Eldon

The deadline of 31st January 2024 for submitting Self Assessment tax returns for the 2022/23 tax year is looming. If you need to submit a tax return, it is important to do so by the deadline to avoid paying late filing penalties.

You can check whether or not you need to complete a tax return for 2022/23 by using the government tool.

If you submit your return later than the deadline, you will typically face a £100 penalty if the tax return is up to 3 months late. Should the return be submitted over 3 months late, you may be faced with a larger penalty.

Any payment for underpaid tax must also be received by HMRC by 31st January 2024. You will be charged interest by HMRC on any late tax payments:

• 30+ days late – you’ll need to pay a 5% penalty of the tax owed
• 6+ months late – you’ll need to pay a further 5% penalty of the tax owed
• 12+ months late – you’ll need to pay an additional 5% penalty of the tax owed

You can complete your Self Assessment tax return online here.

You can pay any outstanding Self Assessment tax bill online here.

For a fee, professional accountants can help you complete your Self Assessment, or complete it on your behalf, however you will need to provide them with the relevant figures. Please get in touch if you would like a recommendation for accountants we have previously worked with.

We are delighted to announce that Eldon has partnered with WizeUp Financial Education.

WizeUp, a financial education and employability charity, was founded as a not-for-profit company in 2011 and granted charitable status in 2020. They are highly experienced in making financial education accessible and interactive through the delivery of workshops in schools across the country.

Financial education equips young people with the tools to develop good money habits in preparation for adulthood, and we are passionate about supporting the provision of meaningful education in our area.

Eldon’s partnership with WizeUp will see workshops delivered in ten schools across the North East, and we look forward to seeing the experts at WizeUp in action.

The Autumn Statement on Wednesday 22nd November announced a few key changes, which we have summarised below:

State Pension

Prior to the announcement, we had been waiting for confirmation as to whether the Triple Lock guarantee would be retained for State Pensions. The guarantee sees the State Pension increase by the higher of inflation (measured by September’s CPI), the increase in average earnings (over the year to September), and 2.50%.

Over the year, the increase in earnings was the higher of the three, at 8.50%. The Chancellor is honouring the Triple Lock, so a full flat rate State Pension will rise to £221.18 pw (£11,501 pa) from April 2024. This is particularly interesting as the full rate is now nearing the tax-free Personal Allowance of £12,570, which has been frozen until April 2028. Many pensioners who previously haven’t incurred income tax could soon begin to face this as a result of the rising State Pension.

Pensions – Lifetime Allowance (LTA)

The Lifetime Allowance (LTA) is officially being rescinded, with this now written into legislation and due to take effect from 6th April 2024. Long-awaited clarification on some of the finer details has been provided:

• Tax-free cash will be limited to a lifetime amount of £268,275 (unless any protections apply). This will be known as the lump sum allowance (LSA).

• On death, a pension death benefit allowance will apply, which is the same as the previous LTA of £1,073,100 (assuming no protections apply).

o Any death benefit lump sums paid within 2 years of death and falling within the allowance will be tax free. Anything exceeding the allowance will be taxed at the beneficiary’s marginal rate of income tax.

o For any residual pension fund, if death occurred before age 75, beneficiaries will be able to draw from it entirely free of income tax.

o If death occurred after age 75, beneficiaries will be able to draw from the pension subject to income tax at their marginal rate.

• Protections will still be available to apply for, with a proposed deadline of 6th April 2025:

o Fixed Protection 2016 (FP2016) – This maintains an LTA of £1.25 million (or now, a tax-free cash allowance of £312,500). Under FP2016, unless you applied prior to 15th March 2023, you cannot contribute further to a pension plan.

o Individual Protection 2016 (IP2016) – This maintains an LTA (now tax-free cash allowance) based on the value of your pension benefits at the point the LTA reduced in April 2016, if over £1 million at the time. IP2016 does not limit further pension contributions.

ISAs

• The ISA allowance will remain at £20,000 for the upcoming tax year.

• Individuals will now be able to contribute to multiple ISAs of the same type each tax year, up to the overall £20,000 limit. Previously, this was limited to contributions to one stocks and shares ISA, one cash ISA, and so on.

• The government will allow partial transfers of ISA funds between providers during the year, with effect from April 2024.

National Insurance

• For employed individuals, the rate of Class 1 National Insurance (NI) contributions will reduce from 12% to 10% (where income falls within the relevant bracket to be paying at this rate). This will take effect from 6th January 2024.

• For self-employed individuals, the rate of Class 4 NI on profits will reduce from 9% to 8%, taking effect from 6th April 2024.

• Class 2 NI will no longer be mandatory for the self-employed where profits are above £12,570. However, individuals will still retain their State Pension entitlement.

