What you need to know about the Autumn Statement 2014
On 3rd December 2014 George Osborne gave us his Annual Autumn Statement which for reasons best known to someone else is in December. But that’s not important right now and if you’re like me it will be googled later. Anyway here are some of the main points relevant to your personal financial planning broken down into relevant headings.
The income tax personal allowance will rise to £10,600 in April 2014 which is £100 higher than expected. The higher rate tax threshold will also increase to £42,385 in April, again £100 more than expected.
Anyone in receipt of Universal Credit will find their benefits frozen for the coming year.
The ISA limit has been raised to £15,240 in April. The chancellor has also said that with immediate effect when the saver dies their spouse will inherit the ISA and be able to maintain its tax free status. This could be very interesting for future IHT planning.
As expected the Chancellor announced that if you die prior to age 75 in receipt of a joint life annuity pension your dependents with receive the dependents income tax free.
This brings joint life annuities in line with flexi-access drawdown but there was no mention of final salary schemes dependents pensions so watch this space.
There were no changes to the tax relief through pensions either before or after age 75.
The single tier state pension is expected to start in April 2016 at £151.25 per week.
As usual the Government wants a headline maker in the Autumn Statement and this year it’s stamp duty. The stamp duty system has been revamped from a stepped to a tiered charging system as show below.
The End is Nigh… well the end of the tax year that is
Last minute tax planning is less than ideal but it’s better than no tax planning. Every year we all get our tax allowances and every year we get the same warning before April 5th… use it or lose it.
What are the tax allowances for this year?
I’m going to limit this post to the main two tax allowances, Pensions and ISAs. Simply because for most of the population these are more than enough to cover our financial planning needs.
ISA Allowances 2013/14 & 2014/15
Up to the 5th April 2014 you can invest up to £11,520 in ISAs of which £5,760 can be invested in a Cash ISA. Remember there is now carry forward of unused allowances with ISAs. From 6th April your annual ISA allowance will increase to £11,880 with a maximum of £5,940 in cash.
For those who have a little more to invest and want to create a fund for their child there are allowance for Junior ISAs and Child Trust Funds as detailed in the table below.
Up to the 5th April 2014 you can invest up to the lower of 100% of your gross earnings or £50,000 in a registered pension scheme. From 6th April your annual pension allowance will reduce to £40,000 however carry forward is allowed under certain rules.
Although it won’t affect most of us it’s important to remember that there is a lifetime allowance to consider. This is being reduced from £1.5m to £1.25m from 6th April 2014.
Again for those with a little more to invest there are children’s allowances available.
Beware the Tax Dog
Remember that just because it is tax efficient doesn’t necessarily mean it’s the most suitable investment for you or your objectives. Think carefully about what you want to achieve before making any investment. Obviously as a Financial Planner I am going to recommend getting advice but if you are in any doubt on how to proceed then get in touch on 02895 815000.
I hate New Year’s Resolutions and all the nonsense that comes with them. I don’t know exactly when I came to the conclusion that they are a load of nonsense but it is now ingrained deep within me. So much so that I don’t remember one I have ever made and certainly none that I have ever kept.
From my observations New Year’s Resolutions have mostly vague statements of intent, some grandiose notion that this year we will achieve everything we have ever dreamed. What a load of…
I have never been one to set New Year’s resolutions, growing up I noticed that they were mostly set by people wishing to lose weight or get fit. These have never been a concern for me, I have always been lucky in that I am sports daft and I have played football in one form or another since I was six years old. As an adult my weight has fluctuated by about a stone give or take a banana but I could always rely on preseason training to get rid of any turkey belly.
In the gym in January and February you will always see the usual influx of seasonal exercisers. People who would vow to lose weight and join the gym with good intentions of going every week. By the end of February most will have given up.
But New Year’s Resolutions and Financial Planning have a lot in common; they both involve setting a goal, designing a plan to achieve that goal and reviewing that plan on an annual basis.
So why do I hate New Year’s Resolutions?
They’re too vague – I want to lose weight, get fit, pay off some debt or earn more money. These are pure waffle in terms of a goal. A goal needs to have a specific measurable target – I want to lose 20 lbs, I want to run 3 times a week, I want to earn an extra £3,000 per annum.
It’s all in your head – New Year’s resolutions are rarely written down, this makes it is easy to lose track of your goals. According to research by the Dominican University in California you are 42% more likely to achieve your goals simply by writing them down.
They don’t come with a plan – A goal without a plan is simply a dream. Once you have a setback, New Year’s resolutions tend to get discarded. Just look at how busy the gym is in January/February compared to later in the year. Goals and their respective plans should be reviewed and amended regularly.
