CHAPTERS - Amazon Web Services...want to be can make planning clearer. As a financial planner, this is often the purpose of our discussions in, as an example, taking an individual

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®F I N A N C I A L

HAPTERSCNEWSLETTER

EARLY SUMMER 2018

3Summer 20182 Summer 2018

Welcome to the second edition of our new-style Chapters Financial Newsletter, with much news and a focus on the new tax year 2018/2019, which started just after this year’s early Easter break.

The start of February 2018 saw significant volatility in many global markets, partly fuelled by the view that future inflation and its factors are likely to be higher than first anticipated. We noted in our last Newsletter that we believe that 2017 was a turning point in the economy as we start to make a transition away from ultra-low interest and inflation rates. Sadly, some press comment suggests a far darker picture, and it was good to see that the markets, once these new inflationary views were factored in, have largely moved forward again. For reference, the Consumer Prices Index (CPI) in February 2018 was 2.7%, a reduction from its previous month of 3.0%.

There is no guarantee as to how any future change or transition on the economic landscape will look. Indeed, for some years I have met with an Agent of the Bank of England once a quarter, and their current view is that a transition will occur, but on a gradual basis, with the expectation that current bank base rates (0.5%) may only rise by 1.0 - 2.0% over the next two to three years.

It is of note that inflation increases are usually fuelled by growth and the sentiment and expectation for positive global growth remains unchanged. It is also important to note that rate changes affect each client in different ways. If you have a mortgage, you might be concerned that borrowing costs will increase, whereas conversely, if you have deposit savings you may be pleased with any uplift, noting it has been years since rates rose.

We have noted in this Newsletter detail of the rather short Spring Statement from the Chancellor in mid-March 2018. He described himself as ‘Tigger’ during his speech, although many thought that there was not much bounce in the messages he delivered. There were no changes to personal financial planning or business planning at this time, although changes will be announced later in 2018.

One of the delights of our planning work is that each client and their circumstances are different, having evolved from the past, and it is a pleasure to be involved in the planning and implementation of each financial position and its future outcomes. Overall, we remain positive about the global economy and financial planning opportunities in the new tax year. The team at Chapters Financial look forward to helping you with these.

The new tax year (2018/2019) is well under way and some clients find this time of year a great opportunity to use up their annual allowances. Enclosed with this newsletter, you will find a handy pocket summary tax table and we hope you find this useful and informative for your future financial planning.

Finally, the feedback on our new style Newsletter has been simply fantastic and thank you to all for the very positive responses. We look forward to further productions into the future and to providing you with topical updates as they arise. Don’t forget to check our Blog page on our website (www.chaptersfinancial.com) for the latest news and features.

Keith Churchouse

Welcome


Spring Statement

The Spring Statement 2018…or a Spring Clean?

Our Chancellor, Philip Hammond MP, stood at the despatch box at lunchtime on 13 March 2018 to deliver the new style Spring Statement. Those who find any Budget type announcements a bore could quote the longest recorded Budget speech, by William Gladstone in April 1853, which lasted 4 hours and 45 minutes. The shortest was Benjamin Disraeli in April 1867 at 45 minutes, only just beating Gordon Brown at around the same length of time in 2005. This not being a Budget, just a Spring Statement, lasted approximately 26 minutes and as you can guess from the length of time taken, there was little to remark upon. It was a response to the Office for Budget Responsibility’s (OBR) findings, rather than announcing changes to financial planning allowances and parameters, but some of the headlines provided a view of the UK’s financial health. We have listed a few below:

• UK growth forecast to be 1.5% this year, slightly higher than projected by the OBR in November 2017. The forecast for 2019 and 2020 remains unchanged at 1.3%

• Debt forecast to fall as a share of GDP from 2018/2019, to a level of 77.9% by 2022/2023

• Inflation to fall back to the Bank of England’s target rate of 2% by the end of 2018

• A suggestion of possible spending increases to be announced in the Autumn Budget, with a detailed spending review in 2019

• Consultations on a range of future policies, including a possible tax on single use plastics, a new strategy for taxing global tech giants and a consultation on the future of cash and digital payments

• Further funding for apprenticeship places

• Additional funding for affordable homes in some regions, including London

As an interesting aside, the OBR’s background papers confirm that the final amount that the UK expects to pay to separate from the EU is 41.4bn euros (£37.1bn).

