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Monthly Market Summary – July 2018

Archive for the ‘Commentary’ Category

Monthly Market Summary – July 2018

Thursday, August 9th, 2018

Despite a brewing trade war between China and the U.S. and an increasingly uncertain post-Brexit future, on the whole, July was a buoyant month for global stock markets.

In the U.K., World Cup fever and hot weather propelled the retail and hospitality sectors to a successful month. In fact, the Centre for Retail Research estimated that every England goal was worth £165.3 million to the nation’s retailers.

Overall, the FTSE-100 index of leading shares was up slightly in the month. Having closed June at 7,637, it ended the month at 7,749 for a rise of just 1%.

On the continent, July was an unusually quiet month. Mainland Europe’s two major stock markets grew confidently during the month; both the French and German markets rose by 4% during July.

Whilst Europe saw a subdued July, Trump’s America had a chaotic month – something most of us have come to expect.

After imposing a 25% tariff on $34bn of Chinese goods in July, which provoked retaliatory measures by China, Trump is now proposing a colossal tariff that will affect $200bn of Chinese imports.

In typically brash American fashion, however, Wall Street has shrugged off the wide uncertainty these “Trump Tariffs” have caused , with the Dow Jones rising 5% in July.

Elsewhere, the Asian markets had a mixed bag. Shanghai and Tokyo closed up by 1%, whilst Hong Kong and Seoul fell by 1%.

This general upward trend could continue. However, the simmering U.S.-China trade war plus an, as of yet, directionless Brexit could bring some turbulence into global stock markets over the coming month.

On the subject of turbulence, if you’re flying somewhere abroad this month, we wish you a pleasant holiday.

Where to holiday with a weak pound?

Thursday, August 9th, 2018

If you are heading abroad over the summer, chances are you will be traveling to an E.U. country. 63% of us hope to travel to Europe in the next 12 months, making it by far the most popular destination for British holidaymakers.

However, in the run up to ‘Brexit day’ next March, the affordability of holidaying in Europe remains uncertain… Those of us who’ve visited the continent since the referendum will have already noticed that they are getting a lot less bang for their buck than previously.

As of yet we have very little information on how Brexit will look. With a ‘no-deal’ Brexit looking increasingly likely, it is possible that the pound will remain turbulent until it becomes clear how Brexit is going to pan out.

Ultimately, it is this which will determine whether or not the pound remains weak against the Euro – something that will have a large effect on how our future holidays feel.

In light of all this dreary information, looking outside of the eurozone for your future holidays may be your best bet for your wallet.

This is because the pound has not fallen equally against all currencies. In fact, it has actually gained against some. These countries are generally long haul destinations, although there are a few closer to home.

For instance, since Brexit, the notoriously flakey Argentine peso has fallen 72% against the pound. So, if you want a really good value holiday, your best bet is a 14 hour flight to Buenos Aires.

For those of you who prefer culture and history to warm seas and white sand, Russia should be on your agenda. E.U. and American sanctions have hit the Russian economy hard since part of their Army “accidentally” invaded Ukraine in 2014.

This has meant Sterling has gained 13% on the Ruble, excellent for those of you who don’t mind swapping St Petersburg for Santorini.

Closer to home – but equally lacking in quality sunbathing – Iceland is significantly cheaper than it was a year ago: The Icelandic krona has fallen by 11% on the pound.

Traditionally pricey Switzerland is also cheaper than usual. The Swiss franc is 7% weaker than it was a year ago. If skiing is your thing, the sliding franc makes Switzerland a viable option.

Unfortunately, landlocked Switzerland and freezing Russia and Iceland have very little to offer those of you who want a beach holiday.

Luckily, the pound has risen by 10% on the Indian rupee, so the sandy beaches of Goa and Kerala are an affordable option. What’s more, the Brazilian real is 18% weaker than it was last year. So, for those of you hankering for warmer climes, these may be your best bet.

