Eldon

On Sunday 4th June, three members of the Eldon team will be completing the highest skydive in the UK. On Monday 5th June, hopefully all three will be returning to work!

From 15,000 feet, Gemma, Donna and James will each tip out of a small plane and hurtle towards the earth for 60 seconds at 120 mph, before their instructor deploys a parachute. Any higher, and oxygen masks would be needed.

Donations that the team receive will be directed towards the County Durham Poverty Hurts Appeal. We know that with soaring food prices, energy bills, and other essentials, poverty is painful, and it can affect so many people in our area. We want to make a difference and have discovered the County Durham Community Foundation’s (CDCF) Poverty Hurts Appeal, which will provide funding to groups working with those most affected by poverty in the local area.

Eldon will be matching funding up to £5,000, and the CDCF will also match contributions. This means that for every £1 given, £3 will arrive with the Poverty Hurts Appeal.

If you would like any further information on the challenge, and how you can offer support, please consider donating at https://cdcf.enthuse.com/pf/skydive. Donations can also be made via cheque.

Good luck Gemma, Donna & James!

Looking back to 2022, interest rates started the year at their previous historically low levels, but as inflation was on the rise and the war in Ukraine fuelled these further, central banks around the world increased their base rates. The Bank of England base rate started the year at 0.25% and ended the year at 3.5%. The Federal Reserve’s Federal Funds Rate started at 0% to 0.25% and ended the year at 4.25% to 4.50%.

Following the rate increases, UK consumer confidence is being recorded at record lows which can often push through into low market confidence. Is this low confidence justified?

The above chart shows all years from 1980–2021, highlighting the Bull and Bear markets throughout these years. As you can see the total number of Bull years and the average Bull period is far greater than the Bear years. Following each Bear market, we can see the recovery and growth that has occurred. Nothing from 2022 suggests this would be any different, however, that is not to say that we are at the end of the Bear market.

This also presents an investment opportunity for investors who have capital to place for the medium to long term. Whilst this goes against typical emotional and psychological attitudes, the evidence shows that investing into the market when it is low, typically increases returns as it can benefit from the likely Bull to come without having had the fall from the Bear.

So how has 2023 started?

Well, people may have seen headlines that the FTSE100 stock market passed through the 8,000 level for the first time earlier in February. The FTSE All Share is up around 6% since the start of the year and the S&P500 is up 4.2% over the same period. However, inflation looks set to be a key issue again this year.

The year started positively, with inflation figures coming in below expectations, in both the UK and US. Markets reacted positively to the news, as it was thought, with inflation seemingly coming down, this may result in a lower interest rate rises in 2023, than predicted.

However, this was short-lived, as inflation data at the end of February in the US has resulted in the biggest weekly loss for 2 months in the S&P500. This has also reaffirmed the Federal Reserve’s previous position – that interest rates will be higher for longer. And now the market seems to be listening to this, with the data now backing-up this statement.

What this does show, is just how sensitive the market is at present.

What should investors do? Well, as ever, being disciplined and remaining invested in a well-diversified portfolio will benefit investors and help the longer term trends and returns come through. As we always say, it’s the time spent ‘in the market’, rather than trying to ‘time the market’ that counts.

The State Pension age is the earliest you can claim your State Pension. Your State Pension age depends on when you were born. For people reaching State Pension age now, it is age 66 for women and men, but the Government has set out two increases to State Pension age in legislation.

For those born after 5 April 1960, there will be a phased increase in State Pension age to 67, and eventually to age 68. You can check your State Pension age here: https://www.gov.uk/state-pension-age

In most cases, you can get a full State Pension if you have 35 qualifying years of National Insurance contributions. You need a minimum of 10 qualifying years to receive any State Pension entitlement.

The full State Pension is currently £185.15 per week increasing by 10.1% to £203.85 per week from April 2023. For some, this may differ due to the way the rules in place pre-2016.

