PK Partnership Mortgage

Budget Snapshot 2017

The Budget statement was delivered today at 12.30pm by the Chancellor of the Exchequer, Phillip Hammond. This is the final ‘Spring Budget’, in the future the Budget will only be made in the Autumn.

Introduction

• This budget takes forward the plan for a brighter future and sets the platform for a stronger, fairer, more global Britain.

• This Spring budget will be the last

• The budget will only take place in the Autumn with effect from Autumn 2017

• From 2018 there will be a ‘Spring Statement’ but no major fiscal announcements

Forecasts

• The Chancellor announced adjustments to previous growth forecasts from those previously announced in the 2016 Autumn Statement.

• Growth forecast for 2017 – revised up from 1.4% to 2.0%

• Growth forecast for 2018 – revised down from 1.7% to 1.6%

• OBR borrowing forecast revised to £51.7bn for 2016/17 (£16.7bn less than forecast in the Autumn Statement)

• OBR borrowing forecast revised down to £58.3bn for 2017/18

• OBR borrowing forecast revised down to £40.8bn for 2018/19

Taxation / Welfare / Finance

• Business with less than VAT threshold turnover will have quarterly tax reporting delayed by 1 year.

• Business Rates – Series of measures to cut business rates by £435m

• Any business losing small business rate relief will be subject to a cap to lessen the burden

• £1,000 discount to all pubs with a rateable value of less than £100,000

• Fund made available to local authorities for bespoke hardship cases

• Long term, preferred approach to be set out in due course by the government with a view to more regular revaluation

• Personal allowance to rise to £11,500 from 2017 / £12,500 by the end of this parliament

• Higher rate of tax threshold to increase to £45,000 from 2017 / £50,000 by the end of this parliament

• Preliminary thoughts provided on the subject of moving towards employed and self-employed being treated equally for tax

• Corporation Tax to be cut to 17% by April 2020 as planned

• Class 2 NICs to be abolished / From April 2018 Class 4 NICs for self-employed to be raised to 10% with a further 1% increase in 2019

• Director shareholder tax free dividend allowance to be reduced from £5,000 to £2,000 from April 2018.

• New NS&I bond will pay 2.2% on deposits up tp £3,000 from April 2017

• National living wage to increase in April 2017 from £7.20 to £7.50

• Universal credit taper rate to be cut from 65% to 63% from April 2017

Infrastructure/Transport

• £300m to support research talent on stem subjects.

• Ambition for UK to be a world leader in 5G – further £16m investment in digital infrastructure.

• Major projects to continue to be implemented across the Northern Powerhouse (£390m for North and £23m for midlands road network).

• Additional monies made available for low emission and driverless car technology.

• £350m for Scottish Government / £200m for Welsh government / £120m for incoming Northern Ireland executive.

Health / Education / Child Welfare

• 2017 will see the introduction of tax free childcare.

• From Sept, working parents with 3 & 4 year olds will get 30hrs of free childcare.

• Investment to be made in skills and education. New funding for a further 110 new free schools on top of the current commitment of 500.

• Free school transport to be made available to all children on free school meals who attend a free school.

• £216m over next 3 years to be invested into existing schools.

• T Levels to be introduced with 15 clear careers focussed routes / 16 to 19 year old students to have practical training time increased by over 50%. Additional £500m per year to be invested in 16 to 19 year olds.

• Education department to invest £140m in pilot projects for lifelong learning

• Care system placing pressure on NHS. £2bn grant funding pledged over the next 3 years for new social care packages in England / Green paper due later in 2017 on the subject of future financing of social care.

• Inappropriate A&E attendance – £100m capital available immediately for triage projects at English hospitals in time for next winter.

Excise Duty

• No changes to fuel, alcohol and tobacco.

• Minimum excise duty of £7.35 on cigarettes.

National Insurance and the self employed

• Flat rate class 2 National Insurance contributions (NICs) of £2.80 a week will be abolished from April 2018 as announced in last year’s Budget.

• Class 4 NICs will increase from 9% to 10% from April 2018 and 11% from April 2019.

• These changes mean that only someone with annual profits of more than £16,250 in 2019/2020 must pay more NICs; and in combination with the increases in the personal allowance, only someone with profits of more than £32,900 in 2019/2020 could have to pay more in tax and NICS than in 2015/2016.

Income tax: dividend allowance reduction

• The dividend tax allowance will reduce from £5000 to £2000 from April 2018.

