U-Turn On Self Employed Class 4 NIC Increases

The Chancellor has announced on 15 March that he would not be going ahead with his Budget proposal to increase the National Insurance Contribution rates for self-employed people. 

In the Budget of 8 March 2017, he announced that Class 4 NIC rate for the self-employed would rise by 1% to 10% in 2018/19 and by a further 1% in 2019/20. The proposed increases provoked a widespread outcry, not least because the Conservatives 2015 election manifesto stated “we can commit to no increases in VAT, Income Tax or National Insurance.”

A week later, perhaps appropriately on the Ides of March, the Chancellor issued a letter to MPs saying that there would be no increase to Class 4 NICs “in this Parliament”. However, the abolition of Class 2 NICs will still go ahead from April 2018, meaning that the self-employed will generally see their NICs bill fall from 2018/19.

At Prime Minister’s Questions, Mrs May has said that the government would review areas of difference in the treatment of the employed and self-employed following a forthcoming report of modern working practices being prepared by Martin Taylor.  Mrs May’s comments reiterated a point made by the Chancellor, who also wrote in his letter that “The cost of the changes … will be funded by measures to be announced in the Autumn Budget.”

Financial gift for Christmas

Give your children or grandchildren a financial gift they can unwrap…

With Christmas just round the corner, making an investment for your children or grandchildren is a great way to give them a financial start in life, long after the festivities are over. Even small amounts can really add up if you save regularly from a child’s birth, and there are many ways to invest on behalf of a child.

 

Junior Individual Savings Account (ISA)

The first and easiest option to choose is a Junior Individual Savings Account (ISA), if the child is eligible. Junior ISAs are flexible, tax-efficient and can only be accessed by the child when they reach the age of 18. Parents and other relatives can save up to £4,080 in the 2015/16 tax year in a Junior ISA, and like adult ISAs, Junior ISAs can be held in cash or stocks and shares, or you can divide the allowance between both.

 

Child Trust Fund (CTF) transfer into a Junior ISA

Changes to CTF regulations now mean investors can choose to transfer existing Child Trust Funds into Junior ISAs. Junior ISA tax advantages may depend on your individual circumstances, and tax rules may change in the future.

Your existing CTF provider may make a charge for carrying out a transfer. If your child does not qualify because they have already used their Junior ISA allowance for the current tax year, or they have a CTF that they do not wish to transfer into a Junior ISA, then there are other options you could consider.

 

NS&I Children’s Bond

You can invest between £25 and £3,000 tax-free for five years at a time until the child reaches

16, at which point they will gain control of the bond. The interest rate is guaranteed, so you’ll know how much the investment will earn at the end of the five-year term.

But if you need access to the money before the end of the five years, you’ll face a penalty – the equivalent of 90 days’ interest on the amount you cash in.

 

Regular savings

If you’re able to commit to making monthly contributions, then you can often benefit from higher rates of interest with a regular savings account.

They’re ideal for savers who are saving for something specific and wish to drip-feed cash into their account in a disciplined way, but these accounts will usually limit the number of withdrawals you can make each year and restrict the amount of money you can invest each month.

Be careful not to miss a payment or exceed the limit on withdrawals, as doing so can cost you interest.

 

Complete an R85 form

In the 2015/16 tax year, each child is entitled to a tax-free allowance of £10,600. Make sure you complete an HM Revenue & Customs form R85, so that any interest will be paid free of tax.

If you haven’t done this, you can reclaim it for them using form R40.

However, if you give your children money and it makes more than £100 a year before tax in interest (or £200 if both parents give money), all this income (not just the income over £100) will be taxed as if it were your own. This limit applies to income from gifts from parents only, not other family members.

 

Start investing

When investing for children, it is a good idea to go for something that gives you exposure to a broad spread of companies and sectors. It is important to get the right balance between good growth potential and not taking too much risk.

