Image courtesy of Flickr_Sheila Sund

UK Dividends continue to Perform

UK dividend yields are better than you might imagine.

Dividends have been rising. UK companies paid out £94.4 billion in dividends in 2017, a 10.5% increase over the previous year. The increase for 2018 is expected to be markedly smaller, as last year’s payouts benefited from exchange rate gains that are unlikely to be repeated.

Nevertheless, UK shares are well worth considering if you are looking for income from your investments. The overall dividend yield for the UK stock market is currently about 3.6%, with shares in the FTSE 100 offering an average yield of 3.7%, in part because of the rise in dividends and the fall in share prices since the start of the year. And don’t forget personal tax on dividends is less than on interest.

There is a wide range of UK Equity Income funds to choose from, so care is necessary when making a selection.

Last year 60% of dividend payments by value were accounted for by just 15 companies. This can mean funds have highly-concentrated portfolios.

For advice on fund selection don’t just look for the highest yield, talk to us on 020 8681 4994.

The value of your investments, and the income from them, can go down as well as up and you may not get back the full amount you invested.

Past performance is not a reliable indicator of future performance. Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.

Congratulations to Fabio Carta who has successfully gained his Certificate in Insurance


We are delighted that our newest recruit, Broker Support Handler Fabio Carta has passed his Certificate in Insurance professional examinations and is now progressing towards a Diploma in Insurance.

The certificate in insurance is a core qualification for insurance staff working across all sectors of the industry which develops core knowledge providing a grounding of the regulatory environment, key disciplines of underwriting and claims.

Amit Patel, Director of PK Partnership commented: “Huge congratulations to Fabio who has progressed exceptionally quickly since joining PK Partnership. Qualified individuals set us apart from the competition as an independent broker in a competitive environment and our in-house personal development programme has helped to attract and retain quality people.”


PK Partnership cost of financial advice

A new era for VCTs and EIS

There has been a major overhaul of venture capital trusts (VCTs) and enterprise investment schemes (EISs).

The changes come as a response to a government consultation paper last summer which looked at patient capital”. This was defined by the Treasury as “long-term investment in innovative firms led by ambitious entrepreneurs who want to build large-scale businesses”.

The paper criticised some EIS and VCT providers as overly cautious and tax-driven.

Notably the paper said, “Industry estimates suggest that the majority of EIS funds … had a capital preservation objective in tax year 2015/16, and around a quarter of VCTs have investment objectives characteristic of lower risk capital preservation”. In response, the venture capital scheme market rushed to raise fresh funds before the Autumn Budget.

From March 2018, the following new rules apply:

  • ‘Risk to capital’ condition VCT and EIS investments must be made in companies that have objectives to grow and develop, and where there is a significant risk of loss of capital, after allowing for tax relief. This is to prevent the emphasis on capital preservation criticised in the consultation paper.
  • VCT investment VCTs are now required to invest at least 30% of new funds raised in qualifying companies (capital at risk businesses) within one year of the end of the accounting period in which the money is raised. This change will encourage VCTs to raise smaller amounts more frequently.

From April 2019, the minimum proportion of qualifying companies held by a VCT will rise from 70% to 80%.

  • Loans made by VCTs VCTs can no longer offer new secured loans to companies, while any effective interest rate charged above 10% must represent no more than a commercial return on the loan.
  • Subscription limits For EISs, the subscription limit for income tax relief was doubled to £2 million from 6 April 2018, subject to any excess over £1 million being in ‘knowledge-intensive’ companies. The maximum income tax relievable subscription for VCTs remains at £200,000 per tax year.

There were no changes to the levels of tax reliefs given to VCTs and EISs. The main rate of income tax relief for subscriptions remains at 30%. The relief can be clawed back if the investment is sold prematurely or ceases to qualify and these clawback periods remain at five years for VCTs and three years for EISs.

VCT dividends are still tax free, subject to a maximum investment of £200,000 per tax year. Similarly, the capital gains tax advantages of VCTs and EISs were left intact.

These reforms add greater risk to VCT and EIS investment, making it more crucial than ever to take expert advice before committing your capital to such schemes.

The value of your investment can go down as well as up and you may not get back the full amount you invested.

Past performance is not a reliable indicator of future performance.

Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.

Some VCT and EIS investments may be difficult to sell and tax benefits depend on maintaining their qualifying conditions.

Levels and bases of taxation and tax reliefs are subject to change and their value depends on individual circumstances.

The Financial Conduct Authority does not regulate tax advice.




Image courtesy of See-ming Lee SML, Flickr

Which ISA is right for you?

You can invest up to £20,000 in the 2018/19 tax year under your main ISA allowance, using a mixof different types. Each has its own terms and conditions including limits, investment vehicles and access rules.

Regular ISAs

The original ISA is a tax wrapper, through which you can invest in cash, funds, individual stocks and shares, or a mixture. You don’t pay UK tax on interest earned on a cash ISA, or on income or capital gains derived from funds or other investments in a stocks and shares ISA.

Nor are you required to include details of your ISAs on your self-assessment tax form.