• Anybody who receives a £10,000 dividend payment this will be affected as follows:

Reducing the money purchase annual allowance (MPAA)

• As announced in the Autumn Statement, the MPAA will be reduced from £10,000 to £4000 from April this year.

• No changes are made in how the MPAA will operate.

• Unused MPAA remains unavailable to carry forward for later years.

Qualifying recognised overseas pension schemes (QROPS): charge on transfers

• There will be a 25% overseas transfer charge on transfers to QROPS requested on or after 9 March 2017 unless at least one of the following applies:

i. both the client and the QROPS are in the same country after the transfer;

ii. ii. the QROPS is an EEA state (the EU, Norway, Iceland or Liechtenstein) and the client is resident in another EEA state after the transfer;

iii. the QROPS is an occupational pension scheme sponsored by the client’s employer; or

iv. the QROPS is an overseas public service pension scheme and the client is employed by one of the employers paying into the scheme.

• Gibraltar is considered part of the EU. The Isle of Man and the Channel Islands are not in the EEA.

• UK tax charges will apply to a tax free transfer if, within five tax years, an individual becomes resident in another country so that the exemptions would not have applied to the transfer.

• UK tax will be refunded if the individual made a taxable transfer and within five tax years one of the exemptions applies to the transfer.

• Payments out of funds transferred to a QROPS on or after 6 April 2017 will be subject to UK tax rules for five tax years after the date of transfer no matter where the individual is resident.

• Transfer to a QROPS will remain a benefit crystallisation event and the overseas transfer charge will be applied after the deduction of any lifetime allowance charge.

PLEASE NOTE: This snapshot is not intended as an in-depth analysis of the Chancellor’s speech (we will leave that to the industry commentators and experts) but we hope this brief summary helps you gain a quick grasp on the key points delivered by the Chancellor from the dispatch box.

For full details of the following headlines (and more) you may wish to visit the HM Treasury website.

 

Image Courtesy of Flickr_Ishan Manjrekar

The ‘convenience difference’ between standard and non-standard personal insurance

A motor insurance client was driving through the countryside on a Sunday evening in Surrey when their Mercedes-Benz was unfortunately struck by a deer that ran out in front of the vehicle. Fortunately the driver nor their passengers were injured but the animal caused significant damage to the car.

Mr P rang their specialist high net worth insurers emergency claim line immediately and they were back in contact within 15 minutes asking what time the client would like a replacement like for like car courtesy car delivered to their office the next day.

The client was very impressed with the level of service and said that the insurer could not have done a better job!

 

Image courtesy of John&Fish, Flickr

New Year Checklist to put you in the best financial position

 

We hope you have had a good start to 2017. We’ve put together a quick checklist to put you in the best possible position to start the year and also protect you and your family should the worst occur.

 

A few questions for you to consider…

• If you are aged over 55, have you taken advice about the options for drawing your pension savings?

• Have you considered the timing of dividends and bonuses to minimise tax rates?

• Are you on track to use this year’s ISA allowance and made any other tax-efficient investments before 6 April 2017?

• Could you exempt half of this year’s or last year’s capital gains by reinvesting the gains in a SEIS?

• Could you transfer income to your partner to minimise higher and additional rate taxation next year, to maximise the tax-free savings and dividend income limits, or to avoid losing child benefit?

• Are you making use of your annual capital gains tax exempt amount by making any available disposals before 6 April 2017?

• Have you made gifts to use your annual inheritance tax allowances?

• Are you investing enough in your pension if you wish to, or have to, retire earlier than state pension age, which is likely to keep going up?

 

Investments are great but equally as important is protecting you and your family.

• Do you have the right level of life insurance? What would happen to you and your family if you suddenly couldn’t work?

• Have you written a Will? It’s a common misconception that assets automatically pass to a spouse or registered civil partner on death, but if you don’t have a Will in place your estate will be distributed under the UK rules of intestacy, which means the law decides who inherits your estate and in what proportions.

 

For independent financial advice please contact PK Partnership on 020 8681 4994

 

 

Image courtesy of John&Fish, Flickr

Christmas opening hours

Our offices close for Christmas on Friday 23 December and reopen on Tuesday 3rd January.

Please refer to your policy documentation or in the unfortunate event of an emergency insurance claim call Amit Patel on 07947 152 018. For urgent wealth management queries please email jonathan@pkpartnership.co.uk

Wishing you a Merry Christmas and we look forward to speaking in 2017.