You can hold investments on behalf of your child in a bare trust or a designated account. A designated account will be earmarked for your child but will be in your name and treated as your investment, and, as such, any income of over £100 will be taxed at your rate, whereas a bare trust will be treated as your child’s for tax purposes. A designated account set up in the right way (i.e. irrevocable) is treated in the same way as a bare trust, and, in both cases, if funds originate from a parent and income exceeds £100pa, it will be taxed on the parent. The trustees of a bare trust have legal control until the child reaches the age of 18 (age 16 in Scotland).

 

Set up a pension

If you’re thinking of taking a much longer-term approach, you could take out a pension on behalf of your child and pay in regular amounts. You can currently contribute up to £2,880 each tax year, which is increased to £3,600 including tax relief. When your child reaches the age of 18, ownership of the pension would transfer to them, and they could start making their own contributions.

INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.

PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.

NS&I CHILDREN’S BONDS ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY.

 

This article is for information only and does not constitute financial advice. Please contact your usual adviser at CST Wealth Management Ltd if you have any questions relating to your own personal circumstances or if you would like to make an appointment to discuss your financial plan. Contact details can be found on our Meet the Team page or by contacting us via info@cstwealth.co.uk or 01656 867167.

The Financial Conduct Authority does not regulate tax advice.

CST Wealth is the trading name of CST Wealth Management Ltd which is authorised and regulated by the Financial Conduct Authority.

 

What is the difference between active funds and passive funds?

You may have heard the terms active and passive with regard to investment funds, but what exactly do they mean and how can they impact your investing?

Actively managed investment funds are run by professional fund managers or investment teams who make all the investment decisions, such as which companies to invest in or when to buy and sell different assets, on your behalf. They have extensive access to research in different markets and sectors and often meet with companies to analyse and assess their prospects before making a decision to invest.

Passively managed investment funds cost less in charges because they simply track a market, and are essentially run by computers to buy all of the assets in a particular market, or the majority, to give you a return that reflects how the market is performing.

The aim with active management is to deliver a return that is superior to the market as a whole or, for funds with more conservative investment strategies, to protect capital and lose less value if markets fall. An actively managed fund can offer you the potential for much higher returns than a market provides, if your fund manager makes the right calls.

It also means that you have somebody tactically managing your money, so when a particular sector looks like it might be on the up, or one region starts to suffer, the fund manager can move your money accordingly to expose you to this growth or shield you from potential losses.

For the privilege of getting an expert active fund manager, you normally have to pay higher fees than you would with a passive investment fund, which can therefore impact your returns.

 

Sources: www.which.co.uk (Published article): www.hl.co.uk

If you would like to talk to an adviser in our wealth team about your investment plans, please get in touch. Our initial appointment is at no obligation and free of charge.

This article is for information only and does not constitute financial advice. Please contact your usual adviser at CST Wealth Management Ltd if you have any questions relating to your own personal circumstances or if you would like to make an appointment to discuss your financial plan. Contact details can be found on our Meet the Team page or by contacting us via info@cstwealth.co.uk or 01656 867167.

The Financial Conduct Authority does not regulate tax advice.

CST Wealth is the trading name of CST Wealth Management Ltd which is authorised and regulated by the Financial Conduct Authority.

How to approach later life care

National Insurance contributions go towards things like your State Pension but they don’t count towards the costs of later life care. This type of care is managed by your local authority and generally comes at a price. That is why you have to apply directly to them if you need help with paying for long-term care. Your local authority (or Health and Social Care Trust in Northern Ireland) will first carry out a Care Needs Assessment to find out what support you need.

The next step is to work out who is going to pay. Your local authority might pay for all of it, part of it or nothing at all. Your contribution to the cost of your care is decided following a financial assessment. This Means Test looks at:

  • your regular income – such as pensions, benefits or earnings
  • your capital – such as cash savings and investments, land and property (including overseas property) and business assets

If your income and capital are above a certain amount, you will have to pay towards the costs of your care.

