Eldon

In June, The Office for National Statistics (ONS) announced the Consumer Prices Index (CPI) rose by 7.9% compared to the previous year. This is down from 8.7% in May which reflects a ‘slowdown’ in the annual rate between May and June.

As inflation is beginning to slow, it is expected that future increases to UK interest rates will also ease. Currently the official Bank of England Base Rate is 5.00% which is the highest it has been since April 2008, during the global financial crisis.

At present, the most competitive easy access accounts are offering c4.50% gross AER. Therefore, by holding £10,000 in one of these accounts, you could be expected to receive c£450 per annum in savings interest.  With increasing interest rates, it is now more important to ensure your savings are held in the most tax efficient manner.

If you would like to speak to a member of our team about interest rates and ensuring funds are held in a competitive tax efficient cash account, please do not hesitate to get in touch.

Gemma’s been out and about recently at the local St Francis Junior school in Newton Aycliffe as part of their brilliant Believe & Achieve Day. The day was a huge success for all and saw Gemma talking with students about Financial Planning as a career option, skills needed, pathways into it, and her own career path.

Very well done to all the staff at St Francis Junior School for organising an excellent day for their students. Even more so, a HUGE thank you to all the students who had researched Eldon and the jobs we provide and asked lots of inspired and fun questions about these. It was a very relaxed and fun day and lovely to share stories with so many bright young people! The future is bright in the hands of these ones!

We are extremely proud of our ‘skydiving team’ who successfully completed their 15,000ft skydives at Shotton Airfield on the morning of Sunday 25^th June.

A huge thank you to the team at SkyHigh Skydiving who kept them all safe and to each and every one of you who has sponsored them. Eldon will be matching their fundraising, as will an anonymous donor, which means they have raised in excess of £5,000 for the County Durham Poverty Hurts Appeal.

The money is actively being deployed across County Durham now to help combat poverty at a time when it is so very needed.

If you would like to read more (or see more pictures) their website is: https://cdcf.enthuse.com/pf/skydive

BRAVO JAMES, JENNY, KENNY & GEMMA! We are proud of you all.

Individuals wishing to maximise their State Pension entitlement are able to purchase credit for missing years by making voluntary class 3 National Insurance (NI) contributions and the government is now giving people more time to make these contributions.

When the ‘new’ State Pension was introduced, transitional arrangements were put in place to allow people to go back all the way to 2006 to purchase any missing years. Originally, there was a deadline set of 5^th April 2023 to purchase these historic years, however, following capacity problems on government helplines, this was pushed back to 31^st July 2023. This deadline has now been pushed back further to 5^th April 2025 to allow individuals to purchase any missing years from 6^th April 2006.

Individuals can usually only pay voluntary NI contributions for the previous six tax years and after 5^th April 2025, the usual six year deadline will resume.

In addition to extending the deadline, the cost of paying voluntary NI contributions for years between 6^th April 2016 and 5^th April 2023 will remain frozen until 5^th April 2025.

How do I check if this will benefit me?

Filling in any gaps in your NI record by paying for voluntary NI can be money very well spent, but not everyone with an incomplete NI record will benefit by doing so. which is why it’s so important to obtain a State Pension forecast from Department for Work & Pensions (DWP) in the first instance.

Once you’ve determined that you have a shortfall, and these gaps are not going to be filled naturally through employment or other means, you should call the Government’s pension helpline to discuss your record and how to make payment. You can find contact details at: https://www.gov.uk/future-pension-centre

Whilst the cost of one full year’s class 3 NI is c£824 (2022/23 rate), this would see your State Pension increase by £302.86 pa. At this level, it would take around 3 years of the State Pension being in payment to ‘break even’ on the cost contribution. It would take a little longer if you’re a basic rate, higher rate, or additional rate taxpayer, however. But this is still a very good deal, given the average life expectancy.

We check State Pension entitlement for our clients as part of our service. If you would like to discuss this further with the team, please do not hesitate to get in touch.

HMRC has recently highlighted that more than 800,000 taxpayers claimed tax refunds for work expenses during the 2021/22 tax year and is reminding employed workers that they can claim tax refunds on work-related expenses that are not reimbursed by their employer through the GOV.UK website.

You can submit a claim through HMRC’s online portal, and it is suggested that it takes around 15 minutes. There is also a handy online tool available which allows you to check the eligibility of the claim before submitting it, together with guidance on the types of expenses that can be claimed.

These include:

• Uniforms and work clothing
• Buying work-related equipment
• Professional fees, union memberships and subscriptions
• Using your own vehicle for work travel (excluding journeys from work to home)

If you don’t already have a Government Gateway account, you will need to register for one before being able to submit a claim. Again, this is a free service, and it is quick and easy to set up with step-by-step guidance available on the GOV.UK website.

If you need assistance with claiming work-related expenses, you can use the services of an accountant. Please do not hesitate to contact Eldon if you have any queries or need help finding an accountant.

Ofgem, the energy regulator, announced a reduction to the Energy Price Cap on Thursday, which is set to see a long-awaited drop in energy bills for millions of households across the UK. The new limit will come into effect from July, to be reviewed every quarter thereafter.