The sweeter side of VAT

Monday, August 6th, 2018

Legal cases are always most fascinating when they make apparent the law’s many intricacies and ambiguities. VAT tax disputes may not always seem like the most interesting subject. However, a recent tribunal ruling showed how captivating they can be…

Kinnerton Confectionery is a company that primarily sells sweets marketed at children – if you’ve ever seen Peppa Pig Sweets, Kinnerton are the company behind them. Most of these – as confectionary products – are standard VAT rated at 20%.

However, the company recently moved out of their normal market and into the allergen-free market, creating a nut, gluten, egg and dairy-free ‘Just Luxury Dark Chocolate’ bar. This got complicated when they sold their new product with a zero VAT rating.

For those of you unfamiliar with the intricacies of VAT confectionary law (most of you, we expect!), here is a brief summary of the U.K law relevant to this case:

  • Most food for human consumption is zero rated
  • However, confectionary should be standard rated – this includes chocolate bars
  • Cakes and ingredients for making cakes are zero rated

This means that cooking chocolate, when marketed as such, should be zero rated because it counts as a cake ingredient.

To avoid full tax liability, Kinnerton branded the chocolate as suitable for cooking. They wrote on the packaging it was ‘ideal for cakes and desserts’, wording that largely mirrors that used by other cooking chocolate manufacturers. Because of this, Kinnerton thought they had a strong argument for zero rating the chocolate bar.

Products placed in the confectionary section tend to receive greater attention than those placed in the baking aisle, but are usually standard VAT rated. By creating a confectionary product that was zero rated, Kinnerton Confectionery tried to have their cake and eat it.

HMRC, however, were quick to catch on. They argued that because the product was often sold alongside confectionary items, it wasn’t marketed or sold as a cooking ingredient. Basically their argument rested on the premise that, although Kinnerton stated that it was suitable for cooking, this didn’t equate to the product being a cooking chocolate.

HMRC decided to appeal against the chocolate bar’s tax status, and their assessment was upheld by a judge. Kinnerton was ordered to pay HMRC a £258,470 liability and had to standard rate their product.

The rather vague distinction between confectionary products and standard foods has resulted in a few strange VAT anomalies. Strawberry flavoured powdered milkshakes, for instance, incur standard VAT; chocolate flavour, however, is VAT free. An even more bizarre example is that gingerbread men with just two chocolate eyes are zero rated; add chocolate trousers and they become liable to full VAT.

Properties slower to sell than a year ago

Wednesday, July 25th, 2018

The housing market has slowed down significantly. The Royal Institution of Chartered Surveyors (RICS) has reported that whereas last year a home typically took 16 weeks to be sold, the average time is now about 18 weeks. June was the 16th successive month of decline.

While people may be experiencing difficulties in selling their houses, the flip side for those buying a property is that house prices haven’t been rising. This is good news for first time buyers in particular.

According to the Halifax, the UK’s largest mortgage lender, in the year leading up to June 2018, house prices rose at their slowest pace since March 2013 with an increase of 1.8%. The Office for National Statistics reported that annual house price growth fell to 3% in May compared with a month earlier. London property values were responsible for dragging down the rate of growth across country, which was the fourth month in a row of falling house prices for the capital. It was a more positive story for the East Midlands which showed the highest annual growth with house prices increasing by 6.3% over the last year. The slowest increases in house prices were in the north-east of England with prices rising by just 1.3%.

The report also showed that the number of properties estate agents had on their books was at an all-time low. The market appears to be reaching stagnation point. It’s not just properties for sale that are affected either. The rental market is affected too, with many landlords abandoning it as a result of tax changes, such as the stamp duty surcharge. This has hit buy-to-let investors and second-home owners particularly hard.

Simon Rubinsohn, chief economist at RICS, commented that, “It is hard to see what is going to provide much impetus for activity in the housing market in the near term.”

There has been speculation by analysts of a potential interest rate rise this summer. This has contributed to an increase in the number of mortgages being processed. According to UK Finance, the number of new home loans hit its highest monthly total in May. Estate agents feel, however, that this would just have an even more negative effect on the already fragile confidence that exists in the market.