If you own your home, the value of it may be counted as capital after 12 weeks if you move permanently into a residential care or nursing home. However, your home won’t be counted as capital if certain people still live there. They include:

  • your husband, wife, partner or civil partner
  • a close relative who is 60 or over, or incapacitated
  • a close relative under the age of 16 who you’re legally liable to support
  • your ex-husband, ex-wife, ex-civil partner or ex-partner if they are a lone parent.

Your local authority or trust might choose not to count your home as capital in other circumstances, for example if your carer lives there.

The maximum amount you have to pay towards your care is different, depending on where you live in the UK. The cost of living in residential care can be split into:

  • your ‘hotel’ costs, including the cost of accommodation and food; and
  • your personal care costs.

The cost of care differs around the United Kingdom, and this cost is usually higher where employment costs and housing are more expensive. In England and Wales you can find out how your local authority charges for the care services by first visiting the local authority website. In Scotland, the personal care you receive in a care home is free, if you’re over 65. If you’re in Northern Ireland, you can find your local Health and Social Care Trust on the nidirect website.

The one certainty of care is that, should you need it (and many of us will), you will be in a better position to receive exactly the sort of care you would like if you have some of your own funds set aside to cover the cost. Like the relationship between your state pension and your private pension, the former will only support you to one level. We save into additional pensions to ensure we have the retirement that we want. The same rules could really apply to our approach to care funding.

 

If you would like to talk to an adviser in our wealth team about your later life care, please get in touch. Our initial appointment is at no obligation and free of charge.

Sources:

www.moneyadviceservice.org.uk (Published information)

 

This article is for information only and does not constitute financial advice. Please contact your usual adviser at CST Wealth Management Ltd if you have any questions relating to your own personal circumstances or if you would like to make an appointment to discuss your financial plan. Contact details can be found on our Meet the Team page or by contacting us via info@cstwealth.co.uk or 01656 867167.

The Financial Conduct Authority does not regulate tax advice.

CST Wealth is the trading name of CST Wealth Management Ltd which is authorised and regulated by the Financial Conduct Authority.

 

Thinking of starting a business when you retire?

A rising number of entrepreneurs between the ages of 50 and 64 are giving the younger generation a run for their money by setting up innovative new businesses with pension freedoms introduced earlier this year, according to a recent article featured in The Guardian.

The latest Global Entrepreneurship Monitor states that a record 7.1% of 50- to 64-year-olds in the UK, equivalent to around 800,000 people, were starting or running a new business in 2014, up from 300,000 in 2010.

AXA Wealth’s Later-Life Entrepreneurs study found that more than 500,000 over-55s are considering taking advantage of pension freedoms introduced earlier this year to help start a new business. Almost half intend to use their 25% tax-free lump sum that they are able to withdraw from their pension fund, to fund their start-up.

Recent figures from the Office for National Statistics estimates life expectancy of 86.1 for women and 83.6 for men, up from 85.6 and 83 in 2010.  The number of people aged 60 or over is expected to pass the 20 million mark by 2030.

 

Be prudent

The new pension freedom means that anyone aged 55 or older is able to use their pension savings any way they wish. However it is important to note that only the first 25% withdrawn from your pension fund is tax free and, taking out a bigger lump sum could result in you receiving a large tax bill and have a major impact on your future retirement income. It is important to know how much money you have in your pension fund to ensure you have enough to provide you with sufficient income to live on in your retirement. And with estimations by the Office for National Statistics predicting that we are living longer however we need to ensure we plan for living for 20-30 years into our retirement years.

 

Get planning

Taking advice from a professional accountancy and wealth planning practice prior to setting up your business is prudent to ensure that you set it up correctly, help to ensure you don’t pay more tax than you need to, protect your personal assets and have a realistic financial plan. The need for retirement planning is also crucial to ensure you are able to enjoy a comfortable retirement without money worries.