The Price Cap limits the amount that suppliers can charge for their standard variable tariffs (SVTs), the default deals that individuals are switched to after their fixed or variable tariffs end. In the midst of the energy crisis, most households are now on SVTs, with almost no suppliers currently offering fixed deals.

As the Cap was forecast to exceed £3,000, the Government introduced the Energy Price Guarantee (EPG) last Autumn. This measure froze the unit cost of gas and electricity so that the average household would pay around £2,500 pa.

However, the reduction in the Cap means that it is now lower than the Government’s Guarantee, down from £3,280 to £2,074. As a result, the average household will pay roughly 17% less than they are currently paying under the Guarantee.

For the first time in 18 months, energy prices are beginning to fall for those on SVTs. It is important to note, however, that this isn’t the maximum that you will pay, but the limit on the unit rate that can be charged for the energy you use.

Return of Fixed Rates?

Given the reduction in wholesale energy costs, which appear to now be being slowly passed to the consumer, we may see suppliers begin to offer fixed tariffs again. Tying into a fixed deal can be a good way to keep energy bills at an affordable level. However, the risk is that you fix your tariff and then the standard rate decreases, meaning that you are tied in at the higher cost for the remainder of the term.

If/when fixed deals return to the market, deciding whether to tie in will likely be a gamble, as we don’t know for certain which way prices will go over the coming year. Either way, the latest Cap reduction is a welcome step in the right direction.

As always, if you have any questions on the above, please feel free to contact a member of the team.

In an effort to combat high levels of inflation, the Bank of England has increased its base rate further from 4.25% to 4.50% – the 12th consecutive increase. The base rate is now the highest it has been in almost 15 years, since October 2008 which was the height of the global financial crisis.

The increase is likely to see mortgage and loan repayments rise for those not in fixed term deals. In contrast, it will also mean that you can earn more from savings. Currently, the most competitive rate available on an easy access savings account is around 3.70% gross AER variable. This may rise in the coming weeks following the announcement.

Under current legislation, basic and higher rate taxpayers have a Personal Savings Allowance (PSA) which is the amount of savings interest that can be earned tax-free. For basic rate taxpayers, the allowance is £1,000 pa, reducing to £500 pa for higher rate taxpayers. Additional rate taxpayers aren’t entitled to a PSA.

As above, rising interest rates are typically a benefit to savers. However, this could also see some exceed the PSA, giving rise to an income tax liability on the interest in excess of the PSA. Any tax due is typically collected by HMRC automatically, through their pay as you earn (PAYE) system.

One method to reduce taxable savings interest is to place money into a cash ISA, as any interest earned within this is tax-free. However, contributions are limited to the ISA allowance of £20,000 per tax year, including those made into stocks and shares ISAs.

Another method is to place money into NS&I (National Savings & Investments) Premium Bonds. These currently have an average prize rate of 3.30% pa gross, and any winnings are received entirely free of income tax. However, as this is the average prize rate, there is no guaranteed rate of return.

If you have any questions on the above, or would like to discuss anything further, please don’t hesitate to contact a member of our team.

Having a spending and savings plan can help you understand what income you have, what needs to be allocated to everyday living expenses and what you can put towards future goals. With groceries, fuel and energy costs rising significantly, for many people, essential living costs now represent a large majority of take-home pay.

The 50-30-20 framework has traditionally been a popular rule of thumb to follow for budgeting outgoings and savings.

The idea is that you allocate your total income as follows:

• 50% on current ‘needs’ (essential living expenses): food, transport costs, mortgage/rent, utility bills, essential clothing, minimum repayments on debt balances.
• 30% on current ‘wants’ (non-essential luxuries): discretionary spending such as gym memberships, eating out, trips, subscription services.
• 20% towards future savings and debt repayments: putting money aside for unexpected financial emergencies, saving for future goals, investments, pensions, debt overpayments.

So does the 50-30-20 rule of thumb still apply in the current climate?

According to budgeting app HyperJar, a new approach of 70-20-10 should be adopted to allow for a much higher proportion of take-home pay to go towards essential purchases, with 20% allocated to non-essential spending and a much lower proportion of 10% towards emergencies and future goals.

It’s clear that you can’t simply sacrifice spending on essential needs, but it is still important to ensure that you’re optimising what you do spend on these bills, although with things such as utility suppliers, shopping around has become unachievable in the current climate.

The next step would be to consider wants – are there things you could do without? This could be cancelling subscriptions or deferring spending on luxury items in the short-term. Such changes may not need to be permanent.

Having the discipline to cut back non-essential expenditure is no easy feat, and it may be tempting to instead reduce outgoings towards future savings and debt repayments.

Lowering this expenditure can have a significant impact on finances both now and in the future:

• Cancelling regular savings

This may seem an obvious option to free up additional cash, but this means you’re likely to miss out on future goals beyond the immediate future.

• Paying off only minimum balances on debt

Paying off the minimum payments means you’ll end up paying for in interest payments over the lifetime of your debt. This means less money to spend on the things you enjoy (both now and in the future) as more of it is going on unnecessary interest payments.

