Issue 68 - New Year - New Opportunities

As we’re approaching the end of January already, it seems a little late to wish you a Happy New Year, but as this is the first News Letter of 2023, I will take the opportunity to do so.

Although this News Letter will focus on ABC and some considerations that UK tax resident clients should be thinking as we approach the tax year end, I did want to make a few comments about investment markets.

As we know, 2022 turned into an extremely challenging year for markets and investment management in general.  There were many factors driving uncertainties in markets, not the least of which being the war in Ukraine and the potential for runaway inflation during the year.  Whilst the former shows no signs of abating as yet, at least we’re seeing inflation numbers starting to reduce.  Of course, that doesn’t mean that costs are going down, but simply they are going up at a slower rate and the expectation is that this decline will continue during the current year and should be significantly lower by the end of the year.

This in turn, should take the pressure off Central Banks and we’re likely to see some easing of the interest rate policy, with some commentators forecasting that rates will start to fall in the US by the end of the year and probably elsewhere shortly thereafter.

As we know, markets tend to look ahead 6 – 9 months and therefore, during January, we’ve already seen positive movements across all major markets and whilst it’s too soon to say that we are out of the woods, it is nonetheless encouraging to see some positive regaining of values and we will continue to watch this going forwards.

News from ABC

As you may recall from earlier correspondence, rather than sending Christmas cards again in 2022, we chose to make charitable donations of £200 each to Demelza House and Chestnut Tree House and we’ve had rather a nice acknowledgement from both organisations to thank us for our small contributions.

Chris (Alexander) as some of you will know, used to work for the Kent, Surrey and Sussex Air Ambulance and was closely involved with their fund raising and other activities.  From her experience, although she knows that funding is one of the most important factors for any charity, what is less known is that giving time to a charity is almost as valuable to them.

With the staff at ABC, we aim to have two main social functions a year, one being a Christmas party and the other being a mid-summer celebration, which is an opportunity for all the staff to get together.  In the intervening months, we are also aiming to have some other group activities and Chris suggested to the staff earlier this month that we might think about offering our time for 1 day each to the two charities we have supported, and the suggestion was almost unanimously taken up and we are now liaising with those charities to see how we could dedicate some time to them.  We understand this might range from helping in the garden through managing some events or coordinating collections, which is a good opportunity for us to have a team event whilst helping others – I will let you know what involvement we have and how that goes in later News Letters.

I also thought it might be useful to introduce you to the team by including our organisation chart, so that you can see who everybody is and where they fit in to the organisation.  Some people you will already know and going forwards, there are other people that you may well have contact with in due course.

We are trying to fully integrate the teams across the various groups of clients within the firm, so that we maintain continuity and personal contact.  If you phone the office now, you will be greeted with a short menu of options, but there are only 3 to direct you to either the private client team, the corporate client team or for any other enquiries.  You will not be faced with a whole menu of options thereafter and you will get straight through to a person to speak to.

We are always mindful of looking for new ideas or ways that we might improve the services that we provide or the relationship that we enjoy with clients and therefore, if you have any suggestions, we’d be very pleased to hear from you.

Similarly, as the integration of the business is now well underway, we find that we have some capacity and whilst we’re not looking to go ‘empire building’, we have room to take on some additional clients.  We are very fortunate that the majority of our clients come to us by way of referral and hopefully, this reflects the services that we are providing and going forwards, we would be very pleased to receive any further introductions.

UK Tax Year End 5^th April 2023 – Considerations

Some of the recipients of this News Letter are overseas clients and therefore, I’m sorry to say the next section will not be relevant to you, but it might raise some questions that we could help with anyway as they relate to you.

As we know, the political scene in the UK turned into somewhat of a pantomime last autumn, with changes of Prime Minister and Chancellor of the Exchequer happening in quick succession.  Having rocked the markets, things seem to have stabilised, with Jeremy Hunt, as the latest Chancellor, who has taken a much more rigorous approach to balancing the books and we know that there are a number of tax changes that were announced in the Autumn Statement, which will have an impact going forwards and could affect future financial planning strategies.

It's not my intention to turn this into a boring review of all the tax changes, but I am highlighting in bullet points key changes and things to consider as a consequence and with the tax year end approaching, which I hope that you will find useful.

• The Capital Gains Tax allowance, which currently stands at £12,300, is being reduced with effect from 6^th April 2023 to £6,000 and that will then be halved to £3,000 in April 2024.  It is important therefore, if appropriate to you, to ensure that you use this year’s allowance as far as possible and given recent markets, if you have an investment that has made a loss, if you crystalise that loss, you are able to carry that loss  forward to offset against future gains.
• For Trusts, the annual exempt allowance from Capital Gains Tax is being reduced from £6,150 to £3,000 in April and then reducing next year to £1,500.
• The dividend allowance, which currently enables you to earn up to £2,000 per annum by way of dividends, is being reduced in April by 50% to £1,000, which might need looking at if you rely on high dividend yielding investments.
• The threshold for higher rate taxpayers paying at 45% is reducing from £150,000 to £125,140.

I appreciate that some of these changes will not affect you, but these are the key points and probably the Capital Gains Tax and dividend allowances are the ones most noteworthy.

• Other considerations as we approach the tax year end are ISA contributions, with a maximum allowance of £20,000 per annum and this is on a ‘use it or lose it’ basis, so if you’ve not made a maximum ISA contribution this year, you might consider doing so before the year end.
• Pension Contributions could be worth considering, as they will attract Income Tax relief at your highest marginal rate and in certain circumstances, you may be able to use unused allowances from previous years – may be worth considering.
• If gifting is something that is important to you, then the Inheritance Tax rules enable individuals to gift £3,000 each and if you’ve not used last year’s allowance, you’re able to carry this forward as well.  Once again, this is tax year sensitive.

If you would like further information on any of these subjects or how they might affect you, then do get in touch to let us know.

As always, if you have any questions or if there are areas where we can assist, we would be pleased to hear from you and going forwards, I’m going to try to encourage other members of the team to make contributions to the News Letter, so you may well be hearing some different views and seeing some different styles included.

As always, stay safe!

Best wishes from all at ABC