• The rates for Class 3 NI will remain at £17.45 pw (£907.40 for a full year) for 2024/25. This is relevant for individuals making voluntary NI contributions to increase their State Pension.

Other Points to Note

• No changes were made to inheritance tax, despite reports that this was being considered. The Office for Budget Responsibility (OBR) report estimates that inheritance tax receipts will grow to £9.8 bn in 2028/29.

• State Benefits are set to increase by CPI (6.70%) from April 2024, including Attendance Allowance.

• Whilst not included in the Autumn Statement, we have since received confirmation from Ofgem that the energy price cap will rise by 5% from January, up to an annual average of £1,928.

We are delighted to announce that we have made the 2023 New Model Adviser Top 100 list for the 12^th year in a row! There is only one other company (in addition to Eldon) to feature every year since the inception of Citywire’s accolade.

Citywire’s New Model Adviser® magazine provides news on personal and business development and insights into the financial services industry. The assessment process for their Top 100 list includes a range of criteria such as professional qualifications, investment philosophy, staff training, fees, service offering, community engagement, and client education. The award recognises outstanding achievements and prominent leaders in the UK financial planning profession.

Congratulations to the Eldon team and thank you to our clients – we couldn’t have achieved it without you!

On 1^st October 2023, the McCloud remedy regulations came into force to remove age discrimination across public sector pension schemes.

What is the McCloud judgment?

In 2010, the government determined that the cost of public sector pension provision was not sustainable and in 2015, reforms were made to public service pension schemes, which meant some members moved from Final Salary into new Career Average Revalued Earnings (CARE) schemes. This changed the way in which their pension benefits in the new schemes were calculated from this point onwards.

Scheme members that were close to retirement at the time were protected from moving to the new schemes and could therefore remain in their existing arrangements. Subsequently, the Court of Appeal found these protections to be discriminatory against younger members. This ruling is called the McCloud Judgment, after a member of the Judicial Pension Scheme involved in the case.

The changes that have been introduced to remove the age discrimination are known collectively as the McCloud remedy.

For reference, the six largest public sector pension schemes in the UK are the NHS, Civil Service, Local Government Pension, Teachers’ Pension, Police and Firefighters, and Armed Forces schemes.

How are public sector schemes changing?

The government is now taking action to remedy the above by reverting affected members of public sector schemes back into the legacy schemes for the seven-year period between April 2015 and March 2022. The intention is to recalculate their benefits based on what their position would have been if they hadn’t switched to the new CARE arrangements during this time. All members will then join the reformed CARE schemes from April 2022 regardless of their age.

At retirement, those affected will be able to make a choice between the benefits provided by the two different schemes, to ensure they receive the most beneficial option for them.

Overall, this will either improve their current position or leave it unchanged; members will be no worse off as a result of the remedy.

What do I need to do?

If you have already retired, your pension fund administrators will work out if you are due an addition to your existing pension. Schemes will be in contact as soon as they can after 1^st October 2023.

For those who are yet to retire, your scheme will provide you with sufficient information to allow you to make an informed decision prior to you taking your benefits.

For those still in active service (contributing to your benefits), in some schemes, there may be new opportunities available to you as a result of being classed as a ‘new entrant’ to the reformed scheme. If this applies, your scheme will contact you to make you aware of your options. Please be aware that there may only be a small time-window to make a decision, so it’s important to read any notification you receive regarding this.

If you have any questions about the impact of the McCloud Judgment on your pension, please get in touch with one of the team.

Santander launched their new ‘Edge Up’ current account earlier this year, effectively replacing the 1-2-3 account which is no longer available to new customers.

Existing customers can still keep their 1-2-3 account if they wish, but it is worthwhile to check whether switching to the new Edge Up account will be more beneficial.

The Edge Up account is similar to the 1-2-3 account in many ways, with interest payable and cashback paid on selected bills. There are a few differences however, illustrated below:

As you can see there is potential for a greater amount of cashback to be achieved each month, with a maximum of £30 pm with the Edge Up account vs a maximum of £15 pm with the 1-2-3 account.

In addition, interest is paid at a higher rate and up to a higher balance. Santander have a handy tool on their website which allows you to assess which of their accounts is the most beneficial depending on the way you use your account. See https://www.santander.co.uk/.

Existing Santander 1-2-3 account holders can move to the new Edge Up account free of charge. To do this, you can simply log in online and complete the process through your online banking account.

Alternatively, it can be done in branch or by telephone. Once changed, you cannot move back to the 1-2-3 account as it is no longer available. Your existing account number and sort code will remain unchanged if you do decide to convert your account.

Note: This article is not intended to be advice and should not be viewed or relied on as such.

