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Preparing for Tax Year End: Maximise Your Savings


With taxation rates in the UK being so high, it’s important to take advantage of the many allowances you could be eligible for ahead of tax year end.

There are straightforward steps you can take to make sure you’re not overpaying more than you should be:

Personal Savings Allowance – the impact of higher interest

For investors, 2023 ended up being a good year, with real growth happening in November and December. With interest rates going up, those with a decent amount in the bank may now see a tax bill.

Through the Personal Savings Allowance, the first £1000 (or £500 if you’re a higher-rate taxpayer) of any income from interest is tax-free. That means any interest income over that threshold is subject to tax.

For example, if you are a basic tax rate payer with £20,000 in a savings account at a 5% interest rate, this gives you an annual interest income of £1000. Your entire Personal Savings Allowance has been used up. A higher interest rate may increase your income interest, but may also increase your tax bill.

Dividends: Reduction in allowances

The Dividends Allowance – the amount you can receive in dividends before paying tax – has reduced for this financial year, from £2000 to just £1000. It will reduce again to £500 in the 2024-25 tax year. This means that you could be paying more tax on your dividends.

However, dividend income from assets held in ISAs continue to remain tax-free.

Capital Gains Tax

The Capital Gains Tax Allowance (CGT) for 2023-24 is £6000, a significant reduction from £12,300 in the previous tax year. It is paid on the gain when you sell, for example, a second home, or a personal possession over £6000 that isn’t a car.

However, if you held funds in an ISA, you don’t pay Capital Gains Tax on the gains you make.

Furthermore, the amount of CGT you pay is linked to your income. Increasing pension contributions reduces your taxable income, which may change your tax band and the rate of Capital Gains Tax you are charged.

Rent a Room Relief

If you rent out a room in your home, you can earn up to £7,500 per year tax-free (halved if you share the income with a partner, for example).

This exemption is automatic – if you don’t earn above this threshold, you won’t need to do anything.

ISA Allowance

Using an Individual Savings Account (ISA), you can save funds and not need to pay tax on cash, interest, income or capital gains from investments, as well as offering flexible access to your savings.

You can save up to £20,000 per year within an ISA tax-free. However, if you don’t use up your ISA allowance by the end of each tax year, it is gone, and can’t be carried forward.

How pension contributions can provide tax relief

The examples above demonstrate some tax implications you may face. However, you can benefit from tax relief to help offset this via your pension. This kind of tax relief exists because the government wants to incentivise people to save for their retirement.

By paying into your pension, you can help reduce the amount of tax you pay, increase your savings for the future and ensure you don’t lose certain entitlements.

If you earn over £100,000, your tax-free Personal Allowance starts to taper, and reaches zero if your income exceeds £125,140. However, by paying more of your salary into a pension, your final amount of adjusted net income is reduced. If it is reduced to under £100,000, you maintain your Personal Allowance.

Increasing your pension contributions can also ensure you don’t lose out on certain entitlements. For example, if you earn over £50,000, the amount of Child Benefit entitlement you receive reduces in the form of a ‘tax charge’. By reducing your net income through pension contributions to under £50,000, this charge will be avoided.

The level of tax relief available varies depending on how your pension works, or the rate of income tax you pay. It’s very important to ensure your pension is set up correctly, and that you are aware of any restrictions in place. A Chartered financial planner can help you with this.

Conclusion

There are many more forms of tax to be mindful of in the UK, and if you ask me, it’s far more complicated than it needs to be.

If a tax is due, there are allowances and reliefs you can take advantage of to mitigate your final bill. I would also recommend reviewing if your funds should be shared with a spouse or partner, or remain in the individual’s name – a financial planner can support you with these decisions.

If you find yourself paying a tax, stop and think: could some or all of it be avoided?

If you would like to speak with one of our pension experts, message us or call us on 01480 869466 for a free initial, no obligation chat.

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What Defines You?