There are no general restrictions on when you can withdraw funds, but special terms may apply for individual providers – for example with fixed-rate cash ISAs. Remember, if you’re investing in the stock market you should be ready to leave your money for at least five years.

Innovative Finance ISAs

This ISA allows investors to use some – or all – of their main ISA allowance to invest in peer-to-peer lenders or crowdfunding activities. These may offer attractive interest rates, but it is important to be aware that they can be higher-risk investments and are not covered by the Financial Services Compensation Scheme.

Lifetime ISAs

You can put up to £4,000 a year into a Lifetime ISA (LISA) and receive a 25% government funded bonus, but you have to be under 40 when you start the plan and can only make contributions until your 50th birthday. The funds can be used to buy your first home or you can save for retirement. Contributions are part of your main ISA allowance and there are investment and cash options. However, if you withdraw funds before the age of 60, and are not buying your first home, there will normally be a withdrawal charge equivalent to 25% of the amount you withdraw.

Help to Buy ISAs

Help to Buy ISAs are cash accounts for first time home buyers, but you can only open a new one until November 2019. You can save up to £200 a month, and put in an extra £1,000 in the first month. The government adds a 25% bonus, up to a maximum of £3,000 in addition to any interest earned. So they are similar to the newer LISAs, but you cannot generally invest as much and there is no starting age limit.

Junior ISAs

Parents and others can save up to a total of £4,260 for a child into a Junior ISA (JISA) each year. JISAs work in a similar way to mainstream ISAs, with much the same cash and investment options available. The key difference is that the child cannot withdraw the funds until their 18th birthday. At this point they can convert it into a regular ISA. You can contribute to a child’s JISA in addition to investing in your own ISA. It is a great way to help a child build up assets for the future. If a Child Trust Fund is held it must be transferred in full to the JISA when one is opened.

Inherited ISA Allowances

If a spouse or civil partner dies holding ISA investments, the survivor can make additional subscriptions to their own ISAs equivalent to the value of the deceased’s ISA holdings at the time of their death. This is in addition to the survivor’s annual ISA subscription limit, currently £20,000.

If you would like advice about which ISA is right for you, please get in touch.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances. The tax efficiency of ISAs is based on current rules. The current tax situation may not be maintained. The benefit of the tax treatment depends on individual circumstances. The Financial Conduct Authority does not regulate tax advice.Past performance is not a reliable indicator of future performance.


Image courtesy of smee.bruce, Flickr

The pros and cons of joint finances

Many couples in long-term relationships maintain independent finances, but typically also operate one or more joint accounts to cover day-to-day bills or for savings. There are a number of benefits and risks to managing money together.

On the simplest level, a joint account can help couples keep track of their finances and ensure costs are spread fairly. Both partners have equal access to their shared funds, regardless of who has contributed what. But differing attitudes to spending and saving can be a source of tension.


If you buy a home together, or just open a joint bank account, your finances become interlinked, creating potential pitfalls. For instance, shared finances could affect your credit rating, as you will be ‘co-scored’ if you apply for credit. This means a partner with a poorer credit score may impact on your own rating. Remember, if you have a shared mortgage or loan, you will be liable for the whole debt if your partner can’t – or won’t – contribute to the repayments.

However, there are advantages alongside the potential risks. For instance, if one partner is a basic rate taxpayer or non-taxpayer and the other pays income tax at a higher rate, it could be worth switching some savings or investments to the lower earner to reduce the overall tax payable. Sharing the ownership of investments could also save capital gains tax (CGT). This could allow both partners to use their annual CGT exempt amount of £11,700 for 2018/19, giving a potential £23,400 of tax-exempt gains this tax year. Husbands and wives and civil partners can normally transfer assets freely between each other without incurring a tax on any gains realised by the gift. However, unmarried couples may create inheritance tax issues, or find themselves with tax to pay on gains realised by making such gifts of assets.
Higher earners can choose to contribute to the pension of a lower-earning spouse, subject to the annual allowance, with the amount of tax relief available the greater of £3,600 or their relevant UK earnings. This could help couples make best use of both their personal allowances for income tax in retirement.
The key to successful joint finances is trust and openness. Couples must be prepared to have full and frank discussions about their earnings, financial goals and future aims.

For more information please contact PK Partnership on 020 8681 4994.


Bank of Mum and Dad feeling the squeeze

Figures from Legal & General released this week suggest young home buyers are growing increasingly reliant on their parents to help them get onto the property ladder. “Bank of Mum and Dad” will help fund one in four property purchases this year – but is starting to feel the pinch, according to new research.

Parents are parting with thousands of pounds to help their children get on the property ladder, but they can’t afford to lend as much as they used to. Parents will help 316,600 loved ones buy a home – an increase from 298,300 in 2017, according to projections.

• Parental contributions are highest in London and lowest in Scotland

• Buyers in London (41%) receive more help from the Bank of Mum and Dad than in any other area

• Under-35s are most likely to receive help from their parents

• Older home buyers also rely on the Bank of Mum and Dad, with 20% of those aged between 45 and 55 receiving help

The report said that whilst parents remain a major lender, they are handing over less cash.