A Private Members’ Bill to help millions save more into their pension and start saving sooner has cleared Parliament and been granted Royal Assent. The changes reduce the minimum age for being automatically enrolled into a pension from 22 to 18 and remove the lower qualifying earnings threshold to enable pension saving from the first pound of earnings.

Auto-enrolment was designed to get more people saving for their retirement, meaning all employers must provide a workplace pension scheme for employees.

As things stand, the current criteria for an employer being required to automatically enrol an employee into a pension is:

• They’re classed as a ‘worker’
• They’re aged between 22 and State Pension age
• They earn at least £10,000 per year
• They usually work in the UK

For workers who do not meet the above criteria, it is still possible to request to join an employer’s pension scheme, however, an employer doesn’t currently need to contribute to an employee’s pension on earnings at or below:

• £120 per week
• £480 over 4 weeks
• £520 per month

The new laws will reduce the minimum age from 22 to 18, which will result in a huge difference to the retirement pots of young people. It is estimated that an additional 4 years of funding for an 18 year old could increase their pension pot by over £45,000.

These changes will also mean that all workers will be entitled to employer contributions and for those with earnings above £10,000, it is expected that they will eventually receive an additional £500 pa in total pension contributions.

The new measures are projected to raise total pension contributions by c£2billion each tax year.

The Department for Work and Pensions (DWP) has yet to comment on the timescales to implement these changes and is expected to launch a consultation on the plans. Despite the benefits to workers, this may have an adverse effect on businesses as costs will increase.

Funding for retirement is one of the most important objectives for most of our clients. If you would like to speak to a member of our team about the above, please do not hesitate to get in touch.

Eldon welcomed Ellie Boylan as a new addition to the administration team last Monday.

Below is a short introduction from Ellie:

“Upon leaving school in 2020, earlier than expected due to the COVID-19 pandemic, I decided my goal was to pursue a career in Financial Services. I secured an apprenticeship at a wealth management company in Financial Service Administration, achieving a distinction in 2021. Following this, I completed a further eight Chartered Insurance Institute (CII) vocational qualifications.

I have joined Eldon as a technical administrator with the plan to further my professional and personal development at a successful firm that puts clients first. I am eager to continue my studies with the hope of achieving my Diploma in Regulated Financial Planning!

Outside of work I enjoy travelling with my friends and family and attending music events around the UK.”

Ellie is an excellent addition to the team, and we can’t wait to see her achieve her goals and succeed with Eldon.

Paraplanner Tom has now gained his Diploma in Financial Planning.

Tom started his studies when he first joined Eldon in November 2021, gaining the Diploma in just under 2 years. Considering he has become a father and a husband in that time too, this is a fantastic achievement!

Tom is now working towards the Advanced Diploma in Financial Planning, with a view to achieving Chartered Status.

Well done, Tom, keep up the good work!

With Artificial Intelligence (AI) seemingly in the news every day, it is no surprise that developments in this area are under scrutiny. Ernst & Young partner, Saby Roy, quoted that ‘the entire world is in a discovery phase right now’, with every industry looking to branch out into AI technology in some way or another.

The financial services sector is no exception, whether it’s the use of ‘chatbots’ for consumers’ online questions, or its use to detect money laundering and potential fraud. According to UK Finance, fraud cost the UK £1.2 bn in 2022. Institutions such as Mastercard and TSB are in the process of trialling a new system designed to detect fraudulent transactions on the Faster Payments network within milliseconds. TSB have estimated that the technology could reduce push payment fraud (scam payments) by around 20%. Once established among larger players in the market, developments will likely spread more quickly to smaller institutions.

Whilst the potential benefits are becoming clearer, there are always downsides to consider. Some experts within the sector have raised concerns of the misuse of technology to make criminal transactions more effective. Earlier iterations of automated tools have also faced scrutiny over inaccurate results, with some wrongful arrests in the US following poor facial recognition technology.

Understandably, some also worry that advancing AI could push workers out of the employment pool. BT recently announced plans to lean-out its workforce between now and 2030, as they look to replace around 10,000 employees with AI.

However, history suggests that technological development will typically create jobs that no one can predict, or even understand. When we consider the role of the blacksmith in historic horse travel, it is unlikely that anyone could have foreseen the boom in car travel and, with it, car factory workers. According to the US Bureau for Labour Statistics, there were 6 times as many car factory workers than blacksmiths by 1950. Similar trends can be seen amongst train drivers Vs pilots, farmers Vs supermarket workers, and so on. Perhaps it is better to look ahead with the optimism of the car factory worker, as opposed to the pessimism of the blacksmith, or perhaps a healthy combination of both.

Overall, like most technological advances, it is likely that governance will be crucial in moving forwards with AI, ensuring that the benefits are monitored in line with the consequences, intended or otherwise.