You can check your current State Pension entitlement either by submitting a BR19 Form to the Department for Work & Pensions or by logging onto the Government Gateway.

If you find yourself with a lower amount than £185.15 per week you may be able to improve your record either through accruing further qualifying years up until State Pension Age or by making Voluntary National Insurance contributions to plug any gaps in your National Insurance record.

Currently, you have up until 5^th April 2023 to fund any gaps in your record between April 2006 and April 2016. After this, you can only fund gaps going back 6 years. Therefore, if you are close to State Pension Age and are not entitled to the full State Pension as things stand, it will be wise to check for any gaps in your National Insurance Record between 2006 and 2016.

If you are thinking about topping up your State Pension for these earlier years, you should check with the Future Pension Centre at the Department for Work and Pensions (DWP) if purchasing those years would improve your State Pension entitlement. They can also advise which years will be most cost effective for you to purchase to improve your State Pension.

Buying any missed years (if you have any that would count) comes at a cost. This can be achieved by:

• paying Voluntary Class 3 NI contributions at current cost of £15.85 per week in 2022/23 (increasing to £17.45 per week in 2023/34)
• paying Voluntary Class 2 NI contributions of £3.15 per week (£3.45 per week in 2023/24), if you are Self Employed and your profit is below £6,725 per annum

If you have some way before reaching State Pension Age, it is important to note that you can accrue qualifying years through the following means and you therefore may not need to fund any gaps in your record:

• earning enough to pay NI contributions on a Self Employed basis (currently £6,725 pa)
• earning over £123 a week from one employer on an employed basis
• gaining a credit for example by being in receipt of Job Seekers Allowance or Carers Allowance
• caring for a child / grandchild under the age of 12, while (the parent is) claiming Child Benefit

Useful Numbers and websites:

Pension Service – 0800 731 7898

HMRC National Insurance Service – 0300 200 3500

In the last article, we looked at the looming January Self Assessment deadline. There is no shortage of important dates to be aware of when considering your finances; below, we have outlined the key dates to note for the coming year.

• 31st January – Self Assessment Tax Return Deadline

This is the deadline for those who need to file a Self Assessment tax return for 2021/22, and is the date that any tax owed must be paid by. If applicable, the first payment on account for 2022/23 must also be made by this date.

• 5th March – Rail Fares Rise

The Government has frozen rail fares until 5th March, on which date they are set to rise by a maximum of 5.9%. A cap has been imposed to help with the cost of living.

• 15th March – The Budget

March typically sees the Chancellor’s main Budget of the year, in which they outline the financial forecasts for the year and any proposals for tax changes. This year’s budget is expected to be held on 15th March.

• 31st March – End of Help to Buy Scheme

The Help to Buy Scheme was offered by the Government to help first time buyers, but closed in October 2022. Those already buying under the scheme have until 6pm on 31st March to complete on their purchase.

• 1st April – Energy Price Guarantee Rises; Changes to Household Bills; and Wage Rises

The Government’s Energy Price Guarantee, which has frozen the unit cost of gas and electric, will rise on 1st April. As a result, the average household will pay around £3,000 pa for energy, up from £2,500 pa.

Other household bills are also set to rise from the start of April, including broadband, council tax and water. Whilst the increases aren’t known yet, they will likely account for inflation to some extent. However, some households may see their water bills fall based on certain providers being unable to meet Ofwat targets on pollution and other issues.

In addition, the National Living and National Minimum Wages are increasing from this date.

• 5th April – Voluntary National Insurance Contribution Deadline

For those looking to top up their State Pension entitlement by making voluntary National Insurance (NI) Contributions for any gaps in their NI Record between April 2006 and 2016, the deadline is 5th April. Following this, individuals will typically only be able to make contributions for the previous six tax years.

• 5th April – End of the Tax Year

The current tax year (2022/23) will end on 5th April. If you’re planning to make use of tax allowances for the year, you will need to do so before this date.

