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Families in the UK paid a record £7.1 billion in IHT in the financial year 2022/23 – more than double the £2.9 billion paid in 2011/12.

It’s a staggering rise, driven largely by sustained property price increases and a long-term freeze of the IHT threshold.

UK IHT receipts rise as frozen threshold and asset price inflation bite

Source: HMRC

How much inheritance tax should you be paying?

In the UK, a zero percent rate of IHT, known as the nil rate band, is applied on assets up to £325,000 per person. If your estate is worth more than £325,000 when you die, any assets beyond that figure may be subject to a flat IHT rate of 40 percent. Any unused threshold may be transferred to a surviving spouse or civil partner, increasing their combined threshold to up to £650,000.

Individuals may also benefit from the additional residence nil rate band of £175,000, where property is left to direct descendants. Similar to the nil rate band, any unused amount can be transferred to a surviving spouse, increasing the combined nil rate threshold to a possible £1,000,000. However, the additional residence nil rate band is tapered for estates worth more than £2,000,000, and therefore withdrawn entirely if a married couple’s combined estate is worth more than £2,700,000.

The UK’s IHT threshold has been frozen since 2009, which has resulted in significant fiscal drag. If the threshold had moved in line with the Retail Price Index’s level of inflation – one of two main measures of UK consumer inflation – an individual would now be able to pass on more than £407,000 without incurring IHT. Projected forward to tax year 2027/28, and that figure would be over £500,000.

But what exactly comes under the scope of IHT?

IHT is applicable to everything from property – your main residence, holiday homes and rentals – to your money, personal art, jewelry, vehicles and other investments.

“There are some people who will be happy to pay any IHT liability, as their money is going to HMRC and helping those less fortunate,” says Chris Black, Head of Financial Planning for RBC Brewin Dolphin – Newcastle. “But the majority of estate owners who have children, and charitable causes that are close to their heart, will want to mitigate its impact. This means starting the process as soon as possible.

So how can you limit your IHT bill and pass on more of your wealth to the people you love?

1. Gift the money

Gifting money can be a tax efficient solution to limiting your IHT liability. Yet 62 percent of individuals we survey are concerned about how to gift properly.

“Many of our clients employ a gifting strategy to offload their wealth in a controlled manner,” says Chris. “But they often require support with identifying how much they should gift and when they should do it.”

Gifts considered “outside” an estate include those between spouses and civil partners, gifts of up to £3,000 per year, and those of £250 or less per person, per year – as long as you haven’t used another allowance on the same person.

One popular option is to gift money to your children for specific purposes, such as buying property, funding education or setting up a business. An added advantage with this is you get to see your loved ones benefit. Gifts towards a wedding benefit from an allowance of up to £5,000 from each parent, £2,500 from each grandparent and £1,000 from anybody else.

A common way for individuals to gift is using a trust, which they may also become a trustee of. This enables you to retain a degree of oversight over how the money is distributed to your children and beneficiaries.

Another option is to move the assets into a family investment company – a corporate structure in which your family members become shareholders. The company can be set up to divide ownership and voting control according to your wishes.

It’s important to note that, with any non-exempt gift you make, you must survive seven years before it qualifies for the zero percent rate.

2. Invest it

Some investments are exempt from IHT entirely. These include Alternative Investment Market companies, Enterprise Investment Schemes, Seed Enterprise Investment Schemes, Agricultural Property Relief and Business Relief qualifying shares.

The latter provides a good example of the rationale behind IHT-exempt investments. Business Relief is a system designed to aid succession in family businesses and stimulate investment into British companies. Here, any investment into a qualifying company is exempt from IHT after only two years. You don’t need to run your own business to benefit either; reputable providers now offer portfolio companies in which anyone can buy shares.

Another advantage is that you retain direct access to the assets, unlike putting money into a trust or setting up a corporate vehicle. This can be reassuring if you’re concerned about the potential cost of future care, or about giving away too much of your wealth too soon. You can also continue to draw an income from these shares or sell them to fund future expenses.

3. Give it to charity

Any gift made to charity during your lifetime is immediately exempt from IHT. If you leave a portion of your estate to charity in your will, you can also reduce the rate of IHT applied to the rest of your estate.

For example, if you leave 10 percent of your estate to charity, the 40 percent rate of IHT that would apply to the rest reduces to 36 percent.

It’s worth factoring this into your will, as well as investigating tax-exempt vehicles such as charitable trusts or foundations.

The beauty of giving money to causes you care about is that, as you begin to set aside money during your lifetime, you can see it being put to work, and take satisfaction in the difference it’s making.

4. Insure it

You may decide you don’t want to give up any or all of your assets during your lifetime, but still wish to minimise the IHT bill.

