Some of you may not have heard the budget announcements yesterday, so here is a very brief summary of some of the highlights:

The personal allowance will be increased to £9,440 for those under age 65, this is all part of the plan to raise it to £10,000 which will be achieved from 2014/15, a year earlier than expected.

The reduction in the personal allowance for those with ‘adjusted net income’ over £100,000 is to continue, which means there will be no personal allowance remaining for individuals where their ‘adjusted net income’ exceeds £118,880 in the 2013/2014 tax year.

The basic rate of tax is and will remain at 20% however the band of income chargeable to tax at this rate is being reduced to £32,010. This means that the level at which the 40% tax band applies will also fall. The previous level was £42,475, but this will reduce to £41,450. Please note, this assumes entitlement to the full basic personal allowance.

Currently the 50% tax band applies where taxable income exceeds £150,000 but as already announced, this rate will fall to 45% in 2013/14.

The basic state pension will rise by 2.5% in April taking it to £110.15 per week, and the Government will introduce a single flat rate pension of £144 per week in 2016.

The main rate of corporation tax is 23% from 1st April 2013. The Chancellor announced in December that the rate from 1st April 2014, previously planned to be 22%, was to be reduced to 21%, the Chancellor has now announced that this will be reduced to 20% from 1 April 2015.

The CGT annual exemption will be £10,900 for 2013/14 and will be increased to £11,000 for 2014/15 and £11,100 for 2015/16.

The Government also confirmed its intention to freeze the inheritance tax nil rate band at £325,000 until April 2018.

From a pensions perspective, there were no reductions to the Annual Allowance and Lifetime Allowance.

26th March 2013 will be the date when capped income drawdown rates will rise from 100% to 120% of the value of an equivalent annuity.

The stocks and shares ISA limit will rise to £11,520 and the cash ISA limit will rise to £5,760 with effect from 6 April 2013

As ever, if you want to discuss this or any other points, then please give me a call.

Shane Beardsley
Managing Director / Independent Financial Adviser
shane@kirkellainvestments.co.uk

2012/2013 ISA Investing….
…the new tax year

The last few days of March and the first few days of April were absolutely chaos. It is amazing how many people wait until the very last minute to maximise any unused ISA allowances.
I am going to be a bit controversial, and suggest that we try to buck the trend this year by utilising these valuable tax efficient allowances earlier in the year!

Joking aside, I know the end of the tax year will be the same as it always is, because it is just human nature. In the same way as most tax returns are filed in January, but if I mention this now then hopefully it might just make a difference.

Obviously ISA’s only form part of the investment strategy for many investors, and if you feel you would like to review your overall investment portfolio or discuss any new investments, then please do not hesitate to contact me.

The End of the Current Tax Year, Part 2, ISAs….
ISA Allowances, use them or lose them….

The end of the tax year also means it is your last chance to utilise any unused ISA allowances for the current tax year. Whether this is Cash ISAs, Equity ISAs, or both.

Should you not have already utilised this years allowances then it is worth noting that over the next 5 weeks you could potentially invest nearly £22,000.00 each into ISAs, £10,680.00 for this tax year and £11,280.00 for next.

This means for example that couple, married or otherwise, could collectively invest just under £44k into tax efficient ISAs within the next 5 weeks.

You might remember from a previous newsletters that there are actually several ISA millionaires in this country. People that have saved into ISAs, and previously PEPs over the years. It can soon add up!

If you want to utilise your tax efficient ISA allowances, then time is running out and I urge you to contact me soon to ensure there is enough time to process it before the year end.

Saving up for that special event….
Private Education, University, Wedding(s) or the Deposit for a house…

Over the last few months I have seen an increase in the number of people wanting to talk to me about saving for future events, such as University, Private Education, Weddings, and Deposits for houses etc.
Everyone knows that events like this cost more now that ever, but what has become apparent is that many people are not usually expecting only one of these events, in some cases they can expect two or even three of these events to occur, and when we started to dig deeper the costs just spiral.

Let’s take private education and university for example, if we assume a young family with two children are looking to send their children to private school and then on to University; they could require literally hundreds of thousands of pounds over what in reality is a relatively short period of time.

That may sound crazy, but one such example involved a family wanting to send two children to Private School from the age of 8 and then onto University, and the fees alone, not including accommodation, food, or inflation amounted to over £200,000.00, and that was a conservative estimate.

Obviously not everyone wants to send their kids to private school, and I know that in some cases people hope to be able to fund school fees from earned income, but not everyone can afford to do that, and therefore planning ahead is essential.

