The Spring Budget’s reduction of CGT on selling second properties seems to be pushing many landlords closer to divesting already, as wealthy individuals also ponder strategies for saving on IHT and private school fees.
Results already from the CGT reduction on residential property
For High Net Worth Individuals, one of the headlines from the Spring Budget delivered by Chancellor Jeremy Hunt on 6 March is that the Capital Gains Tax rate on residential property is to be cut from 28% to 24% from April 2024. We are already hearing from buy-to-let property investors who have taken this as a signal that they should perhaps deploy their capital elsewhere now.
It is no secret that being a landlord has become less appealing over recent years, due to increased red tape and enhanced tenants’ rights, leading many to reconsider letting as an income strategy. Now, those who were previously put off by punitive tax charges when selling properties which aren’t a main residence are being given a final push, it would seem.
It is no secret that being a landlord has become less appealing over recent years, due to increased red tape and enhanced tenants’ rights, leading many to reconsider letting as an income strategy
At the same time, owners of properties used as holiday lets are going to have tax breaks removed as the government aims to get the property market moving and reduce housing shortages in areas popular for vacations.
While renting out property has been a time-honoured path for income-seekers with significant cash to invest, we predict many more people will be exploring other options with wealth managers now. Even if your appetite for risk (and investment service costs) is modest, a well-designed investment portfolio could be just the income solution you need. The wealth management firms on our panel are adept at devising customised solutions that draw on low-cost options like Exchange-Traded Funds. Why not have a selection of leading providers model how such a portfolio could perform for you? Just complete our short questionnaire and we will do the rest.
Taking AIM at tax-savings
As the end of the 2023/24 tax year approaches, we’re receiving a noticeably higher proportion of enquiries focusing on how to execute tax-efficient investments for the next period. They are taking AIM at tax savings alongside investment returns, one might say, as the junior market’s attractions continue to grow.
These conversations continue a trend where individuals are looking at all their options to tackle IHT concerns: last month, we reported that Inheritance Tax (IHT) uncertainty is registering as a real worry for our users as this much hated levy continues to be used as a political football between the incumbent Conservative party and the Labour opposition.
This comes as research indicates that great swathes – and according to some research as many as 90% of – advisers plan to increase their clients’ exposure to the Alternative Investment Marketi this year. The IHT savings AIM investments can deliver are clearly a big driver. It is estimated that IHT will soon raise £10bn annually for the government annually and the IHT paid on gifts has soared over 150% since 2011 to reach £256mn in the 2020-21 tax yearii. No wonder solutions are being urgently sought.
Qualifying AIM shares are considered business property and if held for two years become eligible for 100% IHT Business Relief, effectively falling out the IHT net. It’s not all about IHT savings, however, as there are myriad Capital Gains and Income Tax savings also on offer through investments in growth companies, such as through the Enterprise Investment Scheme
Qualifying AIM shares are considered business property and if held for two years become eligible for 100% IHT Business Relief, effectively falling out the IHT net. It’s not all about IHT savings, however, as there are myriad Capital Gains and Income Tax savings also on offer through investments in growth companies, such as through the Enterprise Investment Scheme. Then there are the returns prospects too of course. As just one vote of confidence, an overwhelming 94% of professional investors believe that small and medium-sized enterprises (SMEs) are going to be integral to the UK’s economic growth going forwardiii .
It is vital that you execute tax-efficient investments correctly however, and this is one area where professional advice is essential. Let us know if this is of interest to you.
i Time Investments
ii The Times
iii Time Investments
Top Tip
Lee Goggin
Co-Founder
Parents are doing the maths on school fee savings
Some seem to regard a Labour victory as being nailed on for the forthcoming General Election and with that a new era in which parents must pay VAT on private school fees. In anticipation of such a move, we’ve increasingly been speaking to parents looking for intelligent financial planning solutions to help keep the bills down.
One strategy being highlighted by both the financial press and schools themselves is the option of paying upfront for school fees. This already gave parents a substantial discount as the schools invest the money, but with the chance to avoid the VAT trap in addition we predict a flurry of savvy families with spare funds to take this route to long-term savings. It is estimated that a child’s education could cost as much as £60,000 less this way.
Planning for education fees that are likely to hit £300,000 or more per child – and that’s without equipment, trips and so on – is a weighty task for even quite wealthy families. Luckily, this is an area in which wealth managers have a huge amount of experience and expertise
Families should also not forget that paying for school fees can be an excellent way for grandparents or other relatives to pass wealth down the generations, and there can be significant tax savings to be had here also.
Planning for education fees that are likely to hit £300,000 or more per child – and that’s without equipment, trips and so on – is a weighty task for even quite wealthy families. Luckily, this is an area in which wealth managers have a huge amount of experience and expertise.
Make a truly informed choice
As out Client Trends confirms, there is a lot on investors’ minds at present but really, effective wealth management is always about able to snap multiple lenses on when looking at your financial situation to pull together portfolio management and tax planning in a unified way. There is a reason that people choose to delegate this complex task to a professional advisor backed with institutional grade research and interdisciplinary expertise via their wider team.
Save yourself time – and stress – by joining the thousands of individuals who have found their ideal wealth manager match through us.
Important information
The investment strategy and financial planning explanations of this piece are for informational purposes only, may represent only one view, and are not intended in any way as financial or investment advice. Any comment on specific securities should not be interpreted as investment research or advice, solicitation or recommendations to buy or sell a particular security.
We always advise consultation with a professional before making any investment and financial planning decisions.
Always remember that investing involves risk and the value of investments may fall as well as rise. Past performance should not be seen as a guarantee of future returns.