One solution is taking out a whole-of-life insurance policy, which pays out after your passing and can be used to pay off all or some of the IHT liability.

“Insurance can mean that, should anything happen to you in the next 10, 15, 20 years, your IHT liabilities are covered,” says Chris. “This can provide you with certainty – and peace of mind. But you need to start early, as the cost of your policy will largely be dictated by your age and health.”

Fail to prepare, prepare to fail

IHT mitigation doesn’t have to be complex. Engaging with an experienced wealth advisor can help you build a holistic wealth plan that meets your needs both now, and in the future.

“It all starts with a conversation” says Chris. By identifying a client’s goals in four key areas – career, family, lifestyle and property – we can build the best combination of strategies for them and their family, while ensuring their plan evolves to serve their needs as they change.

Yet the process of mitigating the impact of IHT can be a hard one to start.

“These are difficult conversations,” says Chris. “They involve considering your own mortality, and it can be all too easy to end up kicking the can down the road as a result. But if you don’t tackle IHT promptly and properly, you may land your family with a heavy administrative and financial burden, at a time of deep emotional stress.”

Proper planning will never completely remove the emotion from the situation, but a proactive, incremental approach to IHT will make the process much easier for you – and dramatically reduce the strain on your loved ones.

The post How can I reduce my inheritance tax bill? appeared first on The Engineering & Manufacturing Network.

The post Brewin Dolphin – New tax year: ten key changes for 2023/24 appeared first on The Engineering & Manufacturing Network.

With several tax and pension rules changing, arranging your finances tax efficiently in 2023/24 is more important than ever. In this webinar, Richard Harwood, our financial planning expert, will explain how to save and invest to beat the tax squeeze, with handy case studies for whichever stage of life you’re at.

In this webinar we explain how to:

• grow your money tax efficiently
• make the most of your tax reliefs and allowances
• pay less tax in retirement
• reduce your inheritance tax liability through gifting
• navigate frozen tax thresholds

There will also be an opportunity to ask questions in a live Q&A.

This does not constitute tax or legal advice. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future.

Host: Richard Harwood

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With the fallout from his predecessor’s mini-budget still fresh in people’s minds, Hunt did not announce any significant tax cuts for households. Instead, this spring budget[1] focused on incentivising people to re-join the workforce and remain in work for longer. This follows a jump in economic inactivity since the pandemic, which has been largely driven by an increase in early retirement[2]. Hunt announced that the pension lifetime allowance will be abolished, and the pension annual allowance will rise to £60,000. Free childcare for working parents will be extended to cover children from nine months old, while over-50s will be offered “returnerships” to help them retrain and get back into the workplace.

Other announcements included some limited support for households struggling with the cost-of-living crisis, the confirmation of an unwelcome tax hike for businesses, and measures that aim to incentivise business investment.

Here, we highlight the key announcements, before giving Guy Foster’s view on the implications for the UK economy and investors.

Lifetime allowance abolished

In an unexpected move, the chancellor announced that the lifetime allowance – the amount of money you can build up in pensions without triggering a tax charge when you come to access pension benefits – will be completely abolished. From 6 April, savers accessing pension benefits in excess of the lifetime allowance will no longer face a tax charge of up to 55% on the excess.

This is an extraordinary change of direction. The lifetime allowance was introduced in April 2006, when it was set at £1.5m. It reached a high of £1.8m in 2010/11, was slashed to a low of £1.0m in 2016/17, before three increases brought it to its current level of £1.07m[3]. In April 2021, prime minister Rishi Sunak (who was chancellor at the time) said the lifetime allowance would be frozen for five years until 2026, but Hunt’s announcement means this will no longer happen.

Abolishing the lifetime allowance is one measure that aims to deter people – especially doctors – from reducing hours or retiring early because of potential tax liabilities. The number of people paying tax charges as a result of breaching the lifetime allowance rocketed by 578% from 1,270 in 2011/12 to 8,610 in 2020/21, according to HMRC. After 6 April, savers will no longer need to worry about these tax charges.

The change doesn’t mean that future retirees will be able to draw more of their pension savings as a tax-free lump sum. The 25% tax-free lump sum is currently capped at £268,275 (namely, 25% of the current lifetime allowance) and the government has announced that the cap will remain and be frozen at this level.

Annual allowance increased to £60,000

The standard pension annual allowance – the maximum amount you can save into pensions in any one tax year without having to pay a tax charge – will be increased from £40,000 to £60,000 from 6 April. In other words, savers will be able to pay up to £60,000 or 100% of their UK relevant earnings (whichever is lower) into pensions each year and benefit from tax relief.