How best to help your grandchildren financially

Wednesday, July 25th, 2018

Being a grandparent is an exciting time of life. You get all the enjoyment of doing fun activities with your grandchildren but can hand them back at the end of the day. Part of that pleasure is knowing that you can help them financially. Often you’re at a stage of your life where you’re comfortably off and in a position where you want to give a helping hand to the next generation.

The plus side of this is that you get the opportunity to make a real difference to your grandchildren’s lives. The downside is that the regulations around inheritance tax (IHT) can be confusing and the red tape overwhelming at times. By taking steps to find out what the rules are though, you can make life easier for family members and still be confident that you have enough money for your own retirement dreams.

One important consideration is the timing of your gift. If there’s a new arrival in the family, the financial needs will be very different than if it is to help older children. For example, the priority may be to help the newborn’s family move to a more spacious home or to help with private school fees for a primary school-aged child. Later on, it may be to help with driving lessons, pay for school or university fees or enable them to get on the housing ladder. You may decide you want to leave your money to your grandchildren in your will, in which case it is vital to plan your giving in advance in a tax efficient way.

IHT will be levied on your estate at 40% when you die, so if you’re giving money away now that will have an impact later. The nil-rate band is a threshold of £325,000 for the value of your estate. Anything above that will be taxed. Making monetary gifts can take the money out of the ‘IHT net‘ but remember this only applies for the seven years after you made the gift. It’s worth exploring some extra allowances such as being able to give £3,000 of gifts per tax year (your annual exemption) as well as an allowance for small gifts and wedding/birthday gifts.

There are a number of alternatives to make your gift. If the money is needed before age 18, a trust structure is a tax-efficient way to give money, while still giving you some control on how it is used. A Junior ISA can also be a good option as it grows tax-free, building up a fund for driving lessons or university fees. You can’t open the JISA on your grandchild’s behalf but you can pay into it up to their annual limit, currently £4,260. If they’re older, you might want to consider a lifetime ISA for a housing deposit. Again, you can’t open it for them as a Lifetime ISA can only be opened by someone between the ages of 18-39 but if your grandchild opens one, it’s a way for them to save up to £4,000 a year and get a 25 per cent government bonus on top.

Whatever you opt for, you’ll have the feel-good factor of helping the next generation in a way that is right for both you and them.

July market commentary

Wednesday, July 18th, 2018

Introduction
Let us invite you to travel back in time to June 2016, to the day after the Brexit referendum. Meanwhile, across the Atlantic, campaigning in the US Presidential election is in full swing.

You are offered two glimpses into the future. The first is that two years on, the UK has apparently made no real progress in the Brexit negotiations. The second is that Donald Trump has been elected President and has had a successful meeting with Kim Jong-un. You would have dismissed both of them as ridiculous and yet that is exactly what June brought us, as Theresa May called yet another Brexit crisis meeting and President Trump met the leader of North Korea in Singapore.

…And then the President went on to announce a raft of tariffs on imported goods – from both China and Europe – which may well see the threatened global trade war develop. Both China and the EU were swift to announce retaliatory tariffs, and (unsurprisingly) June was a month in which none of the major stock markets we cover managed to gain any ground.

June was also another bad month for the virtual currency Bitcoin. The price has been in steady decline over the last two months and, over the weekend, stood at $6,369 (£4,822). There were two main reasons for the fall as the South Korean cryptocurrency exchange Bithumb revealed that it had lost 35bn won (£24m) in a cyber-attack, and governments and regulators around the world – the US Securities and Exchange Commission is the latest – made ominous noises about cutting down on Bitcoin fraud.

In what is surely a sign of things to come, the Canadian province of Quebec halted approvals for Bitcoin mining as it worried about being able to supply electricity to the province.

UK
Sadly, the big story in the UK in June is one which has been written about often in recent times – the continuing decline of retail and the national high street. On the morning of Monday July 2nd, both the Mirror and the Daily Mail led with ‘the battle to save Britain’s high streets’.