• 6th April – New Tax Year

The new tax year (2023/24) starts on 6th April, from which point tax allowances ‘refresh’. State benefits and other Defined Benefit pension income will also increase from this point, with the State Pension and Pension Credit both rising by 10.1%.

Certain tax changes announced in the Autumn Budget are also set to come into effect. The additional rate income tax threshold, above which income tax is due at 45%, will reduce from £150,000 to £125,140. The dividend tax-free allowance will also fall from £2,000 pa to £1,000 pa.

Similarly, the capital gains tax exemption will reduce from £12,300 pa to £6,000 pa.

• 31st July – Second Payment on Account

For those in Self Assessment, the second payment on account for 2022/23 must be made by 31st July.

• 5th October – Deadline to Register for Self Assessment

This is the deadline anyone new to Self Assessment has to register by.

• 18th October – September Inflation Announcement

Inflation figures announced in September are used when calculating changes to State Benefits, tax credits, the increase to the State Pension, and increases for many Defined Benefit pensions. Such changes usually come into effect at the start of the following tax year.

• 31st October – Postal Self Assessment Deadline

Those opting to file their Self Assessment tax return for 2021/22 by post, rather than online, will need to so by 31st October.

• November – Autumn Statement

The Chancellor’s Autumn Statement, typically a ‘mini Budget’, is usually delivered in November each year. The purpose is to provide an update on the Government’s economic plans based on the latest forecasts from the Office for Budget Responsibility (OBR).

• 31st December – End of Mortgage Guarantee Scheme

The Government’s Mortgage Guarantee Scheme was launched in April 2021, offering lenders the option to purchase a guarantee on mortgages where borrowers have a deposit of only 5%. The scheme is designed to help more households get onto the property ladder. Originally ending in 2022, the scheme has been extended until 31st December 2023.

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

The 31^st January 2023 deadline for submitting Self Assessment tax returns for the 2021/22 tax year is fast approaching. For those who need to submit a return it is important to do so before this deadline so as to avoid late filing penalties.

If you are unsure whether you need to complete a tax return for the period above, you can check your position using the government tool.

If you miss the deadline for submitting your tax return, you will typically be charged a penalty of £100 if the tax return is up to 3 months late. If you submit your return over 3 months late, you may be faced with a larger penalty.

For the last two years, HMRC has waived the £100 late filing penalty in light of the pandemic, but no waivers for late submissions have been announced this year.

Any tax due must also be paid and received by HMRC on 31st January 2023. HMRC will charge interest on any late payments of tax:

• If your tax payment is up to 30 days late, you may be charged a penalty of 5% of the tax due.
• You may also be charged with further 5% penalties when your payment is 6 months and 12 months late.

You can complete your Self Assessment tax return online here.

You can pay your outstanding Self Assessment tax bill online using this link.

For a fee, professional accountants can help you complete your Self Assessment, or complete it on your behalf, however they will require the figures to input. Please let us know if you would like recommendations of accountants we have experience working with.

With 2023 fast approaching, we’ve been reflecting on the changes that 2022 has brought to us and our clients. The year started with a challenging outlook for investment markets, exacerbated by various unexpected events throughout the year. It shows once again that short term forecasting isn’t reliable in ensuring our plans for our future are on track over the long term.

We have been delighted to see more clients reach their goals this year, on track as expected; maintaining their plan for their (and their family’s) futures against a rapidly changing backdrop.

Closer to home we have seen a lot of achievements across our team; with higher qualifications, personal goals met, and the most exciting transition for us being the move into employee-ownership.

We have included a link below to our winter newsletter, where you will find an update on Eldon’s developments together with a range of other articles. We have also included links to other news on our website or external sites in recent months that you can dip into. I hope you enjoy reading it.

Winter Newsletter 2022

Christmas Hours

Eldon’s office will close at 12.30 pm on Friday 23rd December, reopening on Tuesday 3rd January 2023.