What is the Alternative?
Get a plan by setting some SMART goals for life not just the New Year. SMART goals have been around for years now but just to clarify a SMART goal is:
Wishing for a comfortable retirement is too vague whereas aiming to retire on £25,000 per annum by the age of 60 is a specific goal. Instead of aiming to reduce your debt you should be aiming to be debt free in 5 years.
These are goals that are specific, measureable and time bound. Your personal financial circumstance will dictate whether they are achievable and realistic but you get the picture.
I suppose then it’s not the setting of New Year’s Resolutions that I hate but the manner in which we tend to set these goals. So I invite you all not to create New Year’s resolutions but set smart goals for the next year and beyond. Commit them to paper and create a plan to achieve them.
It’s that time of year again! We eat a lot, possibly drink a little too much and end up watching the same old Christmas movies as we do every year. So, what can we learn about personal finance from these classic movies and their characters.
It’s A Wonderful Life
Despite dealing with some dark issues, It’s A Wonderful Life is the ultimate Christmas feel good movie. In it, we are spun the tale of the suicidal George Bailey who faces jail and his business faces bankruptcy when his uncle misplaces $8,000 of the company money. An angel called Clarence turns George around when he teaches him how important he is to his family and the local community in his own inimitable way.
Financial problems, debt and depression are very topical issues coming up to Christmas. There can be a lot of pressure to spend an increasing sum of money on Christmas. For some, this adds to their financial worries and can lead to ‘Christmas being put on the credit card’.
Pete Matthew of Meaningful Money has a very good podcast on the subject: Surviving Christmas with your finances intact that is worth listening to. In it, he explains the benefits of setting a budget for Christmas and sticking to it. He explains how he and his wife put money aside each month throughout the year to pay for Christmas, to avoid that one-off “shock” expense and allow them to enjoy the seasonal festivities
Die Hard is a holiday staple in my house as John McClane (the legendary Bruce Willis) tears the Nakatomi Plaza apart when a band of thieves, led by the immense Alan Rickman rudely interrupt his wife’s Christmas work do.
During Christmas, like the rest of the year, it is essential to protect you and your family. If the need for protection is from an imminent physical danger then by all means protect them at all costs. However, in terms of personal finance you might want to consider an affordable budget to get appropriate insurance in place to protect your loved ones.
Elf tells the story of Buddy (Will Ferrell), an orphan raised as one of Santa’s elves, before leaving the North Pole to find his real dad Walter Hobbs (James Caan). Buddy then proceeds to wreak havoc on his Dad’s life and somehow eventually teaches Walter to re-evaluate his priorities.
There is a lesson to learn from Buddy’s dietary regime and the four main food groups “candy, candy canes, candy corns and syrup”.
An unhealthy lifestyle is getting more expensive every year, with the cost of cigarettes and alcohol generally rising above the rate of inflation. For most of us, if we cannot work due to ill health then our income will cease, we may depend on state benefits and potentially become a financial burden on our loved ones. That is unless we have some insurances in place and the cost of these insurances will often be significantly more expensive for people who do not take care of their health.
If you don’t look after your health it will inevitably affect your wealth.
In Gremlins Billy Peltzer gets an adorable pet Mogwai for Christmas from his dad and is given 3 very strict rules: Do not get it wet, do not feed it after midnight and do not put it in direct sunlight. Unfortunately for Billy and the town of Kingston Falls, two of these rules are broken very quickly and everything goes pear shaped.
Unlike Billy’s half-baked inventor dad, most people will opt for a nice dog or cat. They are easy to look after and fulfil most, if not all of the desired criteria in a pet. This is similar to personal financial planning, in that most people do not need complicated financial products that they don’t understand. There are very few people that need anything more complicated that an ISA, pension and some appropriate insurances.
Remember, the devil isgremlins are in the detail.
The Muppets Christmas Carol
Now I could have chosen any version of Dickens’ classic tale but everyone loves The Muppets Christmas Carol, don’t they? In this version Kermit and gang play second fiddle to Michael Caine’s excellent performance as the miserly Scrooge. The usual Ghosts of Christmas Past, Present and Future take Scrooge on a journey that teaches him the error of his ways.
While there are those who are comfortable and very good at managing their own finances, more can benefit from the advice of a third party. Not many of us have Scrooge’s money but we can certainly lose sight of, or neglect to align our plans with our goals when managing our money. A good financial planner can provide an independent advice service that aligns your finances with your life goals.
Let me know what you think of the post or simply what’s your favourite Christmas movie and what can we learn from it?