Can anything be done? June brought us almost uninterrupted sunshine, and it may well be that the retail figures – like those for May – will show a rebound from the depressing figures disclosed in the Spring. The Mail is reporting that 50,000 retail jobs were lost over the last six months and is calling for an urgent review of ‘crippling business rates’.

Even that may not be enough: the simple fact is that it is easier, quicker, more convenient and cheaper to shop online. Even Costa is starting to struggle, reporting a 2% fall in like-for-like sales in the first three months of the year, which it blamed squarely on a lack of shoppers.

The long term trend was neatly captured by the problems of House of Fraser. On June 4th, it ‘rejected talk of a collapse’: three days later it was announcing that 31 of its stores would close. With M&S also planning a programme of store closures, Debenhams issuing constant profit warnings and 60 bank branches closing every month, the UK high street increasingly looks like it could be an idea whose time has passed.

But let us try and find some good news…

June was a good month for the economic numbers in the UK. Unemployment was down, falling by 38,000 between February and April, and the number of people in work rose to a record 32.4m – up 440,000 on the previous 12 months. That said, wage growth slowed again, so it is to be hoped that inflation does not also start to rise, otherwise we will be back in the realm of falling real wages.

The UK also earned the unofficial title of tech ‘unicorn’ capital of Europe. For those of you that don’t know the term, a ‘unicorn’ is a tech start-up valued at more than $1bn (£757m). The UK is home to 37% of the continent’s ‘unicorns’ and, according to a report for London Tech Week, is the number 1 destination for Europe’s top tech talent.

Rather more mundanely, the Bank of England voted to hold interest rates at their current level, but it is looking increasingly likely that base rates will rise to 0.75%, possibly as early as August.

The month ended with MPs voting overwhelmingly for the expansion of Heathrow airport – but do not expect the diggers to move in for a few years. The move will be widely challenged in the courts by local and environmental campaigners.

Finally, what of the UK stock market? The FTSE 100 index of leading shares had a quiet month. It started June at 7,678 and fell by just 41 points to end the month at 7,637. And it is down just 51 points for the year as a whole, having started 2018 at 7,688.

The pound was also down slightly against the dollar, falling from $1.3299 to $1.3211.

Brexit
As noted in the introduction, June brought us the second anniversary of the vote to leave the EU but we remain no closer to knowing what the final shape of Brexit will be. Airbus and BMW made veiled warnings about the consequences of ‘no deal’ but with Theresa May’s cabinet still squabbling about the shape of the eventual customs partnership, that exact outcome appears to be looking ever more possible.

At the time of writing, the newspaper headlines are telling us that this month’s meetings will be ‘make or break for May’, although it would not be a surprise to see that, once again, a last minute compromise will be cobbled together and that this time next month we will still be no further forward.

Europe
The Italian coalition government has survived its first month in office, even giving an impression of normality as new finance minister Giovanni Tria said that the government was “clear and unanimous” in its decision to remain in the Eurozone.

The main news in Europe was the decision of the ECB to end its huge programme of bond-buying which was introduced in a bid to stimulate the economy of the Eurozone. In a statement, the ECB said that it would halve the current scheme – worth €30bn (£26.6bn) a month – after September “as long as the data remained favourable” and end it completely in December. ECB President, Mario Draghi, acknowledged that Eurozone growth had stuttered recently, but was adamant that the underlying growth “remained strong”.

There was big news for jobs in the steel industry as German industrial group Thyssenkrupp signed a deal with Tata Steel to combine the two companies’ European businesses. The new company will be headquartered in Amsterdam and will have a total workforce of 48,000 – but there are fears of up to 4,000 redundancies.

There could be one more redundancy as well… It is hard to escape the feeling that we are approaching the end of Angela Merkel’s time as German Chancellor as key ally Horst Seehofer, the interior minister, threatened to resign over her immigration policy. In Turkey, Recep Erdogan won a new five year term as president, with some commentators arguing that it effectively spelled the end of the country as a democracy.