If you have any urgent questions over this period, please email them to enquiries@eldonfinancial.co.uk and we will make sure that you get a response.

We would like to wish everyone a very Merry Christmas and Happy New Year.

In response to rising inflation, the Bank of England has been increasing the Base Rate and in November 2022 this rose to 3%. As a result, savings rates have been increasing steadily, and are now at the highest levels for more than a decade.

National Savings & Investments (NS&I) currently offer an interest rate of 1.80% pa gross on both its Income Bonds and Direct Saver. The annual equivalent prize rate of the Premium Bonds also increased to 2.20% pa, if you are averagely lucky, but there is no guarantee you will achieve this return.

The best instant access rate available is now around 2.8% pa gross variable.

Fixed rate accounts have also increased: 1-year fixed rate 4.35%; 2 years 4.70%; 3 years 4.75%; 4 years 4.80%; 5 years 4.95%.

Under current legislation, each individual has a starting rate for savings of £5,000, however, as your earnings increase above the personal allowance (currently £12,570 pa) this reduces by £1 for every £1 earned above this. Therefore, once your earnings are above £17,570, you have no starting rate for savings.

As well as the starting rate for savings, there is also a Personal Savings Allowance (PSA) which lets you earn a certain amount of interest from your savings tax free. Depending on the Income Tax band your income falls under, the PSA is a different amount. Basic rate taxpayers can then earn £1,000 of savings interest each tax year without paying tax, whereas higher rate taxpayers can earn £500 of interest tax free. Additional rate taxpayers have no PSA.

With interest rates increasing, the amount of interest you receive will increase, which may result in your total interest exceeding your PSA. It is therefore important to check the level of interest you are receiving, as if you expect to exceed this, ensuring you use your ISA allowance may be beneficial. Placing savings into a Cash ISA means that interest is earned tax free, so even if the interest rate is slightly lower than what is offered in an easy access account you could be earning a higher level of interest.

If the interest you earn exceeds your personal savings allowance, HMRC will collect the tax you owe through pay-as-you-earn (PAYE) if you are taxed this way. This is done automatically, and you might notice that your tax code changes.

As part of our ongoing service, we ensure our clients ISA allowances are used appropriately each year, whether this be within Stocks & Shares ISAs or Cash ISAs.

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

The new chancellor, Jeremy Hunt, revealed the Autumn Statement on the 17^th November. A summary on the headline points is provided below:

State Pension

The Triple Lock for the State Pension is being reinstated, with State Pensions receiving the full inflationary increase of 10.1% (September 2022 CPI measure). As a result, the full flat-rate State Pension for individuals who reached State Pension after April 2016 will be £203.85 pw (£10,600 pa) from April 2023.

Income Tax

The income tax Personal Allowance, higher rate threshold, and the National Insurance limits are already fixed at their current levels until April 2026. This has now been extended for an additional two years, until April 2028.

In addition to this, the income tax additional rate threshold (45%) will be lowered from £150,000 to £125,140, from April 2023.

Inheritance Tax

The inheritance tax nil rate band was frozen at £325,000 until 2026. This has now also been extended until 2028. This will mean the tax-free allowance has been unchanged for almost two decades by that point.

Capital Gains Tax (CGT)

Changes to CGT have long been on the cards. This was another tax allowance that had previously been frozen until 2026. However, the Annual Exempt Amount of £12,300 will instead be cut to £6,000 from April 2023 and then to £3,000 from April 2024. The rates of CGT applied to amounts over this exemption are to remain unchanged.

Dividends

The Dividend Allowance is to be reduced from its current level of £2,000 pa also. This will be £1,000 pa from April 2023 and then £500 pa from April 2024. This is the level of dividends an individual can earn before tax is due on those dividends. Above this level, the tax rate incurred on dividends will remain unchanged.

Other Announcements

Some other announcements were:

• Previously announced but confirmed again, Corporation Tax will increase to 25% from April 2023.

