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November 2023 Newsletter

The Autumn Statement is due on 22nd November and with a general election looming next year it will be interesting to see what the Chancellor has in store. The government’s focus on tackling inflation may rule out tax cuts and significant spending increases, at least for the time being, but rumours are circling about an overhaul of the pension triple lock and the ISA regime along with another look at Inheritance Tax. We shall see!

In this issue:-

Tax allowances checklist
75 days left
Should you have started retirement planning at 36?
Divorce, step-children and the residence nil rate band
Scams – don’t rest on your laurels
Need a little extra support?

We hope you enjoy the articles and find them useful.

PLEASE NOTE:

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.

Tax Allowances Checklist

Now that we are more than halfway through the tax year here is a reminder of the main tax allowances applicable until 5th April 2024.

Are you utilising your ISA allowance?

The earlier you invest, the longer your investment will grow within a tax-efficient environment. The current ISA limits are £20,000 per person (£40,000 per couple) and for a Junior ISA it’s £9,000. There are media reports that the Chancellor will be announcing changes to the ISA regime in the upcoming Autumn Statement. But until then, read our ISA factsheets to find out more about the different types of ISA available and the restrictions that apply:

The 2023-24 ISA Allowances

All about Junior ISAs

Dividend allowance reduction

This has been reduced to £1,000 for the current tax year, with a further reduction planned for 2024/25. There are also tax considerations relating to savings interest which ranges from zero to £6,000 depending on your level of income.

Capital Gains Tax allowance to halve next year

Do you need to dispose of an asset that could be finalised before 5th April 2024? Capital Gains tax will be halving next April from £6,000 to £3,000.

Annual Pension Allowance

The maximum you can pay into your pension and receive tax relief rose from £40,000 to £60,000 effective April this year. However it could be an obvious relief to reduce in the future and is often mooted before a budget. Given there could be a change in government next year it’s worth bearing this in mind.

For more information and assistance, please get in touch with your usual JJFS contact.

75 days left…

The clock is ticking and there are now less than 75 days left for taxpayers who need to file an online self-assessment tax return to meet the deadline of 31 January 2024.

By completing and filing a tax return sooner than the deadline means that taxpayers will know how much they owe and can work out how to make a payment between now and the deadline. It is possible to pay through the HMRC app or, if less than £30,000 is owed, it may be possible to set up a Time to Pay arrangement which can be done online.

It is important to remember that HMRC offers help and support for those who need to complete their tax return.

Those who miss the deadline face a minimum £100 penalty, with further penalties added thereafter. Anyone who thinks they need longer to complete a self-assessment tax return for the 2022/23 tax year should notify HMRC as soon as possible to try to avoid any penalties.

HMRC has also produced two videos explaining how taxpayers can go online and stop self-assessment if they are self-employed and those who are not self-employed.

More information is available on the .gov.uk website here: https://www.gov.uk/government/news/100-days-to-go-to-self-assessment-deadline

For more information please get in touch with your usual JJFS contact or email us on justask@jjfsltd.com.

Should you have started retirement planning at 36?

This article written by Standard Life explains why age 36 seems to be the magic number for people to start taking retirement planning seriously. That said, there is still time for those who are older. Read on…..

Recent research tells us that age 36 is the turning point when people start taking their retirement savings more seriously; 13 years earlier than current retirees. But is it early enough? And what should you do if you’ve already passed the age 36 milestone? Let’s find out.

Before age 36, just 23% of people pay more than the minimum auto-enrolment amounts (that’s 5% of your salary from you and 3% from your employer) into their pension plan. However, our research found that this figure jumps by more than 50% after age 36.

Why is 36 the magic number?

Often by their mid-thirties, people have passed some major milestones like owning their own home, being more settled in their career, getting married or even having children. With some (or all) of these expensive life events potentially behind them, people may be able to turn their attention to a new financial goal: retirement.

On the other hand, people in their thirties will likely have another three decades of work ahead of them. When asked how they feel about this, 20% said ‘depressed’, 14% said ‘tired’ and 11% said ‘stressed’. So the sudden focus on retirement could also be a combination of motivation to save more now and get off the hamster wheel earlier, plus the financial freedom to actually do it.

36 is earlier than current retirees – but is it early enough?

Current retirees started planning at age 49, so a 13-year head start is good going – especially with many retirees looking back and wishing they’d done things differently. In our research, 54% of retirees said they wish they’d saved more and 53% said they wish they’d started saving earlier. But is it enough?

Well, ramping up your retirement saving at age 36 could potentially give your pension pot a healthy boost when you come to retire.

For example, someone who began working full-time with a salary of £25,000 per year and paid the minimum payments (i.e. 5% from you and 3% from your employer) from the age of 22 could be looking at a retirement pot of £488,000 when they reach age 68*. But if they were to top up their payments by just 3% to 8% from age 36, they could be looking at more than £120,000 extra in retirement.