The annual allowance was introduced in April 2006, when it was set at £215,000. It was subsequently increased each year before being slashed to £50,000 in 2011 and then £40,000 in 2014[4]. The number of people reporting pension contributions exceeding their annual allowance soared from 140 in 2006/07 to 41,000 in 2020/21.

The increase in the annual allowance to £60,000 could be particularly beneficial for those whose income means they cross into a higher tax band. For example, someone earning £160,000 a year could make a £60,000 gross pension contribution and see their adjusted net income fall to £100,000. Doing so could enable them to avoid additional-rate income tax and reinstate their tax-free personal allowance (which is tapered once adjusted net income exceeds £100,000).

People on very high incomes could have a lower annual allowance than this because of the annual allowance taper. From 6 April, the tapered annual allowance will kick in once someone has an ‘adjusted income’ of £260,000 – up from £240,000 currently. The annual allowance will reduce by £1 for every £2 of adjusted income that exceeds this threshold, down to a minimum floor of £10,000 – that’s an increase from £4,000 currently.

MPAA lifted to £10,000

In another move that aims to encourage retirees back to work, the money purchase annual allowance (MPAA) will rise from £4,000 to £10,000 from 6 April. The MPAA is triggered when savers flexibly access defined contribution (DC) pensions for the first time, and effectively replaces their standard annual allowance. The MPAA was set at £10,000 when it was introduced in 2015, before being cut to £4,000 from 2017.

Energy bill support extended

To shield households from soaring energy bills, Hunt delayed the planned increase in the energy price cap, which was due to come into force from 1 April. Bills for the average household will remain at around £2,500 per year, instead of rising to £3,000 per year.

Fuel duty has also been frozen and the 5p per litre cut extended for a further 12 months.

Corporation tax hiked to 25%

Despite protests from business leaders, Hunt pressed ahead with a six-percentage point increase in the main rate of corporation tax from 19% to 25%. The increase was first announced by Sunak in his 2021 spring budget, and will come into effect from 6 April as planned. This will affect businesses with profits of more than £250,000. Companies with profits of £50,000 or less will continue to pay tax at 19% (the ‘small profits rate’). Those with profits of between £50,001 and £250,000 will pay tax at 25% but will get marginal relief – i.e., a gradual increase between the small profits rate and the main rate.

Tax breaks for businesses

In an effort to drive business investment and growth, the government will introduce a “full expensing” scheme and reforms to capital allowances, which Hunt claimed would offset the rise in corporation tax. Over the next three years, companies will be able to offset all capital spending against their tax bill in the year it is incurred. This is estimated to save businesses a combined £9bn a year.

Hunt also announced the creation of up to 12 new low-tax investment zones to help “level up” areas outside of London. Each zone will get up to £80m of support over five years, including tax incentives to encourage businesses to those areas.

Other announcements included the provision of £200m for regeneration projects, an additional £200m for local authorities to repair potholes and improve roads (taking the fund to £700m a year), and over £100m of support for local charities and community organisations. There will also be further support for R&D intensive small and medium-sized enterprises via an enhanced rate of tax relief for loss-making companies.

Measures already announced

A whole host of other changes will also come into effect in the new tax year. The key measures affecting investors include:

• The annual capital gains tax (CGT) exemption will be slashed from £12,300 to £6,000. Any profits that exceed the exemption will be taxed at existing rates of 20% for higher and additional-rate taxpayers and 10% for some basic-rate taxpayers (28% or 18% on gains from residential property).
• The annual dividend allowance – the amount of dividend income you do not have to pay tax on – will fall from £2,000 to £1,000.
• The additional-rate income tax threshold (top rate in Scotland) will be lowered from £150,000 to £125,140.
• The personal income tax allowance – the amount you can earn each year before you start paying income tax – will be frozen at £12,570 until 2028, while the higher-rate income tax threshold will be frozen at £50,270.
• The inheritance tax (IHT) nil-rate band and residence nil-rate band will be frozen at £325,000 and £175,000, respectively, until 2028.
• The state pension will increase by 10.1% to around £10,600 a year.

The economy

The spring statement was accompanied by the Office for Budget Responsibility’s (OBR) economic and fiscal outlook[5], which painted a somewhat brighter picture for the UK economy than its previous forecast in November. The UK is no longer expected to enter a technical recession this year – defined as two consecutive quarters of declining gross domestic product (GDP). The economy is forecast to contract by just 0.2% this year, a big upgrade from the 1.4% contraction forecast in November. Inflation is expected to fall sharply from 10.7% in the final quarter of 2022 to 2.9% by the end of 2023. Public sector net borrowing in 2022/23 is expected to be £152.4bn, or 6.1% of GDP. This is £24.7bn lower than its November forecast.