The question now is what you can do about it, there is absolutely no doubt that the sooner you prepare for it the better, and we can advise on a number of solutions to prepare for these events. It is most likely that more than one solution will be required depending on how soon the first instalment will be required for example, or your attitude to investment risk.

Also don’t forget, in a lot of cases it isn’t just Mum and Dad that have to save for this, very often grand parents are keen to help out! If you would like to discuss this in more depth, then please do not hesitate to contact us and we can talk through you individual circumstances

Recent stock market activity…

There is no escaping that the worlds stock markets have seen some very volatile activity over the last few months, and at times like these, it is important that clients do not panic.

Investing for many clients is for the medium to long term, and it is inevitable that at times there will be market fluctuations, and whether sudden falls are a short term blip, or something more serious it is difficult to say, however some say that these types of market fluctuations give rise to buying opportunities.

The first thing to remember when stock markets are experiencing this level of volatility is that most investors do not have portfolios invested ‘wholly’ in UK or global markets and therefore may not be experiencing the same degree of volatility in their portfolios. Dramatic falls in stock market levels are rarely replicated in the fall in the value of diversified investment portfolios. This is why we work very hard to establish a clients risk profile, and concentrate on blending different asset classes to give a portfolio that matches this risk profile.

I am not saying that either to sit tight and ride it out, or to sell is necessarily the right thing to do, as this is more “client specific”, but if you want to talk about this in more depth then please drop me an email.

ISAs: The start of the new Tax Year…and with it, this years ISA allowances….

The end of the 2010/2011 tax year was a little bit hectic to say the least, with many clients rushing to utilise their unused ISA allowances. I know it has been a difficult couple of years, and many people have had to be more careful with their disposable income. However, I have noticed that one thing an economic downturn will do is make people more aware of savings and emergency funds, which it seems has had a positive impact on money currently available for investment.

You may already be aware that the total amount that can be invested into an ISA this year has increased from last years limit of £10,200.00 to £10,680.00, which can be broken down into maximum of £5,340.00 into an Equity ISA and £5,340.00 into a Cash ISA, or £10,680.00 into an Equity ISA alone.

There are many ISAs and providers available in the market and if you want to discuss this and establish which may be most suited to your particular situation then please do not hesitate to get in touch.

Shane Beardsley
Managing Director / Independent Financial Adviser

tel: 01482 658989
email: shane@kirkellainvestments.co.uk
web: www.kirkellainvestments.co.uk

ISAs: The end of the current Tax Year…and with it, this years allowances….use them or lose them….

The current tax year will draw to a close on the 5th April, and therefore now is almost your last opportunity to make the most of this years tax efficient ISA allowances.

Should you not already have utilised this years ISA allowances then it is worth noting that over the next 6 weeks you could potentially invest up to £20,880.00 each into ISAs, £10,200.00 for this tax year (up to the 5th April) and £10,680.00 for next tax year (after the 6th April).

For example, this means that a husband and wife could collectively invest over £40k into ISAs within the next 6 weeks.

Some of you may have seen in the press the arrival of ISA Millionaires. Research conducted recently by the Financial Times has revealed a hoard of investors that have over £1m in ISAs, but also two individual investors with more than £12m. It is a safe bet that they have utilised their allowances every year since inception.

People often overlook ISA investing as a viable proposition when it comes to medium and long term savings, and wealthy individuals questions whether the annual limit is worth it, however, by putting in the maximum each year and reinvesting income you can build up substantial funds.

Had someone utilised the full PEP, and the subsequent ISA allowances from inception they would have been able to save £179,000; and in turn it is interesting to note that it would have taken compound returns of 12.5% per annum to have become an ISA millionaire, and 28% per annum compound to have accumulated £12m in your ISA.

So if you or any of your family, contacts and associates know of anyone looking to maximise their tax efficient ISA allowances or make the most of the allowances afforded to those saving for retirement then please contact me or pass on my details and I will happily arrange an appointment.

Pensions vs ISAs
Tax relief, Tax efficiency, Accessibility, Flexibility?…..

In recent years, some clients have avoided pension schemes, disillusioned by the media and the bad press they have had, or maybe because of past experiences of old style schemes with poor performance and inflexibility. Some investors have chosen alternative routes instead, such as ISAs or property investment such as Buy to Lets.

However, recent developments, such as the easier availability of self-invested personal pensions (SIPPs), have given investors greater flexibility, and the government’s recent removal of the need to buy an annuity at age 75, are helping to make pensions more attractive once again.