Your upbringing and circumstances are not what define you. It’s your choices and the decisions you make that define who you are.

There are circumstances early on in life that shape you, from where you grow up and go to school, to the friends, partners, further education, and jobs you have that shape you in later life.
Life may not always be easy but each action, reaction, or non-action helps to define you as the person you are now.
Your actions and circumstances have got you this far, but where will life take you in the future?

When planning for your retirement, just like the rest of your life, it’s determined by a series of decisions and actions. Some things will be out of your control. By the time you retire, the State Income amount will likely not be enough for what you need.

Therefore, you’ll need to take action to secure the pension fund that suits your lifestyle, whether that be from pension contributions, investment decisions, savings, or property portfolios. You must also decide on things such as long-term care costs, your Will, Power of Attorney, and Inheritance Tax planning (if required).

Preparing for the future isn’t something you have to do alone, however. Our expert financial planners have the most up-to-date advice to create a bespoke plan tailored to your needs now, and what you want for your future.

At Beacon, we work around you with virtual or face-to-face meetings, whichever suits you best. Plus, you can access your plan every step of the way using our online portal.
Whether you want to travel the world or finally sit back and relax, knowing that your loved ones are taken care of, the perfect plan is waiting for you.
Start planning for your retirement now, so that you can focus on living the life you want and being the person you want to be.

If you would like to speak with one of our pension experts, please call us on 01480 869466 For a free initial, no obligation chat.

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Wealthy Concerns


Surprisingly, interest rates didn’t rise in September, with a vote being 5:4 to keep them as they are. Inflation remains a concern for everyone, no matter their financial situation, it has seen a fall and I predict October will see another big fall. Things aren’t fixed overnight and for those with low to average levels of income given the current economic situation, it’s likely that money is extremely tight and savings depleted.

The same is now true of those who would ordinarily consider themselves financially comfortable. Their income, whilst still sufficient, perhaps doesn’t leave as much at the end of the month, and dipping into savings is becoming more frequent than before.

Individuals who perhaps consider themselves as ‘wealthy’ or fall into the high-net-worth category aren’t exempt from economic hardship either. The impact on investment returns has been a blow to those using them to provide extra or total income.

So where does this leave future incomes? Despite no one being able to predict the future with total certainty, it now looks as if we may have reached the top of the rising interest rates, and inflation and mortgage rates are slowly coming down.

Pensions are a hot topic right now, especially for those with large pensions that need immediate action. In April this year, the Government changed lifetime allowances (LTA’s).

From April 2024, the LTA will be abolished. The amount you can take from your pension tax-free won’t change, because it’s capped. However, there’s a strong possibility that new Governments could reintroduce the LTA, so the window for action may be quite small.

Hopefully, the stock markets will start improving soon, but it could still be worth reviewing your funds now. They should be reviewed regularly anyway, not just at review time.

If you have a large pension, speak to one of our Chartered and Certified experts to find out what protections are in place and explore your best options.

Due to the various nuances that can lead to poor decision-making, some with no possible reversal, it’s always better to seek the help of professionals rather than tackle it alone.

Please call our experts on 01480 869466 or email us at info@beaconwealth.co.uk for a free initial, no obligation chat.

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How Much Time Do You Have?


How fast would you travel if you had one hour to travel 60 miles? Answer: 60mph
How fast would you need to travel if you left 10 minutes later? Answer: 72mph
How fast would you need to travel if you left 20 minutes later? Answer: 90mph
How much would you save into a pension if you started now? Answer: Well, that depends on your retirement plans…

According to the Pension and Savings Lifetime Association there are three categories for pension income: minimum, moderate, and comfortable.

Since your pension fund is designed to be your income for when you retire, having a clear savings plan is always the best option. The sooner you start saving into your pension, the longer it has to grow. The better the plan, the more achievable it is.