However, the OBR warned that the economy still faces “significant structural challenges”. Gas prices remain more than twice their pre-pandemic level, business investment has stagnated, the labour force is 520,000 people smaller than expected prior to the pandemic, and productivity has grown at less than half its pre-financial crisis rate. Real household disposable income per person – a measure of real living standards – is expected to fall by a cumulative 5.7% over 2022/23 and 2023/24. While this is 1.4 percentage points less than forecast in November, it would still be the largest two-year fall since records began in 1956/57.

Looking further ahead, the OBR has trimmed its growth forecasts from 2.7% to 2.1% for 2026 and from 2.2% to 1.9% for 2027.

Guy Foster, our Chief Strategist, shares his views on how the announcements could affect the economy and investors

The context to today’s budget was a pretty tense day for financial markets, with Credit Suisse becoming the most significant bank to wilt under investor anxiety. That makes it difficult to note much financial market reaction to a budget which, as usual, had been well leaked in advance.

This had long been billed as a budget to get people back to work. Since 1970, the share of working-age people available for work has risen by about four percentage points, but it peaked when Covid-19 struck the economy. Since the pandemic, there are now 170,000 extra working-age people and 318,000 fewer working-age people looking for work.

The chancellor hopes a combination of carrot and stick measures will reverse that recent decline. The carrot comes from more generous pension arrangements and help with childcare. The stick comes from sanctioning those failing to take up jobs. Age will become a greater headache in the UK as it already is for many other developed economies.

On the other hand, increasing female participation in the workforce has been an extremely effective way of increasing overall workforce participation over several decades. The provision of additional childcare support will hopefully help to mobilise additional labour at a time when the UK is suffering from an acute shortage of workers.

Business investment has been slow over the long term but has improved markedly in recent years. Companies were able to deduct 130% of some of their investment from their taxable profits. That will now fall to 100%. Although the deduction rate is falling, the increase in the rate of corporation tax means the incentive to invest will be strong.

The value of investments, and any income from them, can fall and you may get back less than you invested. This does not constitute tax or legal advice. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. Information is provided only as an example and is not a recommendation to pursue a particular strategy. We or a connected person may have positions in or options on the securities mentioned herein or may buy, sell or offer to make a purchase or sale of such securities from time to time. For further information, please refer to our conflicts policy which is available on request or can be accessed via our website at www.brewin.co.uk. Information contained in this document is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness. Forecasts are not a reliable indicator of future performance.

The post Brewin Dolphin: Spring budget statement March 2023 appeared first on The Engineering & Manufacturing Network.

A financial adviser can carry out a thorough assessment of your personal and financial circumstances but, in the meantime, here are seven financial resolutions that could help you start the new year on a stronger footing.

1. Assess your spending and saving habits

Steep price rises mean it’s more important than ever to have a solid budgeting plan in place. Sticking to a budget can help you avoid splashing out on things you don’t really need. You might even find you have more money to put towards your savings goals.

It’s generally considered wise to have around six months’ worth of essential expenditure in an easy-access savings account. If you already have a rainy-day fund and are saving for goals that are at least five years away, you might want to consider investing in the stock market. Although the stock market can be volatile, history shows that it performs better than cash over long periods.

2. Revisit your financial goals

The new year is a good time to reconsider your financial goals – what you would like to achieve over the short, medium and long term. Your goals might have changed since you first created your financial plan, in which case you may need to adjust where you are saving your money and / or the level of investment risk in your portfolio.

A financial adviser can explain whether you are on track to achieve your goals and, if not, the changes you might wish to consider making. They can also build an investment portfolio that suits your individual needs and works hard to preserve and grow your money over the long term.

3. Check your pension is on track

If you haven’t checked the value of your pension pots recently, this is the time to do so. Understanding how much money you’ve saved up in pensions will help you work out whether you’re on track to achieve your retirement ambitions. An adviser can offer support by calculating the projected value of your pension at retirement and the amount of annual income this is likely to produce.

If there’s a shortfall, you might want to see if you can top up your pension. Pensions are a really tax-efficient way of saving for the future because of the tax relief you receive on personal pension contributions. A £100 pension contribution costs just £80 if you’re a basic-rate taxpayer, £60 if you’re a higher-rate taxpayer or £55 if you’re an additional-rate taxpayer.

4. Make the most of your tax allowances

There are a whole host of other tax allowances and exemptions to make use of each year. Many people wait until the end of the tax year to maximise their allowances, but the sooner you act, the better your chances are of realising your financial goals.

In the 2022/23 tax year, you can invest up to a maximum of £20,000 into ISAs to benefit from tax-efficient income and growth. You can withdraw money from ISAs whenever you like without paying tax, which makes ISAs a useful investment vehicle for pre-retirement goals as well as a tax-efficient source of income in retirement.