On the stock markets, the German DAX index ended June down 2% at 12,306, while the French index was down just 1% at 5,324. At the halfway point in 2018, the German index is down by 5% for the year as a whole, while the French index has risen by just 11 points.

US
Threatened trade war or not, the US announced better than expected data on jobs as unemployment fell to an 18 year low. Forecasters had been expecting 190,000 jobs to be added in May, but that figure was comprehensively beaten as the economy added 223,000 jobs in the month.

As had been expected, the US Federal Reserve announced a rise in interest rates, moving the target rate up from 1.75% to 2%, and going so far as to forecast a further two rate rises this year, reflecting the strength of the US economy. It is the seventh time that rates have been increased since 2015 and takes them to their highest level since 2008.

In company news, there was more gloom for Facebook as it wrestled with yet another ‘privacy bug’ – this time affecting the data of 14m people. And there was bad news for Google as the EU announced that it would fine the company up to $11bn (£8.33bn) over the dominance of its Android system.

Tesla, Elon Musk’s car making company, announced that it would cut 9% of its workforce – mostly ‘salaried employees’ – as it bids to finally make a profit. The company employs 37,000 people and has never made a profit in the 15 years it has existed.

“Profit is not what motivates us,” Musk posted on Twitter. Wall Street does occasionally like to see companies making a profit, but it was a quiet month for the Dow Jones index, which drifted down 1% to close the month at 24,271. Looking at the year as a whole, it is down 2% from its opening level of 24,719.

Far East
China seems well on course to become the world’s most influential economy as the One Belt, One Road infrastructure project continues to extend its influence through Africa and towards Europe, with Chinese leader Xi Jinping committed to creating ‘a paradigm of globalisation that favours China’. The country is now the world’s second largest consumer of crude oil, with 25% of the imports coming from Sudan and the Gulf of Guinea.

For this month though, it was a disappointing performance from China’s Shanghai Composite Index which fell 8% to close at 2,847. Hong Kong followed Shanghai’s example, falling 5% to 28,955 and the South Korean market was down by 4% to 2,326. The Japanese market was more or less unchanged in the month, moving up very slightly to 22,304.

Unsurprisingly, given the threat of a trade war, all four markets are down over the first six months of the year. The Chinese market leads the way with a fall of 14%: South Korea is down 6% and the Hong Kong and Japanese stock markets are down by 3% and 2% respectively.

Emerging Markets
Could North Korea one day feature in this section of our report? It seems that these days the only way to predict the future is to think the previously unthinkable. Kim Jong-un is 34 (or 36, depending on which ‘official’ source you believe) and it is not hard to see him one day taking North Korea down a similar road to China while maintaining rigid state control of the economy.

For now, though, we will look at only the usual suspects – India, Russia and Brazil. The first two saw their stock markets largely unchanged in June, closing at 35,423 and 2,296 respectively. The Brazilian market was down 5% at 72,763. For the first six months of the year, Russia – with future tourism surely buoyed by a successful World Cup – has seen its market rise by 9%, the Indian stock market is up 4% but the Brazilian index is down by the 5% it fell in June.

And finally…
Sadly, the high street seems to be taking a further thumping from consumers as newspapers report that supermarket groups are ‘losing millions’ as ‘cunning shoppers’ buy expensive items such as avocados and put them through the self-service tills as cheaper items like carrots.

It sounds like there is a gap in the market for an app which tells you how many 60p per kg. carrots weigh the same as a £1.50 ready-to-eat avocado…

New shopping techniques aside, a shortage of CO2 (carbon dioxide) was also making the news. It turns out that CO2 is not just something you vaguely remember from school, but a vital component in the food and drink industry.

It is used to add the ‘fizz’ in beer and fizzy drinks, and to extend the shelf life of meat and other food products. Scotland’s biggest abattoir has closed and Asda rationed the supply of fizzy drinks to online customers.

