Bank of England’s target is 2% pa). Growth in the UK economy is predicted to be 0.8% during 2024 and 1.9% during 2025. As with all forecasts, these are estimates and predications can go awry, but they can be useful insight when helping us assess the choices we make about our finances.
The government has announced that it will put legislation in place to allow parents and carers to apply for National Insurance Credits where they have not claimed Child Benefit, to ensure that people do not miss out on their State Pension entitlement.
In most cases, you can get a full State Pension if you have 35 qualifying years of National Insurance contributions, and you need a minimum of 10 qualifying years to receive any State Pension entitlement. One way to earn a credit other than through employment or making voluntary contributions is by claiming Child Benefit. This means a parent or carer can be credited with National Insurance Contributions until their youngest child is 12, even if they are not earning.
Child Benefit payments are received tax-free as long as neither parent earns more than £50,000 a year. However, if earnings are higher than this, some or all of the Child Benefit will need to be repaid in an extra form of Income Tax known as the ‘High Income Child Benefit Charge’.
In April last year, the government recognised concerns that some eligible parents who had not claimed Child Benefit, often to avoid the High Income Child Benefit Charge, could miss out on their future entitlement to a full State Pension. The government said the issue would be addressed to ensure that those affected are not disadvantaged due to not claiming Child Benefit.
HMRC said legislation will be brought forward and will allow individuals to claim this credit from 2026, and eligibility will be closely based on the criteria for receiving Child Benefit. The credit will add qualifying years of National Insurance where eligible, which will support future State Pension eligibility. Transitional arrangements will ensure those affected since 2013 are still able to claim.
Going forward, applications will be available for 6 years following the relevant tax year and the government plans to bring forward secondary legislation as soon as possible.
You can read more about checking your State Pension entitlement here.
The end of 2023 saw positive news in markets, despite experts predicting doom and gloom for the economy at the start of the year. Inflation came in lower than expected and markets speculated that major central banks could cut interest rates through 2024. The Federal Reserve Bank set the table for as many as 3 interest rate cuts through 2024, whilst the Bank of England awaits further evidence that inflation will fall to the 2% target, and stay there, before lowering rates.
With many commentators suggesting that markets may be too optimistic about rate cuts this year, it is clear that the path to falling interest rates remains uncertain; both this and inflation will continue to dominate markets in the short term. So, what does this tell us about what we can expect in the coming months? The truth is nobody knows!
It is not possible to predict the short-term direction of markets and we can never know when they might fall suddenly, whether rallies will continue, and how long they will go on for, despite what headlines might say. Uncertainty in markets causes volatility and, as you might expect, the main factors that contribute to uncertainty are unknown events that cannot be predicted.
So, what does matter? We know it is important as Financial Planners to ensure that our clients are happy with the amount of investment risk they are taking within their invested portfolios. When we talk about risk, we generally mean the level of volatility within the portfolio, rather than the risk of losing all of your money. It’s really important to make sure this is ‘right’ for you as this, as well as maintaining a comfortable cash reserve, can make the difference between being able to accept market movements or not.
No matter what the forecasts are for the months ahead, our philosophy remains the same at Eldon – remaining invested in a well-diversified portfolio, appropriate for your circumstances, risk tolerance, and long-term goals, is what will ultimately lead to a much better outcome from an investment perspective, rather than trying to predict the short term and the unknown.