• The increases to Stamp Duty Land Tax thresholds will now only remain in place until 31^st March 2025.

• Oil and gas companies tax rate will increase from 25% to 35%, starting in January 2023. This windfall tax has also been extended, previously set to end in December 2025 but now ending in March 2028.

• A 45% tax on profits of older renewable and nuclear electricity generation.

• The cap on energy bills of £2,500* pa for an average household will remain in place until April 2023. This will then rise to £3,000* pa for 12 months.

*This cap sets a maximum price that energy suppliers can charge consumers for each unit of energy they use. Therefore, how much you pay will still depend on how much energy you use.

People are being encouraged to take action to trace their lost pension pots, with almost three million pots worth a total of £26.6 billion not currently matched to their owners.

The Pensions Policy Institute has published a briefing note which shows that the scale of lost pension pots has increased by £7 billion from 2018 to 2022.

In recent years we have seen an increase in people moving house and more people changing jobs through the Coronavirus pandemic, potentially exacerbating the problem of lost pensions.

It can be tricky to keep on top of all of the pension schemes you’ve paid into throughout your working career, but it’s important to track these down to ensure you’re claiming everything you’re entitled to in retirement. These lost pots, with an average value of £9,500 each, could make a real difference if they were reunited with their owners.

There are five simple steps to take to trace a pension:

• Retrace career steps
• Check old papers
• Check that the details on paperwork are up to date
• Check for any gaps in your pension history
• Contact your pension provider

If you are unsure who your pension provider is, you can ask your employer or use the Pension Tracing Service. This is a free Government service that can help you find contact details for a workplace or personal pension scheme.

Once you’ve found your pension, you will need to contact the provider to find out how much it’s worth. It is also important to take a closer look to check the rules around the retirement age, whether the investments are suitable for your circumstances and the total charges.

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

Rising inflation has been a theme of 2022, and September’s inflation figure has now been announced, with the Consumer Price Index (CPI) at 10.1%. According to the Office for National Statistics, this has been driven by increases in the price of food despite declines in fuel prices.

September’s CPI is a significant figure, as each year a number of pension schemes use this figure to uprate pensions from the following April.

Most schemes, however, cap their inflationary increases to pensions in payment and in deferment, with a common cap of 5% applying, meaning the inflationary increase applied to many pensions will be much lower than inflation.

It is therefore important to check the scheme rules of your pension scheme to understand how any inflationary increase is applied. This is something that we undertake at Eldon for our clients and factor into our financial planning.

The September figure is also the inflationary figure used by the government for increasing benefits and the State Pension.

The State Pension, as things stand, increases in line with the triple lock, which is the higher of:

• CPI, currently 10.1%.
• Average wage increase – September’s figures are not yet available, but this was 5.4% in August
• 2.5%

If the triple lock is maintained, we will see the State Pension increase by 10.1% from April 2023. This means the new State Pension amount would be £203.85 per week, up from £185.15 per week. With a Conservative Party leadership contest now underway however, we await confirmation of the government’s commitment to the triple lock.

The average wage element of the lock was temporarily suspended in April 2022 to avoid a disproportionate rise in the State Pension, breaking a key manifesto pledge by the Conservatives. Historically, the largest triple lock increase to the State Pension was 5.2% in 2012/13.

Previously tax thresholds, Lifetime Allowance (for pensions) and Inheritance Tax nil rate bands were due to increase by inflation. These were frozen in April 2021 following the pandemic however, meaning tax thresholds are not increased by this significant level.

Rising inflation remains a concern for the Bank of England, and with inflation at more than five times the target of 2% for CPI inflation, it seems likely that future base rate increases in the short term are to be expected.

At what level and how long interest rates may stay at a raised level is unknown. This will undoubtedly be influenced by the UK government. As we have seen over the past 6 weeks, the landscape for this can change at a fast pace.