There are also real fears that there could be a beer shortage this summer as Europe continues to struggle with the CO2 shortage and “beer crazy football fans” threaten to drink Russia dry during the World Cup.

But things can always get worse – and back in the UK we could now be facing a shortage of… lettuce. The heatwave has apparently boosted demand for lettuce but – according to the brilliantly-named British Leafy Salad Growers Association – the soaring temperatures have stopped the crop growing. Broccoli and cauliflower crops have also been affected and the shortage could hit the supermarket shelves as early as this week.

Expect the Iceberg Lettuce to replace Bitcoin as the new default currency of the internet. Maybe it’s time to get out there and plant lettuce in the back garden… or perhaps instead you should be considering a crop of avocados…

Can we make inheritance tax simpler?

Monday, July 16th, 2018

Inheritance tax (IHT) has existed in the UK for over 300 years. In its current form, it was brought in to replace the old Capital Transfer Tax; a measure that was brought in itself as a form of wealth distribution in order to regulate disparity between rich and poor.

Although in concept the idea is quite simple, in reality, the caveats and bureaucracy surrounding it in its present form can make it difficult to get your head around. In fact, this January, Chancellor Philip Hammond called the current system “particularly complex” and appealed to the Office for Tax Simplification (OTS) to hold a review of it. In his communication with them he stated: “I would be most interested to hear any proposals you may have for simplification, to ensure that the system is fit for purpose and makes the experience of those who interact with it as smooth as possible.”

As it stands, in 2018 the IHT allowance remains at £325,000, as it has done since 2010, with no plans to increase it. For those who qualify however, the Residence Nil Rate Band Allowance (RNRB) raises the threshold by £125,000 – this is planned to increase by £25,000 a year for the next two tax years, meaning that in 2020/21 the RNRB will stand at £175,000. The IHT rate itself is firmly at 40% for anything above the £325,000 threshold, however if 10% of an estate is left to charity, the rate is adjusted to 36%. Even with these limited examples, the complexity of the issue is abundantly clear.

The possibility of simplifying IHT is definitely there – it all comes down to the will of the treasury. In fact, in April of 2018, the OTS declared that it would “identify simplification opportunities” and made a request for feedback from those with personal experience of IHT. We can be confident that there will at least be a review of things such as the taxation of trusts, the RNRB allowance and exemptions and reliefs for things such as business and agricultural property.

Simplification could ultimately lead to the system being replaced entirely, but reforms leading to increased taxes would likely prove politically unpopular under the current government. Only time will tell whether or not we see changes in the near future, but the changes are certainly feasible.

What is Making Tax Digital (MTD)?

Monday, July 16th, 2018

HMRC is striving to revolutionise the UK tax system and plans to do that through the Making Tax Digital (MTD) initiative. HMRC wants to be the most efficient tax authority in the world, and embracing the use of digital data appears to be the path towards that. The current system can be scrutinised for not being effective enough, efficient enough or straightforward enough for taxpayers. By bringing in a completely digitalised tax system by 2020, HMRC aims to make those problems a thing of the past whilst also bringing down the overheads involved in managing UK tax affairs.

The changes will effectively bring an end to self-assessment, providing a new experience for a wide range of taxpayers. Most businesses, the self-employed and landlords will be covered by the changes, with the system requiring the majority of business owners to keep a digital record of their accounts and transactions.

Announced for the first time in the Spring 2015 budget, MTD for VAT reporting comes into play starting April 2019. With it comes the introduction of a set of rules for submitting returns with three main requirements. Firstly, digital record keeping will be introduced, meaning that all VAT registered companies will have to store all transactions in electronic form. Secondly, digital links; there will be a digital link between the final numbers and their source data. Thirdly, digital submissions; each and every submission will be made using approved software through HMRC’s new and improved gateway.