• Reducing pension contributions

Missing out on the benefits of compound interest/growth can significantly lower your pension savings over the long term.

• Using your emergency fund to fund other expenditure.

If something unexpected happens and you don’t have a cushion to fall back on, you may need to resort to credit cards or loans which will ultimately cost you a lot more over the longer-term

• Cancelling protection policies.

This is something that’s particularly at risk. Many people don’t see the benefit in paying for protection, as they don’t receive anything tangible for it. However, protection premiums should ideally be grouped in essential expenses. Before taking any action, ask yourself “What would happen if I cancelled this policy and an event occurred that meant I lost earnings/passed away. How would the sum assured be replaced?”

Ultimately, there’s no one-size-fits-all approach when it comes to budgeting. It all depends on your personal circumstances and financial goals. However, the key to being financially secure starts with being able to understand your spending on needs and how much this leaves for everything else so you can be disciplined in saving for your future goals.

The month of April is recognised as National Stress Awareness Month to bring attention to the negative impact of stress.

Given the cost-of-living crisis present in the UK, more people may be feeling the impact of stress and anxiety.

According to the charity MIND: “Stress is how we react when we feel under pressure or threatened.”

Not all stress has a negative impact, however. In fact, some research suggests that short-term bouts can help boost the immune system.

Whilst this is the case, it is important that we manage our mental health and being able to manage stress is an essential component of this. Doing so over the long-term can improve mental and physical well-being, and ultimately help you to become a happier, healthier version of yourself.

If you are feeling stressed and/or anxious, reaching out to others can be a great start to helping manage this; the knowledge that you are not alone can be a comfort.

Other ways to manage stress can include:
• Spending time exercising or exploring nature.
• Taking up a hobby you enjoy and dedicating time each week to enjoying this.
• Breathing exercises.

More useful tips can be found via the links below:
https://www.nimh.nih.gov/news/media/2021/great-helpful-practices-to-manage-stress-and-anxiety
https://orwh.od.nih.gov/in-the-spotlight/all-articles/7-steps-manage-stress-and-build-resilience
https://wellnessatnih.ors.od.nih.gov/Pages/default.aspx
https://mentalhealth-uk.org/help-and-information/stress/
https://www.cdc.gov/mentalhealth/stress-coping/care-for-yourself/index.html

With rising interest rates, finding a suitable place for your cash savings is increasingly important. There are many things to consider when looking for the best accounts, including the interest rate, accessibility of your cash, and protection limits.

Interest Rate

The interest rate is one of the key factors that people focus on when looking for a savings account. With some accounts, you will have the option to receive interest annually or monthly and, usually, the interest rate offered is slightly lower with the monthly option due to the effects of compounding. As such, to maximise your savings interest, it can be beneficial to opt for annual interest, although the monthly alternative can be useful for those that prefer a more regular income stream.

Currently, a competitive easy-access savings account offers around 3.00% gross Annual Equivalent Rate (AER). This means that on a balance of £10,000, you could receive interest of £300 gross (before tax) over the year.

Accessibility

When chasing higher interest rates, it is important to be mindful of the access terms of the account. Accounts can be easy-access, whereby you can make withdrawals without penalty at any time, or they can be fixed, with more limitations.

A fixed rate account means that the interest rate is guaranteed for the duration of the term, however you are unable to access your cash over the period. These tend to range from 1 year to 5 years. However, there are other options, such as 30-day notice accounts, and those that limit the number of withdrawals, for instance triple-access accounts.

Protection Limits

The Financial Services Compensation Scheme (FSCS) means that if a bank or building society fails and can’t pay back your money, you will be entitled to compensation. The bank or building society must be authorised by the Prudential Regulation Authority to qualify. You can check whether an institution is authorised using the Financial Services Register.

The FSCS will cover up to £85,000 per person, per authorised institution, which means up to £170,000 for joint accounts. However, some banking firms have more than one brand, which means that they share the same banking licence. In this case, the limit applies to the total value of all accounts within the same group, rather than on the holdings with each individual institution.

Other Things to Consider

As well as the above, you should also be mindful of the following:

• Is there a minimum initial deposit required to open the account?
• Are there any ongoing minimum balance requirements?
• Do any fees apply?
• Is the interest rate tiered based on the value of the account?
• Can the account be opened and managed in branch, by telephone or is it online-only?
• Does the institution have a good customer service record?

The rates being offered by banks and building societies can change at short notice and it is best to check the market to see the most competitive accounts available if you’re looking to switch. One way to compare account rates is to use a comparison tool such as MoneySuperMarket. This allows you to filter between different access terms to find a savings account that is right for you. Make sure to set your preference to show all providers, rather than just those that can be opened via MoneySuperMarket.

It is also important to keep in mind that changing between accounts regularly in pursuit of the highest rates can be a bit of a headache administratively. Sometimes, the additional interest in monetary terms may only be minimal, and not worth the effort of moving funds around.

If you would like some guidance on whether your money is working in the best way for you, please contact a member of the team.