Image courtesy of Flickr_Sheila Sund

Make writing a Will and your Lasting Power of Attorney one of your New Year Resolutions

It is at Christmas we spend most time with our loved ones and reflect on the year that has passed. Sadly we are seeing a trend of many individuals who haven’t got a Will in place to provide future security for loved ones. By writing a Will and making sure you review it when your circumstances change, you are safeguarding loved ones in the event of your premature death.

It’s a common misconception that assets automatically pass to a spouse or registered civil partner on death, but if you don’t have a Will in place your estate will be distributed under the UK rules of intestacy, which means the law decides who inherits your estate and in what proportions. During the Christmas break please take a moment to read our Guide to Estate Planning.

Wishing you a Merry Christmas.

We look forward to speaking in 2017.

Image courtesy of Flickr_Sheila Sund

Income tax saving for couples

Income over £150,000 is taxed at 45%, and the personal allowance is withdrawn where income (less certain deductions) is more than £100,000. You and your partner might be able to reorganise your financial affairs to avoid exceeding one of these limits. However, there might be capital gains tax (CGT) to pay on switching ownership of an investment if you are not married or in a civil partnership.

In 2016/17, you will be able to receive £1,000 of savings income tax-free if you are a basic rate taxpayer, and £500 if paying tax at the higher rate. If you or your partner has little or no earnings or pension income, you may also be able to benefit from a 0% tax rate on up to a further £5,000 of savings income. You might be able to shift assets between you to make the best use of these limits, minimising tax on your savings income.

In 2016/17, £5,000 of your dividend income will be tax-free regardless of your tax status, so there again could be scope for tax saving by reorganising your shareholdings.

Child benefit – Child benefit is, in effect, withdrawn where either partner has income of £50,000 or more.

Withdrawal is total if income is over £60,000, and partial for income between £50,000 and £60,000. You may be able to keep some or all of your child benefit by switching income between you and your partner, or by taking other steps to bring your income below one of these limits.

Partner’s salary – If you are in business, you could pay a non-earning partner a salary, on which you will get tax relief. You normally have to keep PAYE records even if the salary is below the national insurance contributions (NICs) limit, which is £486 a month in 2015/16. If, however, the salary is between £487 and £672 a month, your partner will avoid paying any NICs, but will still qualify for state benefits.

As well as salary, you can pay an employer’s contribution to your partner’s personal pension plan. There is no tax or NICs on the payment itself, and it should be an allowable business expense. Be warned that the total value of your partner’s salary, benefits and pension contributions must be justifiable in relation to the work performed. Alternatively, you could plan ahead to share the profits of your business by operating as a partnership in 2016/17. You both need to be genuinely involved as business partners, though not necessarily equally.

You might be able to save tax by switching income from one spouse or partner to the other. From the start of the next tax year, you should aim to use up both individuals’ personal allowances (£10,600 in 2015/16 and £11,000 in 2016/17) and minimise any higher and additional rate tax.

PK Partnership cost of financial advice

Understanding income protection gaps: awareness, behaviour and choices

Failure to protect income in the event of disability or illness poses a significant challenge, both in traditional and emerging economies. For families, the impact of illness or disability on income can be devastating.

But not only individuals and households suffer. Income protection gaps can also profoundly affect businesses, governments, and the economy as a whole, undermining productivity and eroding social ties.

The need for such protection is acute and rising. In the developed world, demand for government support – the traditional source of relief – is rapidly outpacing supply. At the same time, disability levels are rising due to an aging population, tighter labour markets and improved medical diagnosis, which can confirm illnesses and disabilities such as mental health problems that were not recognized, let alone treatable, in the past.

Mindful of the challenges, Zurich Insurance Group, the global insurer, and the Smith School of Enterprise and Environment at the University of Oxford embarked in 2015 on a longer-term project to study income protection gaps.

Gaining better insights into key challenges

To better understand people’s attitudes toward income protection, this latest study by Zurich and the Smith School, the second in a three part series, examined many of the factors contributing to IPGs. Surveys done with individuals in Australia, Brazil, Germany, Hong Kong, Italy, Malaysia, Mexico, Spain, Switzerland, the UK, and the U.S., in March and April 2016, and later in the United Arab Emirates (UAE), aimed to learn about people’s awareness, knowledge, and experiences of income protection insurance.