It’s important to note that digital quarterly reporting will only be made mandatory for businesses with a turnover above the VAT registration threshold of £85,000. For businesses, including landlords, with a turnover below the threshold, quarterly reporting will remain optional. There are definitely benefits to choosing to keep your records digitally, making them more robust and enabling an efficient transfer of data between clients, agents and HMRC. Agents will also be able to react to live data, meaning they can proactively offer advice.

If you have any questions surrounding this topic, please feel free to get in touch with us directly.

Can a lack of knowledge of tax rules ever save you?

Monday, July 16th, 2018

Staying on top of the latest tax legislation probably isn’t at the top of the to-do list of the majority of UK citizens, and that’s understandable. If you were to miss something though, would you be let off? Or would your ignorance turn out to be not so blissful, after all?

HMRC agrees that a reasonable excuse can stand as a valid defence for an appellant of a tax penalty. However, what falls under the definition of a reasonable excuse? Documents being lost through theft, fire or flood – that’s acceptable. Serious illness or bereavement (at relevant times), check. Computer or electrical faults, you’re covered. If you need to get hold of a document from a third party then HMRC concedes that it’s reasonable to expect a delay, as long as you can prove you requested the document in reasonable time.

However, under most normal circumstances there are things that will not be considered as a reasonable excuse. Pressure of work, difficulty in complying, lack of reminders from HMRC, and yes, ignorance of tax law. Officially, not being aware of the law to which you have failed to comply will not get you out of paying your penalty. There have been isolated cases, however, where the opposite is true.

For example, in April 2015, the way in which UK citizens living abroad filed Capital Gains Tax (CGT) returns on any UK properties they sold, changed. Where before they would report their capital gains on the annual tax return, now they must file a special Non-Resident Capital Gains Tax (NRCGT) return within 30 days of the property’s disposal. Plenty of UK citizens living abroad missed the memo, and appealed their penalties when they discovered the news.

Judges rulings on these cases were inconsistent, but in the McGreevy v HMRC [2017] case, the appellant was successful, with the judge stating that, “it is preposterous to expect that a document on HMRC’s website which is not easy to find for a tax judge makes invalid all possible excuses about not knowing of the NRCGT return deadlines,” also saying that, “only a small coterie of people obsessed by tax” would expect anybody to even consider checking the Autumn Statement. Each appeal will be looked at on a case by case basis, but officially, it’s up to you to stay informed.

Seeing a financial adviser is like having an MOT

Wednesday, June 27th, 2018

We’re all used to taking our cars for their MOT, aren’t we? Before we book it in for the test, we may well get a mechanic to check the vehicle over to make sure it will pass with flying colours. It’s a useful time to put in new brake pads, check the suspension and make sure the lights are all in working order.

This got us thinking that in some respects, our finances are no different to a car. They too could often benefit from a bit of fine-tuning from time to time to ensure they’re running at optimum performance and that our investments are working as hard as they might.

Of course, it’s a legal requirement to make sure our cars are roadworthy but there’s no such law for our money – it’s just up to to the individual to make sure your finances are maintaining a high level of performance. This is why it can be worth asking a financial adviser for a financial MOT or healthcheck. It’s an opportunity to not only check what you already have in place but to also consider ‘new parts’ you may want to install.

It’s all too easy, for example, to think your pension will just grow at its own speed and not pay it much attention. By enlisting the help of a financial adviser, though, you can check your pension fund is invested in a way that is getting the best return for you. Investment group, Bestinvest, has stated that twenty six of the top funds in the UK, containing £6.4 billion, are badly underperforming, and have been doing so for three years. In fact, at times, they have failed to meet their targets by over 5 per cent. An adviser will be able to monitor the situation and, if necessary, transfer your savings into better performing funds.

Another ‘new part’ you may decide to investigate may be insurance. You could already have life assurance in place but realise you don’t have any critical illness cover and are leaving you and your family exposed if you experienced a serious health setback. Or you could review your savings and realise you’re not making the most of your potential tax-free returns through the various ISA products available.

Whatever your particular situation, maybe it’s worth booking yourself in for a financial MOT to make sure your finances are fit for your current circumstances.