Not everybody knows exactly when they will retire and that’s okay. The starting point should be to figure out how much you want to retire on. Then look at your current situation, and create a plan to realistically achieve this goal.

Hopefully, you have pension funds already, and know whether or not you are on track. Remember, the investment strategy of five years ago is different to now, so it’s possible that your plans may need to change.

It’s important to review whether you’re in the right pension and/or right funds, and to see if your funds have been affected by the past few years’ lack of growth. If you’re unsure if your pension is on track to achieve your goals or have questions you don’t know the answers to don’t panic. This is what a financial adviser is for.

For some, meeting with a financial adviser may be outside their comfort zone. This may be down to various reasons, but your financial adviser is not here to judge.

They will help you to make the most appropriate decisions for your pension and will assist you on your journey to retirement.

If you would like to speak with one of our pension experts, please call us on 01480 869466 For a free initial, no obligation chat.

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Investment Monthly Round-Up


You can view our Investment Monthly Round-Up for July, written by our Senior Investment Manager, Nicholas Carr, by clicking here

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Womens Pensions


When saving in a pension early, the money paid in has the longest time to grow, which for most is beneficial as starting salaries are not typically high. Then contributions made in later years are often of higher value when salaries have increased with career length. However, according to Scottish Widows, this is not the case for everybody. Their ‘Women and Retirement Report’ (2022) shows that women have a significantly lower average pension fund than men: £260,000 versus £137,000.

Women need a pension just as much as men, especially as they live longer on average, yet their final pot is much lower than required. So, you may be asking, why is this the case? Well, research shows that women typically face a triple whammy of pension contribution reductions: Child care, later life care, and divorce.

Firstly, child care is often considered a contributor to the widening pension gap as traditionally it is women who take career breaks, sometimes for years, to raise children. This is not the case for all women but for many, it has an invariable impact on pension savings. Unfortunately, for many this reduction in contributions is not just a short-term gap that they can try to close later on. Depending on home-life circumstances, some women can’t return to full-time work or find they have fewer opportunities to climb their career ladders.

Secondly, later-life care has a similar effect. Again, this may not be the case for every woman, but as noted with child care, they are more likely to make work sacrifices to undertake a caring role. Thus, caring for an elderly parent can also mean reduced hours, reduced pay, or sometimes stop working altogether.

Individually, these breaks can affect the final pot value, even more so if taking both types of care leave or if it is a single-earner household.

Thirdly, an issue that is gaining more attention is that divorce may cause women to experience further pension inequality. When couples divorce, their assets get split but pensions are often overlooked, traded, and in many circumstances not valued at their ‘true’ value. When valuing a pension it is not as simple as looking at its current worth, it needs to be looked at in comparison to the partners.

Make sure you aim to contribute as much as possible, for as long as possible into your pension, starting right from the earliest opportunity. Especially, if you’ve had or are likely to have employment breaks. Experts are working to close this gap, so if you have any concerns about your pension, speak to a chartered or certified IFA, even better if you can speak to advanced pension specialists.

 

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Care Fees Planning


Care Fees Planning

It has been reported that one in seven people are expected to need care. Anyone involved in the funding of long-term care will know just how expensive it is.

The Office of National Statistics (ONS) now states that women need 2.9 years of care and men 2.2 years. This means that the cost could be anywhere from around £150k to £300k on average. Indeed, some could cost less, but some could also cost more.

The majority of the population don’t appear to have made provisions for care fees instead of relying on their home to cover the costs… Private and state pensions will help towards this, but these are often relied on by the partner who may well find themselves leaving their home and moving in with their child. Which, probably may not be the circumstances that either party would have chosen to happen.

The Government was due to bring in a cap for costs but has so far failed to do so. Thus, it remains that an individual needs total assets of less than £23,250 (including your home) before they can be fully funded by the local authority.

Sorting assets for care payment typically rests with the person holding power of attorney. Though, it is not unheard of for children to assist with this. At Beacon, we have several highly qualified experts who specialise in this area that can assist you.