Sound good? Just think what could be possible if you started earlier than 36. We know that the earlier you start paying attention to your pension savings, the better off you’re likely to be in retirement. So why not start as early as you can?

What if you’re older than 36?

If you didn’t start thinking about retirement at 36 – don’t panic. It’s never too late to start taking your retirement more seriously. Whether you’re 36, 46 or 56, there’s still time to take some steps towards a more comfortable retirement.

Remember, your pension plan comes with lots of benefits to help you save for a better future. Read Why it’s not too late to save for retirement in your 50s to find out how these benefits can help you save, no matter your age.

Ready to get started?

If reading this has made you start to think about your own retirement planning but you’re not sure where to begin, try this five-step guide to retirement planning for an easy breakdown of what you should think about.

For more information or advice please get in touch with your usual JJFS contact or email us on justask@jjfsltd.com.

*if beginning working with a salary of £25,000 per year and paying 3% employer, 5% employee monthly contributions into a workplace pension and assuming 5.0% investment growth and 3.5% salary growth per year. Figures are not reduced to take effect of inflation. Annual Management Charge of 1% assumed. The figures are an illustration and are not guaranteed. Earning limits not applied.

The information here is based on our understanding October 2023 and shouldn’t be taken as financial advice.

A pension is an investment and its value can go down as well as up and may be worth less than was paid in.

Divorce, step-children and the residence nil rate band

The RNRB allows up to £175,000 of the net value of a property to be exempt from IHT if it is passed to a direct descendant (i.e. children, grandchildren, step-children). The property must be the main residence of the deceased and in the case of more than one property in an estate, only one can attract the RNRB. This relief is in addition to the existing Nil Rate Band (NRB) of £325,000 and, like the NRB, is transferable on death to a spouse.

‘Children’ for these purposes includes adopted, fostered, step-children and any children for whom the deceased acted as guardian while they were under 18; and the children/grandchildren of all such children.

But what happens if a couple divorce? In particular, if there are step-children in the family, will either of their estates still be able to benefit from the residence nil rate band if, after they divorce, their Qualifying Residential Interest passes to a former step-child/former step-children on death?

The dictionary definition of a step-child, is “the child of your husband or wife by a previous relationship”.

In most scenarios, from a legal standpoint a step-parent won’t automatically be entitled to see their step-children if they divorce the biological parent. Further, the duties and financial obligations of a step-parent will depend on the specific facts of the case.

However, from an inheritance tax perspective, section 8K(3) of the Inheritance Tax Act 1984 provides that:

“A person who is at any time a step-child of another person is to be treated, at that and all subsequent times, as if the person was that other person’s child.”

So, essentially, yes, it would be possible for the couple’s estate (and so the step-children receiving that estate) to still be able to benefit from the residence nil rate band provided all the conditions are satisfied.

If the deceased downsized to a smaller, lower value home, or sold or gave away their home after 7th July 2015, the proceeds of that could still qualify for the RNRB. However, if the total estate exceeds £2million the RNRB will be tapered by £1 for every £2 the estate is valued over £2m.

For more information please read our factsheet and/or get in touch with your usual JJFS contact.

Scams – don’t rest on your laurels

Scams and being scam savvy are a regular topic in our newsletters and at the risk of being repetitive, it’s important for us all to remain vigilant. Scammers are continually upping their game and keeping pace with technological advances such as Artificial Intelligence. So we can’t afford to rest on our laurels, as illustrated by these startling statistics.

Did you know:

– Criminals successfully stole £1.2 billion through fraud and scams in the UK during 2022*

– There were 277,000 cases of identity fraud reported in 2022 – with the over 60s an increasingly targeted age group**

A recent report from National Trading Standards states that of the 19 million people who lost money to scams, less than a third of those victims actually reported their loss because they felt embarrassed at being caught out. Shockingly, their research showed that 20% of adults believe they are likely to become a victim of a scam in the next 5 years.

For some handy reminders to help protect yourself, take a look at our factsheet on being Scam-Savvy and if you have any questions or queries please get in touch with your usual JJFS contact.

*[Source: UK Financial Annual Fraud Report 2023]

**[Source: Cifas Fraudscape 2023 report]

Need a little extra support?

The word ‘vulnerable’ has been a bit of a buzz word this year, but rightly so, given the focus on those amongst us who may be ‘vulnerable’ and ensuring these individuals are properly supported in the context of providing goods and services.

As a small firm, we pride ourselves on providing a highly personalised service, always taking into consideration the personal circumstances of our clients and recognising when we may need to provide a little extra support. Vulnerability takes many forms and can be temporary, for example during times of bereavement, divorce or ill health, all of which can affect us at some point during our lives. In fact many people undergoing these life challenges may not consider themselves vulnerable anyway, so it’s even more important that we recognise this and ensure we provide the best support possible.

Our info sheet explains how we can support you during the course of providing our services which you can read here and you can always get in touch with your usual JJFS contact to discuss further.