The information has relevance both for those seeking to protect themselves, and in many cases their employers, as well as providers of income protection products and services. Ultimately, the information obtained in this study points the way toward possible improvements in the approach, and general issues of relevance to public policymakers and others.

Experience plays a greater role than financial literacy

One of the most important and surprising findings of the survey was that having first-hand experience, or (to a lesser extent) knowing someone who has had such experience with income protection gaps, was one of the biggest factors influencing demand. Experience trumps formal or abstract knowledge of insurance. Moreover, this holds true across all income levels. This is confirmed by behavioural research demonstrating that ‘subjective knowledge’ gained through life experience has a much more significant influence on people’s actions and decision-making than ‘objective knowledge,’ which is abstract and formally learned. People who have income protection insurance are not necessarily more financially literate. A potential area for future investigation would be how to replicate experience before something bad happens, including using technology-based solutions.

Misperceptions about the cost of income protection

The main reason people cited for lack of income protection insurance was a perceived high cost. But how much they would be willing to pay for such insurance – on average, remarkably consistent at 5 percent of respondents’ monthly income – was considerably higher than the average cost of income protection insurance for most people. Clearly, people’s perceptions about the cost of income protection need to be examined and, where it makes sense, addressed.

Men and full-time workers are more likely to be insured

Men are more likely than women to have income protection, but household status as primary or secondary wage earner is more important than gender.

Gender gaps existed in about half of the countries surveyed, particularly those where overall demand for insurance was lower. Men are more likely to have insurance overall. But in some countries, an individual’s position in the household as a primary or secondary wage earner played a greater role determining demand for insurance: sole or primary wage earners are more likely than secondary earners to have insurance.

Income Protection solutions and advice: the perceived and preferred role for employers and governments

Appetite for income protection may reflect a reliance on public programs in countries where a relatively high level of security has traditionally been available. This could become problematic in countries with high levels of state support as access to benefits is curtailed, and claims periods are shortened.

Governments have an important role to play. For example, for many, they are the preferred provider of income protection cover. In today’s world of constrained public budgets, most likely this role will be realized in the form of public-private partnerships, or ‘PPPs.’ For those who do not work for large companies or sharing platforms, other avenues must be found to form partnerships to close the income protection gap. Pooling such groups together, perhaps across industries or even geographies, would help to diversify risk, thus stabilizing prices for such individuals.

Work status plays a major role: the rise of the ‘gig’ economy is putting more individuals at risk.

The fact that a majority of people would prefer income protection cover as part of a benefits package, even if this means slightly lower take-home pay, shows the potential value of offering income protection insurance through the workplace. Workplace solutions typically involve income protection-related insurance coverage as well as rehabilitation services and prevention and well-being initiatives. But, in practice, employees may not know much about income protection, and may not be aware of its availability; they may fail to understand its importance to them. In addition, such arrangements tend to be most prevalent amongst large employers and multinational companies, meaning they are not currently an option for the majority of workers.

The diversity of preferred sources of income protection coverage and advice, from banks to employers to insurers and insurance brokers, points to a need for multiple-solution models that include both the public and private sectors.

A changing workforce

The changing nature of labour markets already has major implications for the way workers access income protection. An increase in short-term contracts and part-time positions is leaving many workers exposed to risk. There is an urgent need to design new channels for income protection solutions that are both ‘portable’ (across jobs and borders) and appropriate to different country contexts.

 

Image Courtesy of Flickr_Ishan Manjrekar

Autumn Statement Snapshot 2016

The Autumn Statement speech was delivered today at 12.30pm today by the new Chancellor of the Exchequer, Phillip Hammond, and is the first set of official economic forecasts since the UK referendum vote to leave the European Union.

Autumn Statement

The government updates their plans for the economy twice a year (in the Budget and Autumn Statement) and we have highlighted below the key points arising from the Chancellor’s speech.

PLEASE NOTE: This snapshot is not intended as an in-depth analysis of the Chancellor’s speech (we will leave that to the industry commentators and experts) but we hope this brief summary helps you gain a quick grasp on the key points delivered by the Chancellor from the dispatch box.

For full details of the following headlines (and more) you may wish to visit the HM Treasury website.

