Category

Financial Planning

A short guide to Lasting Power of Attorney

By | Financial Planning

What is a Lasting Power of Attorney? In short, it’s a very useful and powerful legal document which specifies to whom you give authority to act on your behalf, should you become “incapacitated”. This refers to events which affect your physical and mental wellbeing, removing your ability to manage your personal affairs effectively and independently. As such, a LPA document comes into effect during your lifetime – not at the end of it, like a will does (which is a separate legal document). Below, our financial planning team at WMM explains how LPA works, the different types and how it can play a key role in your financial plan.

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A short guide to better money management

By | Financial Planning

You have your monthly spending and bills. Birthday and Christmas gifts. One-off, unexpected costs (e.g. a broken boiler). Pension contributions. Holidays. Rare, big purchases like a new car. Savings and investments. The list goes on. Money management is difficult, to say the least. Yet doing it well is certainly possible. Here at WMM, in light of the financial hardships many people have experienced with COVID-19, we wanted to offer this 2021 guide below.

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March 2021 Budget & preparing your financial plan

By | Financial Planning

The March 2021 Budget took many people by surprise. Several pundits had expected a sweep of tax rises to help pay down the public debt caused by COVID-19 (e.g. rises in fuel duty and Capital Gains Tax). Yet the only clear tax rise concerns Corporation Tax, which we will examine in more detail below. Although it may appear that little has changed in this Budget, there are still important aspects to consider for your financial planning in 2021. We address some of the highlights below.

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The tax efficiency of a well written will

By | Financial Planning

Many people think that a will’s main purpose is to ensure that your possessions go to the right people upon your death. This is partly right, but a will also holds immense power to help reduce a future inheritance tax (IHT) bill if you plan it carefully. In 2019-20, the UK government collected £5.13bn in IHT receipts – much of which was needlessly paid. How, then, can you ensure that you keep as much as your hard-earned wealth as possible within the family?

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How to avoid a disjointed financial plan

By | Financial Planning

Many people in the UK have a tendency to deal with isolated areas of their financial plan, in a reactive way. For instance, suppose a couple in their mid-30s suddenly has their first child. At this point, they may quickly realise that they need a life insurance policy (e.g. to pay off the mortgage). Yet this reactive approach may not come at the best timing. In 2020, for instance, the COVID-19 pandemic has led many insurers to restrict their products and even raise prices.

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Little-known tax tips to consider in Autumn 2020

By | Financial Planning

This content is for information and inspiration purposes only. It should not be taken as financial or investment advice. To receive personalised, regulated financial advice regarding your affairs please consult us here at WMM (financial planning in Oxford).

Chancellor Rishi Sunak was expected to deliver a new Budget in the Autumn, yet this has now been officially called off. Many pundits were speculating a large tax raid – especially upon higher earners – in an attempt to start balancing the books in light of large coronavirus spending earlier in the year. It’s important to note the significance of this delay. Holding a budget in the autumn allows civil servants, accountants and the wider public time to implement large changes to the UK tax regime before the end of the financial year in April.

As such, a budget in the spring of 2020 could leave many people with insufficient time to make adjustments to their financial plan (to optimise their tax position). In light of this, our financial planning team here at WMM in Oxford wish to stress the importance of taking advantage of the existing rules to put your wealth and finances in the best position. Below, we offer some ideas on how to do that for you to discuss with your financial planner.

 

Plan your estate carefully

There are many misconceptions about inheritance tax (IHT) – which is understandable, since it’s such a complex area. One myth that’s important to bust straight away is the idea that IHT is only payable when you die. Bear in mind that transfers into a trust can also incur a 20% charge when above the available nil rate band. Moreover, be careful not to assume that shares on alternative investments (AIM shares) are exempt from IHT. Check these areas with your financial adviser.

Regarding gifts, the “7-year-rule” is currently still in place during the 2020-21 year. Some are suggesting that this rule could be axed in the coming months (which is possible). Yet it’s crucial to not simply make a gift now in an attempt to leverage the rule before it possibly changes. Bear in mind that taper relief applies on gifts applies at 20% after three years. Unless the gift exceeds your nil rate band (i.e. £325,000) it is unlikely that you will save any IHT.

Also, be careful with ISAs (individual savings accounts). Unlike pensions, these are not exempt from IHT. Assets outside of the UK can also be subject to IHT!  Finally, make sure your executors are aware of some of the nuanced IHT rules which might catch you both out. For instance, your unused nil rate band is not automatically transferred to your spouse/civil partner. Rather, this must be claimed by your executors using the relevant forms. Also, remember that executors are personally liable to pay IHT. As such, it’s crucial to make sure they have access to the funds they need to do this in the future.

 

Other thoughts

A number of measures introduced by the UK government earlier in 2020 are set to expire at some point soon. The Stamp Duty holiday, for example, is currently set to conclude in March 2021. Many landlords with Buy To Let properties are thinking about taking advantage of this window, but should remember that CGT has to be paid much earlier now on residential property sales.

