This summer is more of a time to take stock than usual, and there is good reason to check your financial and life plans are still fit for purpose. Here are key areas where you might need to tweak things.
Our recent survey of HNWIs found that 38% have been rethinking their financial and life objectives as a result of the COVID-19 crisis. We wouldn’t be surprised to see that figure rise significantly higher in the months ahead.
A raft of changes to the tax regime, many of which concern property and investments, are being discussed as geopolitical uncertainty and challenging market conditions rumble on. Although not exhaustive, many of these developments might signal the need for a rethink.
1. Does your investment strategy need an overhaul?
Our survey found that achieving investment income was by far and away our users’ biggest financial concern – unsurprisingly in light of the widespread dividend cuts seen across the fixed income universe and a global recession beginning to unfold.
Our survey found that achieving investment income was by far and away our users’ biggest financial concern – unsurprisingly in light of the widespread dividend cuts seen across the fixed income universe and a global recession looming
Your portfolio strategy may need significant revision if you are nearing retirement. It may also pay to have some cash flow modelling carried out to ensure that your plans are still feasible. Remember, the earlier you take action the more efficacious it will be.
Importantly, a quarter of HNWIs told us the crisis has exposed flaws in how they or others have assessed their risk-profile. How long you have to recover from any losses is a key concern. It is always worthwhile getting an expert second opinion, which we can arrange fast and free.
2. Can you hack a big hike in CGT?
Astronomical levels of public debt have made many see a tax raid as inevitable, despite the benevolence of the Summer Economic Update.
Chancellor Rishi Sunak’s recent request that the Office of Tax Simplification review the Capital Gains Tax (CGT) rules, specifically questioned how the tax is levied relative to others like income. Many saw this as a signal that the Government is targeting aligning the two, meaning CGT could hit 40% for higher-rate taxpayers and 45% for additional-rate taxpayers.
If you have significant CGT exposures (or expect to have them) it is well worth taking advice well ahead of any expected change
If you have significant CGT exposures (or expect to have them) it is well worth taking advice well ahead of any expected change. Tax mitigation is one of the key pillars of wealth management and planning when you realise gains on assets is crucial.
3. Relying on Main Residence Relief?
Although it is held to be to unlikely, there has been talk of changes to Main Residence Relief (MRR) that is alarming since most of us hold a substantial proportion of our wealth in our main property. MRR is among the most important and substantial reliefs, shielding homeowners from tax when selling their main home (CGT is currently charged at 28pc for residential property that is not a primary home for higher-rate taxpayers).
Such a move would inevitably jam up the property market, critics say, and some predict the introduction of a new lifetime allowance for MRR rather than the abolition of the 0% rate for main residences.
If you have a significant property transaction in mind, like downsizing, consider organising a contingency planning session with an expert in tax planning. Optimising the timing of a home move could save you thousands
Either could count as a game-changer for High Net Worth Individuals. If you have a significant property transaction in mind, like downsizing, consider organising a contingency planning session with an expert in tax planning. Optimising the timing of a home move could save you thousands.
Top Tip
It is good practice to periodically review both your wealth management plan and your wealth manager to ensure that all your objectives are aligned. The events of 2020 mean that many people will now need to revise their roadmap urgently. Why not let us arrange a no-obligation introductory conversation with an expert to get the ball rolling?
Lee Goggin
Co-Founder
4. Should you take advantage of the SDLT holiday?
The Stamp Duty Land Tax threshold has been raised from £125,000 to £500,000 until the end of March 2021, in a move that the Centre for Economics and Business Research expects to lead to an additional 41,000 in new transactions over the period and 60,000 transactions being brought forward.
It estimates the SDLT discount will take £4,400 off of the average transaction. With that or potentially more on the table in savings there certainly might be merit in bringing a planned purchase forward, although there are a web of other considerations to be weighed. The tax holiday has fanned the flames of a house-buying frenzy and prices have been pushed up in greener areas. Talking things through with an adviser will help you see whether it is more cost-effective to wait for prices to come back down.
5. Grace period to end for those with second homes?
Those with more than one property need to also bear in mind that experts believe the nine-month tax-free period that can be utilised between buying a second home and selling your main residence could come to an end, forcing instead immediate sales.
Although less headline-grabbing, this change to the regime could have a very significant impact on how people had planned to execute moves. It also promises to be complex in application as CGT will be pro-rated in line with lost MRR.
6. Do you want more focus on ESG?
Various research has highlighted how ESG (environmental, social and governance) investments both held up well during the crisis and are recovering well, and surveys continue to confirm growing interest in responsible investing.
In fact, a growing group of investors insist on ESG driving portfolio construction; according to the deVere Group, 56% of clients who seek to include ESG-orientated investments into their portfolios do so in the belief that they are safe havens in troubled times. Yet according to the Investment Association just 6% of funds available can be classed as ESG, illustrating how vital professional assistance is in when seriously pursuing these aims.
According to the Investment Association just 6% of funds available can be classed as ESG, illustrating how vital professional assistance is in when seriously pursuing these aims
All the leading firms on the findaWEALTHMANAGER.com panel are adept at reflecting investors’ values in their portfolios, so why not talk to some experts about how you can do well at the same time as doing some good with your capital.
Take the chance to get ahead
It remains to be seen which of these speculated tax changes will actually come to pass, although it seems unavoidable that the status quo must change. Tax planning is one of the key pillars of wealth management and using the summer as an opportunity to strategise with an expert for various scenarios could be a very wise move.
The same is true of ensuring your investment strategy remains fit for purpose. Future-proofing so you can be confident of achieving your goals needs to be the order of the day. This might not be the summer many of us had hoped for, but we should get as many positives out of it as we can. For lots of people, that means getting proactive in neglected areas of “life admin”.
The leading wealth managers on our panel can tackle the whole spectrum of investment and financial planning challenges to save you serious money (and time). Talk to our expert team to learn more about what your options could be.