Budget Changes

• The Spring budget in 2017 will be the last

• The budget will only take place in the Autumn with effect from Autumn 2017

• From 2018 there will be a ‘Spring Statement’ but no major fiscal announcements

Forecasts

• The Chancellor announced adjustments to previous growth forecasts from those previously announced in the 2016 Budget Statement.

  • Growth forecast for 2016 – revised up from 2.0% to 2.1%
  • Growth forecast for 2017 – revised down from 2.2% to 1.4% in part due to uncertainty following the Brexit vote
  • OBR borrowing forecast revised up from £55.5bn to £68.2bn for 2016/17
  • OBR borrowing forecast revised up from £38bn to £59bn for 2017/18
  • OBR states national debt now 87.3% of GDP for 2016/17 up from 82.6%
  • OBR states national debt now 90.2% of GDP for 2017/18 up from 81.3%
  • The Government no longer seek to deliver a surplus in 2019/20
  • Public finances should be returned to balance as early as possible within the next parliament
  • Departmental spending plans set out in the 2015 spending review to remain
  • No change to overseas aid budget – currently 0.7% of GDP

Taxation / Welfare / Finance

• Personal allowance to rise to £11,500 from 2017 / £12,500 by the next parliament

• Higher rate of tax threshold to increase to £45,000 from 2017 / £50,000 by the next parliament

• Corporation Tax to be cut to 17% by April 2020 as planned

• Insurance Premium Tax to rise from 10% to 12% in June 2017

• National living wage to increase in April 2017 from £7.20 to £7.50

• Universal credit taper rate to be cut from 65% to 63% from April 2017

• Rural rate relief will increase to 100%

• April 2017 – Salary sacrifice schemes to fall in line with normal taxation rules (with certain exclusions and certain areas protected for a period)

• Government commits to maintain the ‘triple lock’ on state pensions

• Government to shut down inappropriate use of VAT

• Employee shareholder status to be removed

• £102m from Libor fines to be allocated to armed forces and emergency services charities

Productivity Gap

• Raising productivity is essential for a high wage, high skill economy

• New national productivity investment fund of £23bn to be introduced over five years

Infrastructure/Transport

• Ambition for UK to be a world leader in 5G – £1bn to be invested in digital infrastructure

• £400m venture capital fund made available to support technology firms

• Additional £1.1bn for English local transport network

• Major projects to continue to be implemented across the Northern Powerhouse

• £390m made available for low emission and driverless car technology

Housing

• £2.3bn housing infrastructure fund to support building of up to 100,000 homes in high demand areas

• £1.4bn to deliver 40,000 additional affordable homes

• £3bn homebuilder’s fund for 200,000 new homes and £2bn to build on public sector land

• £3.15bn to build 90,000 affordable new homes in London

• Private rental – letting fees applied to tenants to be banned as soon as possible

Health / Education / Child Welfare

• 2017 will see the introduction of tax free childcare

Excise Duty

• Fuel duty frozen for seventh year in a row

Devolution

£1.8bn allocation from the local growth fund to English regions

Should you have any queries please do not hesitate to contact PK Partnership on 020 8681 4994.

 

Image Courtesy of Patrícia Almeida on Flickr

Flooding advice for businesses

 

Flooding is one of the most common and widespread natural source of damage to properties in the UK. The effect of a flood is devastating and distressing for a business.

Flooding can cause serious damage

Flooding can not only cause serious damage to property, contents, production and ability to trade, it may also impact on employees, as well as deliveries that may need to travel through flood affected areas to reach you. Equally, it will affect the ability to supply your customers. Business turnover may not recover to pre-loss levels for many months, if not years. Indeed, some businesses fail to recover at all.

Other than moving location, you cannot always stop a property at risk of flooding from being deluged. But there are measures that can be put in place to minimise the damage and speed up the repair time.

Leading UK insurer Aviva has put together a commercial flood guide which will help you prepare for a flood as well as what to do and during a flood.

 

 

 

Image courtesy of Flickr_Pink Sherbert Photography

The Three D’s: Death, Divorce and Dementia

 

On his way to a recent appointment our Director Prakash listened to a an interview on Radio 5 between Adrian Chiles and money expert Martin Lewis on what they called ‘The Three D’s’.

Click here to listen to the interview which is well worth a listen! I am sure you will agree that the clear message is how important it is to get the correct financial planning in place, as stories featured in the interview are unfortunately all too common and something that you experienced.

For more information and advice on financial planning please contact PK Partnership on 020 8681 4994

 

 

 

 

 

 

 

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