Other allowances include the capital gains tax (CGT) exemption and the dividend allowance. These allowances are due to be slashed in April 2023 and again in April 2024, so you might want to act quickly to maximise your tax-free investment gains and tax-free dividend income before the changes come into effect.

5. Review your protection

Having the right protection is crucial to ensure you and your family’s finances hold up in the event of unexpected illness or death. Even if you already have protection, the new year is a good time to check it still reflects your circumstances. If the level of cover is too low, your loved ones could be at risk of financial hardship should the worst happen to you. A financial adviser can make sure you have the right policies and level of cover to suit your individual needs.

6. Make or update your will

Making a will is one of the most important things you can do. It ensures your assets go to who you want after your death, and that your wishes are carried out as you intended. If you’ve already made a will, consider whether it needs updating – for example, if your personal circumstances have changed. Making or updating your will could make a big difference to the future of those you care about.

7. Get some smart advice

Understanding where to invest, how much you need to save for retirement and what to do to secure your family’s financial future can be really difficult on your own – and that’s where getting some smart advice comes in. This new year, why not ask one of our advisers to review your finances and check everything is as it should be? It could make a real difference to your financial future and give you the peace of mind that you’re making the right decisions for you.

For smart advice that’s tailored to you, speak to one of our advisers today.

The value of investments, and any income from them, can fall and you may get back less than you invested. This does not constitute tax or legal advice. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. Information is provided only as an example and is not a recommendation to pursue a particular strategy.

The post Brewin Dolphin – Seven financial resolutions for 2023 appeared first on The Engineering & Manufacturing Network.

How much have I saved so far?

The first step in understanding how long your pension is likely to last is to work out how much you’ve saved so far. This might seem obvious, but it’s possible you’ve accumulated several workplace pensions over your career, some of which you may have forgotten about. Ask your pension providers for an up-to-date valuation, and use the government’s free pension tracing service to track down any lost pensions. Don’t forget the state pension, which currently pays £185.15 per week (around £9,600 a year) for those who qualify for the full rate. You might also have other sources of retirement income, such as ISAs and savings accounts. A financial adviser can review all your savings and investment pots to give you a true picture of your retirement savings.

What’s my life expectancy?

Latest figures from the Office for National Statistics show a 66-year-old woman has an average life expectancy of 87 years. However, they also have a one in four chance of living to 94 and a one in ten chance of living to 98. For a 66-year-old man, the average life expectancy is 85 years. If you stop working at age 66, which is the current state pension age, your savings may need to last for 20 or even 30 years in retirement.

How much retirement income do I need?

How much retirement income you need each year will depend on your lifestyle in retirement. Travelling the world, for example, is likely to cost significantly more than pottering around your garden. The Pensions and Lifetime Savings Association (PLSA) has calculated that the average single person needs £33,600 a year to fund a ‘comfortable’ retirement, while the average couple needs £49,700 a year. This would cover all your basic needs as well as some luxuries, such as three weeks in Europe each year, replacing your kitchen and bathroom every ten to 15 years, and replacing your car every five years. Bear in mind that these are average figures. An adviser can help you add up your expected outgoings and then explain what level of retirement income this would translate into.

How long would a comfortable retirement income last?

Our analysis shows that if you retired at age 66 with a £500,000 pension and started withdrawing £33,600 a year, your pot could run out by age 85. This assumes the fund grows at an annual rate of 5% after fees and the income increases annually with inflation (assumed at 2% p.a.). If you retired with a £750,000 pension, you could still have money left in your pot at age 95. If you have a £500,000 pension, don’t be alarmed. Remember, the state pension could boost your income by around £9,600 a year, perhaps enabling you to withdraw a lower amount from your personal pensions. If, for example, you started withdrawing £24,000 a year from a £500,000 pension, you could still have money left over at age 95 (based on the same assumptions as above). Another way of funding retirement is to buy an annuity. This pays a guaranteed income for life, no matter how long you live. A financial adviser can guide you through the pros and cons of annuities and income drawdown, so that you can make a fully informed decision on what’s right for you.

Next steps

Understanding how long your pension will last in retirement can provide clarity and peace of mind about your future. However, it is a complex calculation with many variables – and that’s why it’s important to get smart advice from someone who understands your individual circumstances. An adviser can show how long your retirement savings are likely to last, explain the best way to access your pension in retirement, and check your money is invested in a way that suits your needs and goals.

1 https://www.gov.uk/new-state-pension/what-youll-get

2 ONS life expectancy calculator

3 https://www.gov.uk/state-pension-age

4 https://www.retirementlivingstandards.org.uk/

The value of investments, and any income from them, can fall and you may get back less than you invested. Neither simulated nor actual past performance are reliable indicators of future performance. Information is provided only as an example and is not a recommendation to pursue a particular strategy. Information contained in this document is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness.