One of the main arguments in favour of using a pension as your main method of building up a retirement pot is that your contributions are eligible for tax relief at your highest marginal rate of income tax, and so therefore your savings in a pension are automatically worth more even without any consideration for investment growth, and this is even a benefit to non-taxpayers that still receive this 20% tax relief up to a maximum contribution of £3600pa.

Other tax breaks for pensions are that investments grow virtually tax-free in a pension fund and that 25% of the fund can be taken as a tax-free lump sum. However, your regular pension income is still subject to income tax. In contrast, you receive no tax relief on ISA contributions but the investments grow in a tax-sheltered environment, and any capital gains that are generated are tax-free and when income is taken there is no further liability to income tax.

We also have to consider whether an employee being offered membership of a company based scheme will receive additional contributions from the employer, matched funding for example! This would make the value of your personal investment into the scheme far higher! Consider a higher rate tax payer contributing £200pm into a pension with matched funding from his employer, assuming his income supports this, his net contribution after all tax relief could be £120pm for what will end up as £400pm going into his pension each month!

Some of the downsides of pension planning over saving into ISAs for example is the accessibility. Even at retirement only 25% in most cases is available as a tax free lump sum, with the remainder being used to provide retirement income, whereas you could access as little or as much of your ISA as you wish, whenever you wish. Even at retirement, accessibility is limited. Once the tax-free lump sum has been taken, the remaining fund must be used to provide an income.

It has frequently been debated whether ISAs are a better choice than pensions for some of the reasons above, but I have to say, I don’t think either argument is correct, and I firmly believe that it is best to have a combination of Pensions and ISAs amongst other investment types to get the best of both worlds. But one thing is clear, the worst thing that you can do, is do nothing at all!

Shane Beardsley
IFA / Managing Director

Increase to the Financial Services Compensation Scheme (FSCS) limits….
£50,000.00 to £85,000.00…..

The Financial Services Authority (FSA) announced earlier this week that with effect from the 31st December 2010 the deposit compensation limit for the UK will increase from £50,000 to £85,000 per person, per authorised firm. This is roughly the Sterling equivalent of the £100,000 deposit compensation limit which comes into force in all European Economic Area (EEA) member states at the same time.

There are additional changes that also come into effect on the same date, and they are faster payout rules with a seven day payout for most claims, and gross payout, which protects customers by ring fencing their deposits if they have other savings and loans with the same firm. Under existing rules any outstanding loans or debts would have been deducted from any compensation.

This new limit will protect the vast majority of depositors, and they are going to begin a publicity campaign in the New Year to inform customers of the compensation limits and of the importance of ensuring that they are covered.

The old limits have featured quite heavily over this past year with a number of clients and subsequent recommendations we have made, and therefore if you think this affects you or you want to discuss this in more depth, then please do not hesitate to contact me if you would like to discuss this or any other matter.

Shane Beardsley
Managing Director / IFA

Holiday Property Bond
27 Years and counting…..

Over the years, we have rightly focused on what could be described as “mainstream” solutions to your problems of investment returns, retirement planning, school fee provision and the like. Occasionally, however, something regarded as “unusual” or “alternative” demands attention. Over 39,000 UK investors have embraced the Holiday Property Bond as at least part of their holiday solution and we think you should at least be aware of it…

Have you ever thought of buying a second home or been prepared to consider an alternative method to fund your holidays! Some of our clients have reached a stage in their life where accumulated capital can be used to generate pleasure – in holiday form – and not just more numbers on a spreadsheet.

Owning a villa in the sun is a dream for many of us, especially as we near (or have achieved) retirement and maybe have a little spare capital. But the Holiday Property Bond offers you something that in many ways is even better. It is a completely original concept ; a life assurance bond linked to a growing portfolio of high quality holiday property and securities. What it means is that you can invest a lump sum in the Bond and enjoy the use of any of its 1300 villas, apartments and cottages for your holidays, rent-free for the whole of your life and your children’s lives.

The Bond was founded in 1983 by a small group of investors and has grown year after year. It now has over 39,000 investors (Bondholders) and over 1,300 first-class holiday properties throughout the UK and Europe, with net fund assets exceeding £260 Million (as at 31.12.09). Most investors are people like you from business and professional backgrounds who find the Bond offers them the consistently high standards of holiday accommodation they seek.

I have available two short DVD’s showcasing the Bond’s properties and “How it Works” presented by Sue Barker, BBC presenter and a Holiday Property Bondholder. Just email or call me and I will let you have the information you need to decide if the Holiday Property Bond is right for you.

Shane Beardsley
Managing Director / Independent Financial Adviser