The amounts being handed over are falling with the average amount they are expected to contribute towards a property purchase expected to fall from £21,600 in 2017 to £18,000 this year.

The average parental contribution this year comes in at £18,000, down £4,000 on the past 12 months, according to Legal & General.

Buyers in the Northeast have seen the average family contribution plummet by £12,200 in the past 12 months.

In London, more than 40% of buyers had financial help from family to invest in property. In London, the average family contribution now comes in at £30,600 – up from £29,400 in 2017.

Legal & General chief executive Nigel Wilson told the BBC, “People are feeling a bit of a pinch around the economy and therefore we’re seeing pretty much a national trend outside of London for less to be given.”


Modball Rally Insurance – are you correctly insured?

The Modball Rally is just around the corner starting 23 June.

Teams are encouraged to check with their insurer if participation in the Modball rally is covered, and if not call our private client division on 020 8681 4994 to arrange specialist insurance cover.

In our experience most insurers do not cover this rally so do check small print!

The rally and high net worth market is an important and specialist focus for PK Partnership. We understand that people taking part in such events are by nature usually passionate advanced drivers who are sensibly minded to protect their investments, which makes events such as this possible.




20th Anniversary London – Tokyo Gumball 3000 insurance arrangements

PK Partnership is delighted to have teamed up with Gumball 3000 for the second year running as the official insurance partner of the organisation.

PK Partnership Director, Amit Patel said, “We are delighted to be the official insurance partner of Gumball 3000 again – and are looking forward to providing bespoke cover during this landmark anniversary year. We have worked very hard over the past year to further understand the Gumball risks and build relationships with Gumball members. This has enabled us to reach out to the wider insurance market and seek cover for the Japan leg of this year’s rally, which is no mean feat, given the challenges of global territories.”

Max Cooper, CEO of Gumball 3000 commented, “We are pleased to partner with PK Partnership for the second year running. We have been very impressed by their work ethic, especially with their work behind the scenes to overcome the challenges ahead of this year’s rally to find appropriate insurance cover not just in Europe but Japan as well.”

Image courtesy of Flickr_Sheila Sund

Next stage of automatic enrolment

Since 2012 employer and employee automatic enrolment contributions have totaled 2% of ‘band earnings’, with the employer having to pay at least 1%.

From 6 April this year, the minimum contributions will rise to 5%, with 2% from the employer.

The extra outlay could be significant, especially for employees. Taking someone earning £26,000 a year as an example, the employer contributions will increase 98% from £16.77 a month to £33.28. The employee contributions will rise 198% from £13.42 a month to £39.94.

Further increases happen in April 2019, as the total rises to 8% with 3% from the employer. Each April there are generally also tax and NIC changes, so the impact on employees will be cushioned marginally.

The Financial Conduct Authority does not regulate tax advice. Levels and bases of taxation and tax reliefs are subject to change and their value depends on individual circumstances. Tax laws can change. Occupational pension schemes are regulated by The Pensions Regulator.


PK Partnership cost of financial advice

New focus on inheritance tax

The government has requested a review of inheritance tax (IHT), focusing on making the system less complicated.

The Chancellor, Philip Hammond, has asked the Office of Tax Simplification (OTS) for “proposals… for simplification, to ensure that the system is fit for purpose”.

The OTS has been asked to “focus on the technical and administrative issues within IHT” and also to consider “whether the current framework causes any distortions to taxpayers’ decisions surrounding transfers, investments and other relevant transactions”. This means the OTS will be looking at implifying the rules, instead of proposing radical reforms. The Chancellor is unlikely to reduce IHT revenue, as the tax is forecasted to raise £5.4bn in 2018/19.

Appropriately, the OTS did look at IHT when developing its ‘Complexity Index’ in 2015. The Index examined over 100 aspects of UK taxation, assessing their complexity and its impact.

Unsurprisingly, IHT ranked close to the top for complexity – coming third behind two sets of capital gains tax computation rules. IHT earned this position thanks to no fewer than 94 reliefs and nearly 200 pages of legislation.

If the OTS repeated the exercise today, IHT could well come first because of the extra complexity added by the residence nil rate band (RNRB) and its associated downsizing rules.

These rules led the then head of the Treasury Select Committee, Andrew Tyrie, to say, “The main beneficiaries of this [legislation] would be tax advisers and lawyers”.

You should not defer your estate planning because of the impending OTS review – there is no timetable for the OTS to respond, and their previous recommendations on income tax and national insurance contributions have yet to be implemented. If you have not reviewed your will since the RNRB started in April 2017, now is the time to do so. The RNRB could save your estate up to £70,000 in tax (up to £140,000 for a couple) by 2020/21 but, as Mr Tyrie made clear, it is far from straightforward. The end of the tax year offers also opportunities to use your annual IHT exemptions, as covered in our feature article.

The Financial Conduct Authority does not regulate tax advice. Levels and bases of taxation and tax reliefs are subject to change and their value depends on individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate will writing, trusts and some forms of estate planning. For specific tax advice please refer to a tax specialist.



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