 

Some useful websites include:

betterbusinessfinance.co.uk Enables you to search for sources of funding depending on your locality, industry and amount you’d need to fund your business,

gov.uk/write-business-plan Download free business plan templates and find help and information on how to write your business plan.

http://business.wales.gov.uk/ Supports new and established businesses in Wales.

 

Source:

The Guardian

 

This article is for information only and does not constitute financial advice. Please contact your usual adviser at CST Wealth Management Ltd if you have any questions relating to your own personal circumstances or if you would like to make an appointment to discuss your financial plan. Contact details can be found on our Meet the Team page or by contacting us via info@cstwealth.co.uk or 01656 867167.

The Financial Conduct Authority does not regulate tax advice.

CST Wealth is the trading name of CST Wealth Management Ltd which is authorised and regulated by the Financial Conduct Authority.

Work and Pensions Committee to investigate pension freedoms

There has been a significant amount of news over the past 6 months concerning new pension rules and pension freedoms.  At times it has been overwhelming and confusing particularly to those nearing retirement.

It has been reported that the Work and Pensions committee is to follow its investigation of the retirement freedoms with a new inquiry into the state pension reforms.

The Committee has reported that it has concerns over those who are close to retirement and in particular may not understand the new pension system, since they will have put plans into place for their retirement, under the previous pension rules.

The Committee has also raised its concerns over those with less than 10 years of National Insurance contributions, as they will no longer receive any pension, and that people will no longer be able to count on a percentage of their spouse’s pension after their death.

There are also a few other areas where the Committee will take a closer look:

  • To establish how the Department for Work and Pensions is providing information on the changes;
  • At whether workplace pension schemes could play a greater role in signposting to information;
  • At women born between 1951 and 1953 – they would have previously been able to retire at age 60 but their new state pension age has increased.

The Committee reported that complex changes need to be communicated better and people need to be given the options available to them in an easy to understand manner.

We will have to keep a close eye on whether their recommendations will be taken on by the Government. The new state pension is being introduced in April 2016.

If you are approaching retirement and would like our assistance with your financial planning then please do get in touch via email on info@cstwealth.co.uk or by ringing 01656 867167. Our wealth team has the knowledge and experience to provide you with a plan and recommendations that will suit your situation to help you achieve a retirement you are happy with.

 

Source:

Money Marketing

 

This article is for information only and does not constitute financial advice. Please contact your usual adviser at CST Wealth Management Ltd if you have any questions relating to your own personal circumstances or if you would like to make an appointment to discuss your financial plan. Contact details can be found on our Meet the Team page or by contacting us via info@cstwealth.co.uk or 01656 867167.

The Financial Conduct Authority does not regulate tax advice.

CST Wealth is the trading name of CST Wealth Management Ltd which is authorised and regulated by the Financial Conduct Authority.

Affluent men now living longer than average woman

Inequalities in life expectancy by income widen in England and Wales, with biggest gains enjoyed by those earning the most, according to the latest data from Office for National Statistics (ONS).

Affluent men in England and Wales are outliving the average woman for the first time since official records began. Since the 1970s men have been catching women up in terms of how long they have lived. The shift has been widely attributed to major changes in men’s working environments, particularly the decline of heavy industry and mining, the move towards the service sector as well as the reduction in the proportion of men smoking.

The ONS research found that while male solicitors, clergy and surveyors have an average life expectancy of 82.5 years, men working as street sweepers, fishmongers, welders and window fitters will survive to only 76.6 years.

Meanwhile the average woman working as a florist or a care worker has an average life expectancy of 82.4 years.  Increases in women entering the labour force over the last 50 years are considered to have had an impact on levels of stress, smoking and drinking, leading to changes in the health of females.

But despite the privileged man’s slight overtake, women in the most advantaged socioeconomic group – which takes into account an individual’s occupation, education and salary – still have the longest life expectancy at 85.2 years. Which means the advantaged man is still being outlived by his equally advantaged female peers.

However, a factor that could throw into reverse improvements in lifespans is the epidemic of obesity and diabetes, health professionals have warned.