The relatively light touch of this Statement reflects the nature of this lesser speech, with the major changes and announcements expected in the autumn months, usually October/November. We will of course keep you posted on the date of the Autumn Budget when announced and the changes that follow.

In the meantime, we hope that the enclosed Chapters Financial tax card for the tax year 2018/2019 is helpful when considering your personal and business financial planning. If you would like to take action early in this tax year to use up allowances, such as the ISA allowance (£20,000), then please let us know.

Summer 2018 7Summer 20186

About the personal journey...and you!

Starting with the end in mind is never a bad thing, as an objective. And knowing where you are now and where you want to be can make planning clearer. As a financial planner, this is often the purpose of our discussions in, as an example, taking an individual from pre-retirement to post-retirement and what that might look like financially. What an individual wants to do in retirement is of course up to them, with the likelihood of the additional luxury of more time. A client’s ambitions for retirement will shape our planning through the detailed discussions that we hold together. In our experience of discussing this position with clients, it can be an exciting prospect or, for others whose life has been their work, a daunting cross-over.

But how has the ride to your desired ‘destination’ been? Did you have a good journey? And why does this important question matter?

We are what we have become through our personal experiences. For some, life seems to have been a fulfilled experience, and for others not so, with a kaleidoscope of variances in between. After all, we are all different! In a vital way, it is these factors that shape our planning for you, along with the ‘hard’ facts of age, capital, budget, tax position, debt, etc.

The team at Chapters Financial has a wealth of experience in mapping and planning options for a client in meeting their financial objectives for the future and managing expectations, and these bespoke plans are based around one thing...you!

We are often asked by clients and enquirers, ‘What would you like me to bring to our meeting?’. Facts and figures about your financial position are very useful, but most important is an understanding of the journey that is you.

We look forward to furthering your journey in 2018.

From 6 April 2018, the minimum contributions that employers and employees must pay into the automatic enrolment workplace pension scheme have increased.

This increase takes the total minimum contribution from 2% of qualifying earnings to 5% of qualifying earnings. Of this the employer must contribute at least 2% of qualifying earnings whilst employees make up the difference of 3%.

A second increase to minimum contributions will take place from 6 April 2019 when the total minimum contribution will be 8% of which 3% will be employer contribution and 5% staff contribution.

Increase of automatic enrolment contributions

Company Funds – Where Should you Invest Them?

I met a business man recently who was finding the going rather mixed. ‘Could be better, could be worse’ was his passing comment as we chatted about all things business, trading year ends – and, of course, money.

He had some profits and cash within his business and was exploring his options. The obvious choice was to think about making a pension contribution before the end of his business year as an allowable expense. He understood the attraction of this option; indeed, he had discussed this with his accountant, but had some future longer-term business plans which meant that he was keen to maintain capital within the company, but wanted it to work harder for him in the intervening period (preferably somewhere closer to how hard he was working).

This led our discussion on to the way companies can invest. He was aware of placing funds on deposit with the bank or building society, which as many business people will know seem currently to offer lower deposit rates for business accounts than for personal arrangements but another lesser known option is to place the funds on the money market with the bank. Many banks feature money market accounts on their websites, with some minimum investments usually applying. This option is another deposit type arrangement that the banks do not regularly discuss, but it usually offers a higher rate of return for a fixed period, which can be a week or two, a month, three months or longer. Each bank offers different terms and conditions, so check these, and bear in mind that it can be disconcerting when the money disappears from your current account on agreement to proceed and then reappears when the fixed rate term ends. If suitable, you can then re-agree new terms at the prevailing rates at that time.

But what else can be achieved in investing funds from a company?

Open-ended investment companies (OEICS) and stocks & shares

Just as an individual may invest cash into investment funds or individual company stocks & shares, this is also an option for cash within a company. The range of available investments is significant and offers the potential for both capital gains and dividend income, although these are not guaranteed and it is important to remember that fund values can fall as well as rise and that the capital invested is not secure.