Finally, investors with property investments should consider ways to optimise their tax position in the coming months. For instance, it might make sense to transfer ownership of a property to a spouse/civil partner so that rental income is charged at their lower, marginal rate of tax. Bear in mind that property transfers in 2020 can still be done between members of such couples without a tax charge. This is a decision with important implications, however, so seek advice first.

 

Invitation

Interested in finding out how we can optimise your financial plan? Get in touch today to arrange a free, no-commitment consultation with a member of our team here at WMM.

You can call us on 01869 331469

 

Capital gains tax: a 2020 update

By | Financial Planning

A review of capital gains tax (CGT) was ordered by the Chancellor in July 2020. Many believe that an increase could be on the horizon as the government seeks to plug the hole in the public finances – which has widening following the COVID-19 lockdown and generous policies such as the recent stamp duty holiday and VAT cut. In this article, our Oxford-based financial planning team here at WMM offer a brief recap on how CGT works in 2020-21, and what possibilities may be in store for the system in coming months.

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Why business protection could be crucial in 2020

By | Financial Planning

This content is for information and inspiration purposes only. It should not be taken as financial or investment advice. To receive personalised, regulated financial advice regarding your affairs please consult us here at WMM (financial planning in Oxford).

Since March 2020 many businesses across the UK have struggled with staffing, revenue and customer engagement. The COVID-19 pandemic has forced many organisations to completely change strategy – perhaps even moving from “growth mode” to “survival mode”. Given the high stakes involved (e.g. lost jobs, suppliers and closure) it’s crucial for business owners to ensure that their interests enjoy maximum protection in 2020 and going into 2021.

Here at WMM, our Oxford-based financial planning team offers this short guide on business protection in 2020 – hopefully providing some ideas and inspiration about how to take your own business protection to the next level.

 

Key Man cover

One of the most important types of protection which all business types need to consider is Key Man Protection (or Key Person Protection). In simple terms, this is a policy which pays out a specific lump sum if a designated “key person” in your organisation dies. This could be the owner of the business or other crucial employee such as a senior sales person, chief technical officer or other vital staff member who you cannot afford to lose.

There are two main types of Key Person Protection to consider with your financial planner:

  • Life Cover / Critical Illness Cover (CIC). This provides financial assistance should a key person become diagnosed with a certain illness or condition such as cancer, a stroke or heart attack. Cover such as this is often “bolted onto” the second type, below.
  • Life insurance. The type of insurance described above – it pays a lump sum if the person covered by the policy dies or is diagnosed as terminally ill.

 

Share protection

For limited companies with shareholders, the sudden unexpected loss of a key shareholder can cause big issues. Not only can there be emotional trauma after a close friend has suddenly left your presence, there can also be disputes over how to continue the company. If no appropriate shareholder protection is in place, after all, then the shares of the deceased automatically go to their estate. This typically puts their ownership into the hands of family members – who may have little/no experience or interest in taking over their management. In worst case situations, this can even lead to family members engaging in disruptive behaviour over how to take your business forwards. This is not something you want in the best of times – let alone in a pandemic.

 

Do I need either option for my business?

It would be tempting for a financial adviser to simply recommend that a business owner just takes out both of the above types of protection. Yet it’s important to weigh up each option with an experienced professional. Sole traders, for instance, will not require the second type – since you do not have any shareholders!

Key Person Protection, however, is likely a much more serious consideration for all types of business. One study suggested that 52% of UK businesses would likely collapse within 12 months if they suddenly lost a key person in their organisation. With the increased financial constraints in 2020 brought about by COVID-19 and the subsequent lockdown, it is likely that the danger is now even more pronounced.

Finding the right kind of cover, however, is not always easy and the best deals are not always clear – especially since many providers have increased their premiums since March 2020. Here at WMM, our team can assist you in identifying a suitable set of candidate policies which may be most suitable for your business needs.

 

Conclusion & invitation

Are you a business owner in Oxford looking to increase your protection? Get in touch today to arrange a free, no-commitment consultation with a member of our team here at WMM.

You can call us on 01869 331469

 

Why & how to hold cash during a crisis

By | Financial Planning

Many people are aware that having a decent cash reserve is important during the best of times, let alone during periods of financial volatility. According to some research, about 25m people in the UK (i.e. nearly 50% of the population) live each month “paycheque to paycheque”, leaving them very vulnerable to a sudden outlay of money. An unexpected boiler replacement, for instance, could plunge a household to thousands of pounds of debt without a sufficient “cash cushion”.

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6 financial plannings areas to review at summer

By | Financial Planning

The slower pace of life during the summertime can be a great opportunity to review your financial plan. Here at WMM, our Oxford-based financial planning team suggest 6 important areas which you may want to look over – especially if you are tempted to spend more money on a lavish holiday overseas following the months of lockdown we’ve all experienced!

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