This new information tells us that on the whole we are living longer. We will be living longer in our retirement years than our parents/grandparents did meaning that the need for retirement planning is crucial to ensure that we have the retirement we desire.

 

Sources:

The Office for National Statistics

NHS

 

This article is for information only and does not constitute financial advice. Please contact your usual adviser at CST Wealth Management Ltd if you have any questions relating to your own personal circumstances or if you would like to make an appointment to discuss your financial plan. Contact details can be found on our Meet the Team page or by contacting us via info@cstwealth.co.uk or 01656 867167.

The Financial Conduct Authority does not regulate tax advice.

CST Wealth is the trading name of CST Wealth Management Ltd which is authorised and regulated by the Financial Conduct Authority.

Good mental health is something most people take for granted

Figures show that about a quarter of the UK population will experience some kind of mental health problem in the course of a year.  That’s a staggering figure.

Ignorance and prejudice still surround sufferers, with the stigma making matters much worse. Sadly, though, despite the prevalence of mental illness, the fear of being judged, labelled, or discriminated against can stop people from talking about mental health – which, in turn, can stop them from getting the help they need.

If you have been affected in your family by mental health problems or a close friend has suffered, then you are more likely to be aware of it than others. But if not, you may think that it will never affect you or that you’ve never really given it much thought.  It affects all of us – it affects how we think and feel about ourselves, how situations and events in our lives affect our thoughts and behaviour and how we deal with life’s rough times.

 

As individuals we cope with daily life in different ways to one another. One person may live out their problem or situation for a long time whereby another may plod on through and from a difficult situation quickly. No one way is best and our coping mechanisms can change over time. How we’d initially coped may cause us problems in the future. Some of us are happy to talk about our worries and feelings and some of us are not so comfortable with it or may not altogether.

Not coping is not a weakness.  Often life events are out of our control and we can try and cope the best ways we think fit however additional help means we don’t have to struggle alone. That’s where income protection can help you.

Research has shown that, with early intervention and access to treatment, the potential for recovery – and return to work – is significantly improved.  Income protection provides a support network – giving individuals someone to turn to if they need it as well as the financial support if they are unable to work.

It’s important to note that income protection is the only insurance which will cover you if a mental health condition stops you from working.  It can help you get your life back on track.

If we were able to predict the future then we would be better prepared for whatever life may throw at us. However, we don’t have crystal balls and none of us knows how we will react to and cope with any given situation.

We can help you put plans in place today to make it easier for you to deal with what tomorrow may bring.

Some other useful blogs

You may find some of our other blogs useful:

The Critical Factor

Income Protection

This article is for information only and does not constitute financial advice. Please contact your usual adviser at CST Wealth Management Ltd if you have any questions relating to your own personal circumstances or if you would like to make an appointment to discuss your financial plan. Contact details can be found on our Meet the Team page or by contacting us via info@cstwealth.co.uk or 01656 867167.

The Financial Conduct Authority does not regulate tax advice.

CST Wealth is the trading name of CST Wealth Management Ltd which is authorised and regulated by the Financial Conduct Authority.

Want financial security?

Savings should be built into your monthly budget, if you want to have some financial security and shouldn’t really be seen as an optional extra after other expenses have been covered.

 

Why you should save

Firstly, for emergencies. You can never be sure that either your income or your expenditure will stay the same as it is now. Your circumstances can change such as work, family or health. By saving, you pay the unexpected bills before they appear and you have a safety cushion in the back of your mind.

Secondly, you may be saving for a particular ‘something’ such as a deposit for buying a home, education funds for children, weddings or other big life events. But there may be other reasons.

Thirdly, having some security in your later years to help fund your retirement alongside your pension income surely makes sense?

 

How much should you save?

For your emergency fund, a rule of thumb is to aim for between three and six months’ worth of your regular income in savings. This will give you a cushion to plan, to put things into place if your circumstances change plus it will help you have ease of mind.

