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February 2021 Newsletter


We hope you have been keeping safe and well. Twelve months ago who would have believed we would be in lockdown for the third time as we begin 2021. Whilst the Brexit Agreement was a positive step to start the New Year the additional challenges created as a result will take time to work through. At least we have a silver lining in the form of the vaccine programme which appears to be running relatively on track.

This issue focuses primarily on tax planning issues as we approach the end of the tax year, but we have also included an update on our own working arrangements and the ongoing Pension Triple Lock.

We hope you enjoy the articles and find them useful.

In this issue:-


Tax Planning Before 5th April

The tax year end is fast approaching but there is still time to take action in a number of areas before the deadline.

Your Pension
Have you taken advantage of any unused tax allowances over the past three years (back to 2017/18)? Last year the Chancellor increased both adjusted income and threshold income by £90,000, giving many higher rate tax payers the opportunity to make increased contributions this year. The introduction of a single flat rate relief across the board is still a persistent rumour so we strongly recommend you check that you have used your available allowances.

The annual limit for an adult ISA is £20,000 (or double that for a couple each saving into their own ISA account), £9,000 for the Junior ISA and £4,000 for the Lifetime ISA. In addition, for those eligible, the Lifetime ISA gives a 25% government top-up on contributions. None of these allowances can be rolled over so if you don’t use them, you lose them.

ISA income and gains do not have to be reported on your tax return and the fact that interest earned on cash or fixed interest securities, dividends received and capital gains are all tax free, is of particular relevance to higher rate tax payers.

Capital Gains Tax
The Chancellor has been actively exploring ways to reform CGT making this a good time to review any unrealised gains in your investments. There are options to crystallise capital gains and we suggest you get in touch with your usual JJFS contact to discuss.

Inheritance Tax
The Chancellor has also been considering changes to IHT but for now the three main IHT annual exemptions remain in place:

The Annual Exemption: you can give away up to £3,000 free of IHT which can also be carried forward to the following year (but can only be used after that current year’s allowance has been exhausted).

Small Gifts Exemption: you can give away up to £250 outright per tax year free of IHT to as many people as you wish, so long as they do not receive any part of the annual £3,000 exemption.

The Normal Expenditure Exemption: this allows you to make any gift free of IHT provided that: it is made from income (including ISA income); that you make the gift regularly; and that it does not reduce your standard of living as a result.

Given the extent of the Government’s huge deficit, much of the above could be fair game for the Chancellor and we recommend you use your allowances whilst you can. If you would like to discuss please get in touch with us as soon as possible.


The Triple Lock Minimum Wins Again

In a previous newsletter we discussed the potential suspension of the pension ‘triple lock’ given the prospect of an extraordinary increase in state pensions in April 2022. However, in December the Department for Work & Pensions announced the proposed increases to benefits for 2021/22 and the state pension will once again benefit from the Triple Lock, rising by 2.5% from April.

The Triple Lock requires an increase that is the greater of:

•  Earnings growth
•  Price inflation
•  A floor of 2.5%

With inflation at 0.5% to September 2020 and earnings growth falling as a result of the pandemic, the 2.5% floor still stands.

In fact, over the ten years to 2021/22 the 2.5% floor has been the basis for four increases, something which was probably not anticipated when the Triple lock was announced by the coalition government in 2010. Then, as now, the Bank of England’s inflation target was 2% and earnings were expected to outpace inflation by 1% or more, making the 2.5% floor a safety net that probably would only be called upon in a deep recession.

In reality, earnings and inflation have virtually matched each other over the period at just under 2% with effectively no increase in the buying power of average earnings over the past ten years. In contrast the Triple Lock has delivered a real terms increase of almost 11%. If you are on the receiving end of the Triple Lock, that is good news, but if you are under State Pension Age (age 66 now) it means more government expenditure you have to finance.

Putting this into context however, the new state pension still remains a very modest sum with a maximum of £179.60 per week from April 2021, equivalent to just under one-third of current average earnings (approx £580 a week). No wonder the UK is likely to remain in bottom place of the OECD’s league table based on the proportion of earnings replaced by state pensions.

The Triple Lock has been widely criticised by experts for being an unnecessarily expensive protection that creates intergenerational unfairness but the political implications of removing it has been something that none of the mainstream parties are prepared to confront. However, there have been suggestions that if no action is taken, an earnings bounce in 2021 as the economy recovers could mean a 5% 2022/23 increase under the Triple Lock formula at a time when inflation is below 2%. Given the dire position of public finances, such a scenario would offer Rishi Sunak the golden opportunity to justify a reworking of the Triple Lock.



Still Business As Usual At JJFS

At the time of writing it is just over 4 weeks since the start of the third national lockdown and we are continuing to operate in line with Government advice and guidelines to keep our staff healthy and safe.

The majority of our staff continue to work remotely from home with skeleton staff in the office Monday to Friday. The transition to home working last March has worked very well for us enabling the firm to service our clients throughout the pandemic with minimal disruption. We continue to offer meetings via video call using Microsoft Teams or by phone if preferred.

We are pleased that all staff remain on board and we have not needed to use any of the Government’s financial assistance schemes.

The ongoing vaccine programme provides a level of optimism and we hope that things will start returning to some semblance of ‘normal’ for us all, later this year.



These articles do not constitute any form of personal advice or recommendation and are not intended to be relied upon in making (or refraining from making) any investment or financial planning decisions.


What’s Simon Been Up To During Lockdown?

Never one to miss an opportunity, Simon Jackson has taken strength training during lockdown to a whole new level.

Either that or he’s traded in his VW Golf for the latest Massey Ferguson. (Which takes changing a tyre to a whole new level too).

We have no idea what else he’s got up his sleeve. Stay tuned……












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