The post How long will my pension last in retirement? appeared first on The Engineering & Manufacturing Network.

Make the most of pensions
Some entrepreneurs see their company as their pension, but this is a risky mentality to adopt. It is easy to assume that you will sell your business when you want to retire and the proceeds will be your pension. But what if it takes longer than planned to sell your business, or it isn’t worth enough to fund your retirement? Making contributions into a pension could help you build a more secure retirement, and it is also a very tax-efficient way to save. As the owner of your company, you can make your own tax-efficient savings into your pension, and you can also make employer contributions which are then deductible against corporation tax.

Protect against risks
You’re probably well-versed in insurance for your business premises and stock. But have you thought about insurance for what is arguably your most valuable asset – your people? As a business owner, you are your business. If you were to die or suffer an illness that meant you couldn’t work, your business could struggle to keep trading. Protection against death and illness is crucial for entrepreneurs. You should also consider protection for the other key people min your business. Key person protection and shareholder protection are just some of the solutions that could help your business stay afloat should the worst happen to one of your key members of staff or shareholders.

Plan your exit in advance
Exiting your business may seem a long way off, but thinking about your exit early on could reap rewards further down the line. If you want to sell your business in the future, then it pays to work out your ‘magic number’. That’s how much you would need from a sale in order to achieve the lifestyle you want. A financial adviser can help you work out how much your future lifestyle might cost, and whether the potential proceeds from a sale, alongside your pensions, savings and investments, are likely to be sufficient. They can also work with you to allow you to undertake new projects or invest in other ventures. If you are hoping to leave your business to your family, you might qualify for business relief, which may mean there is no inheritance tax to pay on the value of your company shares when you die.

Don’t put all your eggs in one basket
Your focus may be on making your business the best it can be, but it’s important to think about your overall investment strategy. As well as putting money into your business, consider investing across other asset classes, such as equities, bonds and cash. Diversifying your investments could help to cushion the blow to your long-term finances if your business doesn’t perform quite as well as you hoped. How much money you put into each asset class will depend on a range of factors, including how long you’re investing for, your goals and your attitude to investment risk. A financial adviser can help you build a diversified portfolio that suits your individual needs.

Surround yourself with experts
There’s a lot more to being a successful entrepreneur than just having a good idea. Your business needs to be built on solid financial foundations so it can grow to be a success. That’s why it’s important to surround yourself with a team of experts from day one. At RBC Brewin Dolphin, we can introduce you to the right people at the right stage of your journey – whether that’s venture capital firms, lawyers, accountants, or existing clients who may have been in your position before and who can share their experience. We’ve worked with thousands of business owners, helping them to gain clarity over their financial future and supporting them in making the right decisions. With us at your side, you can concentrate on what you enjoy the most and look forward to the future with confidence.

The post Brewin Dolphin – Financial planning tips for entrepreneurs appeared first on The Engineering & Manufacturing Network.

However, balancing the books in the wake of the pandemic will be essential, given forecasted borrowing of £355bn over the current financial year, a peacetime record. The Treasury has announced the launch of tax consultations on 23 March, which are expected to pave the way for significant tax rises to pay for the enormous cost of the pandemic in future budgets. But, for now, a rise in corporation tax alongside a series of frozen thresholds will raise some revenue. Here, we look at the main announcements and what they mean for investors.

Covid-19 support
The furlough scheme has been extended until the end of September, despite the strength of the UK’s vaccination programme and roadmap for releasing lockdown. The Job Retention Scheme was originally due to end on 30 April, but its extension is aimed at supporting businesses while they get back on their feet.

Around 4.7m people have recently been under furlough, according to the latest government figures, with about 68% of the people receiving support under the Job Retention Scheme working in the travel and hospitality sectors. With business closures and industries hit hard by a series of lockdowns over the past year, it was inevitable that further income support would be needed. Sunak also confirmed a fourth grant under the self-employed income support scheme, and a fifth from May. Each of these grants will pay up 80% of three months’ average trading profits, capped at £7,500. Those whose turnover has fallen by less than 30%
will be eligible for a reduced grant of 30%.

Business rates relief for the retail, hospitality and leisure sectors will be extended until the end of June. There will also be an extension to the VAT cut for hospitality and tourism sectors, until September. A Recovery Loans Scheme will offer loans up to £10m, with the government providing lenders with an 80% guarantee. In addition, around £5bn in cash grants were announced for businesses hit hard by the pandemic, including
shops, pubs, restaurants and personal care services such as hairdressers. The government estimates that around 700,000 businesses will be eligible for up to £18,000 each. Meanwhile, the temporary cash bonus
for businesses taking on an apprentice will increase to £3,000, to boost jobs.