If you are saving for a big project or life event then it would be wise to determine how much you need, when you’ll need it and what rate of return you can expect. This will enable you to set aside a certain amount each month and cut back on luxuries if need be, to help you build your pot.

 

How should I save?

The best savings strategy for you will depend on your personal circumstances and is a balancing act between risk and returns.

Low-risk investments (like cash savings accounts) keep your money relatively safe but offer low rates of growth, while others potentially offer better growth but also more risk of losing money.

 

We can help you with your investment strategy so that you make informed choices based on your circumstances and lifestyle goals.

 

If you would like to talk to me about your particular situation and future plans I’d be more than happy to meet with you. Our initial consultation is at no obligation and free of charge. Please email me on tracey@cstwealth.co.uk or ring 01656 867167.

 

This article is for information only and does not constitute financial advice. Please contact your usual adviser at CST Wealth Management Ltd if you have any questions relating to your own personal circumstances or if you would like to make an appointment to discuss your financial plan. Contact details can be found on our Meet the Team page or by contacting us via info@cstwealth.co.uk or 01656 867167.

 

The Financial Conduct Authority does not regulate tax advice.

CST Wealth is the trading name of CST Wealth Management Ltd which is authorised and regulated by the Financial Conduct Authority.

 

Banking on an inheritance

One in three Britons rely on a cash windfall to fund their retirement plans

 

Anticipated inheritances often don’t materialise. But one in three working Britons (35%) are still relying on an inheritance in order to achieve a stable financial future. The reality is that many could be in for a big shock. The study[1] released by LV= shows millions are banking on an inheritance to provide them with financial assistance, with this cash windfall often key to their retirement plans[2].

 

Unsurprisingly, the most common thing people would do with an inheritance is to pay off their mortgage and clear other outstanding debts[3]. One in six people (16%) would also use inherited funds to bolster their retirement savings.

 

Leaving less or nothing

 

For those individuals who are hoping to be left an inheritance, unfortunately the number of people leaving significant amounts to the younger generation is falling, with most people leaving less or nothing at all[4]. According to the findings, a quarter of retirees (28%) say they don’t expect to leave much to their children. A fifth (20%) say they intend to spend their money enjoying their retirement rather than eave it behind, and 4% say they will follow Bill Gates and Warren Buffett’s lead and leave their money to charity.

 

Unprepared for later years

 

Without such help, many working people admit that they would be unprepared for their later years. One in five (20%) say they will struggle to retire comfortably without inheriting and a quarter (25%) will have to work longer than planned should they not receive such a windfall. Increasingly people are now spending almost as long in retirement as they do in the workplace, so it’s worrying to see that so many people say they are reliant on something essentially out of their control to provide them with a comfortable retirement. n

 

 

Source data:

 

UK nationally representative research carried out by Opinium between 24-27 March 2015, questioning 2,004 UK adults online, of which 516 were retired.

[1] Of those questioned who were not yet retired (1,488 adults), 35% said they relying on some sort of inheritance to help financially now or in the future.

[2] 20% of non-retired respondents said that without some form of inheritance they will struggle to have a comfortable retirement.

[3] Respondents said that if they were to receive any inheritance, 60% would make other provisions (apart from putting towards pension) to ready themselves for later years, such as paying off debts (31%) or paying off the mortgage (29%).

[4] Sourced from HM Revenue & Customs statistics. Latest figures on number of Inheritance Tax paying individuals (not including estimated figures) shows the number of individuals falling from 35,000 in 2005/06 to 16,000 in 2011/12.

 

This article is for information only and does not constitute financial advice. Please contact your usual adviser at CST Wealth Management Ltd if you have any questions relating to your own personal circumstances or if you would like to make an appointment to discuss your financial plan. Contact details can be found on our Meet the Team page or by contacting us via info@cstwealth.co.uk or 01656 867167.

The Financial Conduct Authority does not regulate tax advice.

CST Wealth is the trading name of CST Wealth Management Ltd which is authorised and regulated by the Financial Conduct Authority.