Any dividend income received will be taxed as a trading income at corporation tax rates, as will any capital gains when they are crystallised, because companies do not have a Capital Gains Tax (CGT) allowance. Your accountant may be able to provide additional tax guidance.

It would also be important to consider your attitude to and tolerance of investment risk and capacity for loss for these funds. This may be different to your personal view of your own funds.

Any final investment proposition may be a combination of these options and it is important to remember that cash-flow is the lifeblood of any business, so be careful where money is tied up, if at all, to ensure that any capital demands of the business are met in the short to medium term.

Summer 2018


Taking AIM at Inheritance tax

We have said before that inheritance tax is usually an emotional topic. Indeed, many feel that, having paid tax through the standard tax systems over the years, it is unfair that when you die your estate is subject to additional tax, especially at the current tax rate of 40%, on the amount above the nil rate inheritance tax band (currently £325,000). Obviously, there are additional allowances, if you qualify and the value of your home is sufficient, through the residence nil rate band and we have detailed this position further on our website: www.chaptersfinancial.com/private-clients/inheritance-tax-planning

But what else can you do, especially if you have used up other allowances, such as the annual gift allowance and made gifts from surplus income, where available?

If you are prepared to consider some higher-risk investments, one option that you could look at is investment into Alternative Investment Market (AIM) shares. As noted on the London Stock Exchange website:

AIM is the London Stock Exchange’s international market for smaller growing companies. A wide range of businesses including early stage, venture capital backed as well as more established companies join AIM seeking access to growth capital. (Source: www.londonstockexchange.com)

You can guess therefore that this opportunity is not for everyone and needs to be considered in line with clients’ other assets, their individual circumstances and their attitude to investment risk.

The tax advantage for qualifying shares is that after two years, the investment falls outside the investor’s estate for inheritance tax purposes (rather than after seven years as an example if made as a gift) through Business Property Relief (BPR). The investments can also be held within an ISA wrapper (which is normally subject to IHT, but tax free otherwise), and could be achieved, if appropriate, by the transfer of an existing ISA plan within its current tax wrapper into an AIM ISA share portfolio. Financial advice would need to be sought to see if this opportunity is appropriate in each individual circumstance. A useful guide can be found at: www.londonstockexchange.com/companies-and-advisors/aim/publications/a-guide-to-aim-tax-benefits.pdf

It is important to note that HMRC determines eligibility for BPR at the point at which probate is sought, and therefore it may not be possible to know for certain at the outset whether an AIM investment will fall outside the estate for inheritance tax purposes. Clearly, this increases the risks of AIM investment.

Chapters Financial is not responsible for the content of external website information.

I think it is possible to get side-tracked into thinking ISAs can carry on tax free after death. They can now be passed to a spouse or civil partner on death and carry on enjoying the tax advantages after an ISA rule amendment published in late March 2015. However, thereafter, anyone else receiving the fund will need to be aware that it forms part of the estate for inheritance tax purposes.

There are many variants / offers of these AIM investment options and these need to be considered carefully. Various criteria are also applied by some providers as to the minimum amount invested, (often around £100,000) and investment charges can also be higher than for more ‘mainstream’ investments.

I am pleased that we have continued on the important theme of inheritance tax planning from our last Newsletter in this edition. Having moved into the new tax year (2018/2019), this creates the potential for new opportunities to reduce inheritance tax a stage further with the use of the annual gift allowance (£3,000) as an example. If you have not reviewed your inheritance tax position recently, then the summer of 2018 might be a good time to a achieve this.

In the Spotlight

Sally Rule – The Property Person

Buying and selling a home involves one thing - emotions, usually both good and bad.

Property market changes and technology have had an impact on this. Time has proven that even the most experienced of house movers sometimes need a personal helping hand when selling their properties…and of course finding a new place to call home.

My advice to clients through the service I offer is simple. First take a look at the five ‘Ps’ for home styling when selling.