The economy
The UK economy began 2021 with another lockdown, but the rollout of vaccines and a roadmap for relaxing restrictions is expected to prompt a rebound in activity. While the UK economy has suffered its worst downturn for more than 300 years, much of the bad news is hopefully now in the past. The Office for Budget Responsibility (OBR) predicts the fastest economic growth in 2021 for almost 50 years, as the country emerges from lockdown. It forecasts the economy will return to its pre-pandemic peak by mid-2022, earlier than previously thought, with growth at 4% this year, and 7.3% in 2022, up from November’s 7% forecast. However, In the budget, chancellor Rishi Sunak used the government’s “fiscal firepower” to further support businesses amid the Covid-19 pandemic, while laying the groundwork for future tax rises to repair the country’s finances. Budget 2021 3 March 2021 the OBR still expects the economy to be 3% smaller than its pre-pandemic forecast in five years’ time. Meanwhile, the government’s support for jobs is working,
with unemployment expected to peak at 6.5%, compared to the November forecast of 7.5%. Ultimately, the country is not facing a fiscal crisis and can continue to borrow while interest rates remain low, despite
the high levels of borrowing.

Corporation tax
Sunak announced a significant rise in the rate at which company profits are taxed, saying it was ‘fair and necessary’ for businesses to contribute to the UK’s recovery, given the huge support packages provided
during the pandemic. Corporation tax will rise from 19% to 25% from April 2023, an increase that is expected to raise £12bn per annum. Even after this rise, the UK’s corporation tax will be among the lowest in the G7. President Joe Biden is raising this tax from 21% to 28% in the United States. However, companies with profits of up to £50,000 will continue to pay corporation tax at the current rate of 19%. Meanwhile, a taper above £50,000 will be introduced, with Sunak stating that only 10% of businesses will pay the new, higher rate of tax.  There will also be an extension to the loss carry back for businesses to help otherwise-viable UK businesses which have been pushed into a loss-making position. The trading loss carry-back rule will be temporarily extended from the existing one year to three years. This will be available for both incorporated and unincorporated businesses for up to £2m of losses in each of 2020-21 and 2021-22. The chancellor made a series of announcements that could affect you when the new 2021/22 tax year begins on 6 April. Here, we consider some of the most significant.

Personal allowances
The chancellor froze the personal tax allowance and higher-rate tax thresholds, saying that although these will rise in April 2021 they will then be frozen until 2026. The personal allowance, which is the amount you can earn each year before you start paying income tax, will rise to £12,570 from £12,500 in April. The higher-rate tax threshold will rise from £50,000 to £50,270. By freezing these thresholds, instead of increasing
them every year during this parliament, this measure is expected to raise around £6bn per annum. Some have called the freezing of allowances a ‘stealth tax’, or a way of dipping into people’s pockets without them realising amid the rising cost of living – although the chancellor was at pains to be open about this in his speech to parliament. The National Insurance Contribution (NIC) threshold will rise to £9,568 for the 2021/22 tax year before being frozen.

Pension lifetime allowance
The chancellor has also chosen to freeze the pension lifetime allowance, which is the total amount you can save into your pension before incurring tax charges. Recently, the lifetime allowance has increased each tax year in line with inflation. But from the 2021/22 tax year, it will remain at £1,073,100 until 2026. Money withdrawn as a lump sum above this level will incur a 55% tax charge, while money withdrawn as income will
incur a 25% charge, with the remainder then subject to income tax at the individual’s marginal rate. The freezing of this allowance will see more people paying additional tax on their pension benefits.

Capital gains tax
Business and property, and investors with unrealised capital gains may face a tax hit in future budgets. For now, however, the rate of capital gains tax (CGT) has also been frozen until 2026.
The chancellor announced a review of CGT last year, with the conclusion being that the current rules created ‘odd incentives’, with CGT taxed at a lower rate than income. CGT is currently charged at 10% and 20% for most taxable assets, or 18% and 28% for properties that are not a main home. At present, the annual tax-free allowance for capital gains stands at £12,300, but there are plenty of reports speculating that this may change in the future.

Stamp duty
The stamp duty holiday has been extended until the end of September to keep the property market buoyant as the country emerges from lockdown. Originally part of a series of measures to boost the
economy amid the pandemic, the stamp duty threshold was increased to £500,000. Homebuyers pay 5% stamp duty on the property’s value from £500,001 to £925,000, 10% on £925,001 to £1.5m, and 12% above £1.5m. The holiday enables people to save up to £15,000 on their stamp duty bill. Unsurprisingly, the chancellor has kicked the tax-raising can down the road. For those expecting the worst, they are relieved to only have had their allowances frozen. That story could be quite different next year.