Our planning not only involves the best way of providing the provisions for funding care costs, but it will also find the best options for other things such as avoiding Inheritance Tax (IHT).

Usually, by the time people require care the seven-year rule for gifting is far too late, and even the two-year rule can sometimes be touch and go. So, we strive to ensure the best possible options for your situation.

If you have concerns about funding your care or the care of a loved one, I would suggest that you start planning sooner rather than later.

To speak with our experts, please call us on 01480 869466 for a free initial, no obligation chat.

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Investment Monthly Round-Up


You can view our Investment Monthly Round-up for May, written by our Investment Manager, Nicholas Carr, by clicking here.

A wealth of financial expertise

Financial Worries


Financial Worries

With inflation not coming down as quickly as expected, interest rates still going up, and mortgage rates back on the climb, it’s now a goodtime to review your finances.
I’m sure the older generation can remember when mortgage rates were in double figures, but for those with mortgages taken out in the last ten years, these new rates are going to hit hard.
Some standard size mortgage payments are going up £400-£800 per month. Compared to the rates we paid, they seem low, but the amount borrowed today is so much higher.
Many landlords are reviewing their buy-to-let mortgages and are now selling because the rent just doesn’t cover the new loan repayments.

Unfortunately, many companies have taken on extra borrowing due to the lack of sales during and after Covid. So now these companies are having to pay much more in repayments, on top of a higher payroll cost.
Companies also need to look at their structure, as well as individuals. And I am starting to talk to business owners about this concern. Whilst I am finding the demand for this to be low at the moment, it is expected to increase.
Companies, just like individuals, need to take advice early and not wait until it becomes an emergency.
Poor stock market valuations have also curbed the growth expectations and indeed many individuals have seen no growth for a few years.

High inflation, interest rates, and loan repayments –coupled with a lack of investment growth, has lead to many having to review their financial goals and objectives.
My colleagues and I are now helping individuals, and companies, regarding the changes needed to their financial plan and/or investment strategy, which incorporates our in-house investment team.

If you are worrying about your financial plan, talk to one of our Chartered and Certified advisers.

If you would like to speak with our experts, please call us on 01480 869466 for a free initial, no obligation chat.
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Protect and Serve


Protect and Serve

In 2021 more than 150 million working days were lost in the UK due to sickness but research has found only 6% of adults have an Income Protection plan.

What is income Protection?

Income Protection is designed to cover a percentage of your income if you are off work due to sickness or an accident. It can be paid for a limited period or all the way to your retirement.
Government employees have an excellent scheme which normally means that in the event of an illness they receive six months full pay, followed by six months half pay, and then a discretionary period which could also mean an early retirement.

Is it individual or company cover?

Some companies, like mine, have a scheme in place to protect staff incomes.
Whilst for others it is up to individuals to arrange plans for themselves if their company doesn’t offer this as a benefit.
If it is an included benefit, most company schemes will pay for a period of up to two years, which for many is sufficient coverage for accident/illness recovery.

Why does it matter?

Unfortunately, within our company we have had two team members diagnosed with cancer but thankfully both had cover in place, so received income throughout the full time that they were off.
Money is tight for most people given inflation and increasing interest rates but imagine how much worse it would be if you were hit with long term sickness or an accident that meant that you lost your income or even possibly your job…

Increased pay outs of late, due to long-term effects of Covid has proven the importance of having an Income Protection plan.

At Beacon we have found our Employee Benefits department has been receiving more requests for this type of benefit by small to medium sized companies who are recognising the importance of ensuring financial security for their staff.
We never know what’s round the corner, so whilst individuals need to plan for pensions and investments, they also need to plan for the unexpected.

Having cover is always recommended, like a lifebuoy it will protect you and serves to keep you afloat.

If you are interested in reviewing your protection options, please call us on 01480 869466 for a free initial, no obligation chat.

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