Pavement to Porch – anyone interested in a property is likely to drive past and make a judgement on what they see. There is no data to confirm just how many people drive past; it is therefore key to ensure the boundary is in good order, the path is clear and free from weeds, the outside light works and there is space to stand at the door.

Presentation – all of us are unique and we style our homes to suit our personality; however, this does not mean it suits one and all. Presenting your home to appeal to a wider audience will help attract more viewings and offers.

Photographs – your agent will employ a professional photographer to take the best photos to promote your home and detail the care that you have put into the property. This ‘energy’ is reflected in the pictures when you are showing to purchasers that your home is a great place to be.

Price – your agent will value your home based on the available market conditions, comparisons and other information; however, get the marketing right at the outset. The price can change, but the ‘energy’ can’t. Don’t change the price, add to the value with the energy you put into your home.

Purchaser – If your home is priced correctly and with the best agent, you will receive quality viewings, with applicants who have been qualified and match as best they can to your home. You only need one!

Through my 30+ years of experience in property sales and purchase, I prefer to shift the energy, not the price and, as part of my Surrey based service, I provide impartial observations and suggestions to make small, affordable changes to the property to broaden the appeal to a wider audience. This creates an opportunity for the homeowner to achieve the best price.

As we all know, first impressions count and none more so than when selling a home.

Home Finding Anyone can buy a property. However, the reality is that people are very busy with life, both work and socially. When does anyone have time to filter the property descriptions in depth and make considered opinions on which to view? The answer of course is possibly sneakily at work, during a lunch break, after work until late in the evening and at the weekends…possibly time you would prefer to spend doing other things.

This is something I come across regularly, and many find it useful to have someone engaged to carry out location and property research during the day, previewing suitable properties for buyers to then accompany them on a suitable scheduled viewing day.

More detail can be found at Sally’s website: www.thepropertyperson.com or you can email her at [email protected]

If you would like to be in our spotlight in our next edition please let us know by emailing [email protected]


And Finally…...Football is the game, we’re all together!

It is unlikely to have escaped your notice that the Football World Cup 2018 is being staged in Russia this summer, starting in June and filling the airwaves until July. Anyone that knows me may note that I am not the biggest of sporting fans, so those who cringe at the thought can be comforted by knowing I will be joining their ranks.

We thought a few historic facts might be of note, tuned of course to the economic points of the time.

1930 World Cup Start

It all started in July 1930 in Uruguay. At the same time, the Great Depression was taking hold of the world and I am sure the festival was a beneficial distraction for some, who had more pressing financial needs. The world and its population has changed significantly since then, with us all living longer. Life expectancy for a man then was to age 58 as an average and 62 for women.

1966 England Wins the World Cup

If you had been celebrating, the cost of a pint of beer was 2/- (10p), a bottle of wine would set you back 15/- (75p) and a ticket for a seat in the stands for the final tie at (the old) Wembley would have cost you £3-15 (£3.75).

Hand of God? 1986

England was put out of the Mexico World Cup by Argentina and Mr Maradona. You would also probably have been financially put out with bank base rates of 9.875% (May 1986) and average inflation rates of 3.32%, similar on the inflation front to current times.





























































Hadleigh House, 232 High Street, Guildford, GU1 3JF.

Tel: 01483 578800Fax: 01483 578864

email: [email protected]

Summary & ReviewYou may be aware that the team at Chapters Financial are advocates of regular reviews of your financial planning to ensure that it continues to meet with your changing needs and circumstances. We welcome referrals and please do pass our details on to contacts you may have that may benefit from our service. We are always pleased to receive referrals from our clients and contacts.

Please contact the team at Chapters Financial; Keith, Vicky, Esther, Julia or Suzanne on 01483 578800 or by email at [email protected] to discuss your requirements and to book a meeting or financial planning review.

If you would like to receive this information in email format please let us know.

This Newsletter provides general information and should not be used as individual advice.

Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority. Registration number: 402899

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CHAPTERS - Amazon Web Services...want to be can make planning clearer. As a financial planner, this is often the purpose of our discussions in, as an example, taking an individual