I don’t envy the chancellor at all. He’s
stuck between helping the economy
recover and raising taxes to fill the deficit
black hole (and prompting a Tory
rebellion if he raises them too soon).
This was a well-judged budget, careful
not to trample on any nascent recovery

Guy Foster, Chief Strategist

However, the extension will see a tapering of support from June, gradually reducing the nil-rate band. From July until September, the first £250,000 of a property purchase will be free from tax, falling to the original £125,000 thereafter.

Mortgage guarantee scheme
A new mortgage guarantee scheme aims to help prospective buyers get onto the property ladder with a deposit of just 5%. Available on properties worth up to £600,000, the government will offer lenders the guarantee
they require to provide a mortgage covering the remaining 95%. The scheme echoes the Help to Buy mortgage guarantee scheme, which closed at the end of 2016.

Other points of note
UK infrastructure bank
The chancellor gave further details of the UK’s infrastructure bank, which will be supported by £12bn of initial capital and £10bn in government guarantees. The bank will fund £40bn of infrastructure projects that support the government’s ‘levelling up’ agenda. The bank will offer a range of products, including equity, loans and guarantees. Savers and investors – ISA allowance Fortunately, for savers and investors, there were no changes to ISA allowances. The main ISA limit for 2021/22 remains at £20,000, while the limit for Junior ISAs remains at £9,000.

However, plans were revealed for environmentally conscious savers with the proposed launch of the UK’s first sovereign green bond later this year. The bond will be offered by the Treasury-backed National Savings &
Investments and enable savers to support green projects, including renewable energy and green transport.

Pensions tax relief
Despite suggestions that radical reforms to this tax incentive might be announced, with rumours of moving to a flat rate of 25%, the chancellor chose to leave current rates and allowances in place.
However, the current system benefits higher earners the most, and there could be substantial savings from any changes, so the chances of future reforms is reasonably high. This might therefore be a temporary decision on an issue that could be revisited in a future budget. Even then it is unlikely any change would be introduced overnight, as any changes will mean investors and company pension schemes need sufficient time to adapt.

Inheritance tax
The inheritance tax (IHT) thresholds remain the same and will be frozen until April 2026. Everyone is entitled to pass on assets of up to £325,000 on their death, free from IHT. This may be boosted by the residence nil-rate band, for passing on a property to a direct descendant – which remains at £175,000 per person for the 2021/22 tax year. This means a married couple with children will be able to pass on a maximum of £1m in total without having to pay IHT – two lots of £325,000 (£650,000) and two lots of £175,000 (£350,000).

How we can help
If you would like to discuss any of the matters raised in the budget, please speak to your adviser who will be able to ensure that you are making the most of the reliefs and allowances available to maximise return.

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Running a business is an exhilarating and often exhausting undertaking. You influence not only your own destiny, but that of your staff too, as well as possibly the sector you operate within. It’s a heady cocktail, but we
find that many business owners would like to get to a point where, if they’re working at all, they’re doing so out of choice rather than necessity.

But how do you know when you’ve reached that point? How do you know when you’ve made enough to live your dream life? More importantly, what are you not doing by staying involved in the business? What are you missing out on whilst still young enough to enjoy it? If you’ve unwittingly already reached the point where you can live your dream life, why are you ploughing on?

We understand that taking your foot off the gas may not come naturally; indeed, to get to where you are today, you’ll have taken risks and no doubt have suffered sleepless nights. Your self-reliance, determination and resilience is likely what has led to your success. Thinking about exiting your business is understandably a difficult topic.

‘Everyone is different. It’s about building a personal visual plan so you understand the life you can live.’Chris Black – Divisional Director

Our job is to help you work out:
1. what your dream life looks like;
2. how much that dream life costs;
3. when you can live that dream life, and
4. ultimately, if that dream life is already within your grasp.

If not, the strategy needed to get you there. When we know these things, we can give you clarity on when you can confidently step away from the business. In conjunction with your other professional advisers, we
can then help implement an exit strategy that maximises your chances of living life on your terms.

We’ve worked with thousands of business owners like you, who have benefitted from the clarity we can bring to the conundrum of “how much is enough”. We do so without bamboozling you with jargon and often, we end up showing you that your ‘magic number’ is smaller than you think it needs to be.

To find out more, and to get real clarity on when you can live your best life, contact Chris Black, Divisional Director, at chris.black@brewin.co.uk or at our Newcastle office on 0191 279 7793 /
07733 307230.

The post AFFILIATE NEWS: Meet Chris Black Divisional Director of Brewin Dolphin appeared first on The Engineering & Manufacturing Network.