The latest stories in the news for January 2018, which may be of interest to our clients.
HMRC bans personal credit card payments
As HMRC will no-longer be able to pass on the cost of card handling fees, payment of tax bills by personal credit card will no-longer be permitted. The ban comes into force from 13th January, though debit cards and corporate credit cards are still allowed. This has caused some consternation among the 0.8% (454,000) of taxpayers, who prefer to spread their tax bill using a personal credit card, as HMRC only sent written warnings with tax bill reminders in December.
Investing in 2018: Europe and Emerging Markets
Most industry experts and commentators anticipate a year full of opportunity for investors even if sterling strength reduces Brits’ global returns a touch. Though fears simmer in relation to high price/earnings ratios, markets reaching new highs and minimalistic volatility most asset managers expect Europe to produce the highest returns this year. Emerging markets (which delivered some of the highest returns in 2017) are also earmarked as a promising area as American markets have lost some of their appeal.
What MIFIDii means for you
Despite Brexit, an EU directive will come into force this month that is designed to increase transparency and reduce costs for investors. Meet MIFIDii (not Miffy!) the snappily entitled Markets in Markets in Financial Instruments Directive. MiFID II’s overarching remit is greater investor protection which it will achieve by targeting the processes of asset managers, banks, brokers and exchanges. It touches on investment advice, how products are sold and regulated, as well as information and costs. In simple terms, this means greater transparency over the way funds are sold and a downward push on costs for retail investors.
Crypto currencies: craze, phase or stays?
The world’s most famous cryptocurrency smashed an array of price records in 2017, taking the flight of Bitcoin to a stratospheric level with its price rising by more than 1,400pc. Against the clamour The Telegraph takes a look at the top ten performing cryptocurrencies – 6 of which have experienced higher growth levels than their more famous, though flawed, forerunner Bitcoin in 2017. It is these flaws (in particular the high transaction fees and resource required to make sure payments are made quickly) later rivals are aiming to iron out. The article takes a closer look at two cryptocurrencies analysts believe are worth watching this year: Iota ($9.5bn) and Cardano ($10bn).
Next generation advice
Prophesies that robots would soon take over the world of financial advice have proven ill founded. According to consumer site Boring Money, robo advisers accounted for less than 1 per cent of the UK’s £192bn non-advised online investment market at the end of the third quarter of 2017. What’s held back take-up? Well it seems that algorithms to deliver low-cost automated services to the masses aren’t quite enough. In matters of money management, people still want some level of human interaction which is leading to a new breed of “robos” who are morphing their business models to provide over-the-phone and face-to-face advisory services. Less DIY, more DIWM (Do it with me).
UK Economy in fair health
There is some good news among Brexit gloom (or at least fatigue) as latest data indicates the UK economy accelerated faster in the fourth quarter of 2017 than had been forecast. This is largely thanks to a motoring services sector that posted better-than-expected performance last month. The IHS Markit/CIPS services purchasing managers’ index (PMI) showed a reading of 54.2 in December, up from 53.8 in November, with economists pencilling in a figure of 54. A reading above 50 indicates growth
House price growth slow but not dead
UK house price growth increased 2.6% last year, confounding doom-mongers who prophesied a slump in the wake of Brexit. Yes growth has slowed, with the 1.9 percent drop in increase between 2016 – 2017 in part due to the rising pressure on household incomes… but growth is growth. Of interest, the Times highlights that a notable exception is London where prices fell for the first time in eight years, according to Nationwide.
Many people could be in for a shock when they check their pay packet in April 2018. That’s because a bigger slice of their pay automatically diverted to a savings pot for their pension. Automatic enrolment went live in 2012 and but the total minimum amount paid in is currently just 2% of qualifying earnings. However, on 6 April this will rise to 5% – typically 2.4% from the worker, 2% from their employer and 0.6% in tax relief. The Mail asks could this be enough to tip people out of inertia an trigger an increase in opt-outs?
Open banking – the end of traditional banking?
Open banking is just around the corner. From January 13, Britain’s nine largest banks and one building society will be required to make customer account data available to approved rivals. A secure set of online technologies will essentially allow bank customers to authorise third parties to access their account details. The bold vision is that the new regime will loosen monopolistic grips, even up the playing field and, in particular, present a significant opportunity for challenger banks and fintech (financial technology) businesses who will be able to compete on a more-or-less level playing field. Interestingly five banks have admitted they will not be ready for the deadline.
The good news for those dealing with inheritance tax is the (from April) increase on the ‘main residence nil-rate band’ – the amount you can receive before tax from the property that was the deceased’s main residence. The amount will rise from £100,000 to £125,000 per person – giving individuals £450,000 and couples £900,000 tax-free inheritance. This at the time the Times highlights that HMRC last year increased their inheritance tax take by nearly 15 per cent. Against the backdrop of a much more aggressive approach towards tackling avoidance experts underline doing the simple things will be key.
Crowd based capitalism
The term “crowd-based capitalism” is a catch all to describe what is also known as the sharing economy, gig economy, on-demand economy, collaborative economy, renting economy, or peer economy. The Independent looks at how the sharing economy is taking underutilised assets and making them accessible online to a community, leading to a reduced need for ownership of those assets. These platforms (think Uber, AirBnB et al) are redefining the way consumers find, use, and pay for services, as well as how they engage with, assess and award service providers.
Brexit: no buyer’s remorse
There was a theory (snobbish and a bit nasty though it possibly was) that those who had voted to leave the EU would quickly regret what they had done as the Treasury mooted economic apocalypse came swiftly to pass. The hypothesis followed that most Brexit voters would soon be clamouring for the chance to think again. For buyers remorse strategy to have worked, the economy would have had to contract sharply and for unemployment to rocket – something equivalent to 2009 and something that has evidently not happened.
The end of rip-off charges?
While companies and service providers can no-longer charge customers for using a credit or debit card there are a range of unintended consequences that highlights the tendency towards ‘sound-bite-grabbing’ politics. Yes so-called rip-off charges may now be outlawed but one immediate effect of the new law is that it is no longer possible to pay your tax bill online direct to HMRC. Many retailers, especially the large ones, will of course simply find other ways of passing the costs on.
Cash Isas have been a popular go-to savings account for people who are looking to take advantage of their tax-free allowance, but since the Bank of England cut interest rates to 0.5 per cent in March 2009 cash Isa rates and savings rates generally have dwindled. With a historic low of 0.93 per cent returns, Cash Isas experienced their worst year on record in 2017, with average returns at In contrast, the average stocks and shares Isa returned 11.75 per cent. Until either the personal savings allowance is withdrawn or challenger banks shake things up don’t expect much to change.
Income Investing for 2018
Real interest rates globally are hovering around historic lows and although the Bank of England has for the first time in a decade moved interest rates up by 25 basis points, the underlying economic fundamentals indicate that this hike is likely to be a one-off and that rates are expected to remain well below historic norms for the foreseeable future. Against this backdrop The Telegraph looks at the options to achieve meaningful returns without unduly compromising levels of risk within a portfolio. Key Sectors to look at for dividend growth this year are: mining, banking, insurance, oils and gas, tobacco, utilities, consumer staples and pharmaceuticals.
House prices to flatline
While house price growth stayed positive last year (despite the negative mood music) the harbingers of doom (experts) believe that won’t be repeated in 2018, as the twin spectres of Brexit and rising interest rates put the brakes on the property market. Most are warning homeowners to prepare for an underwhelming and subdued 2018, with a number of leading commentators predicting UK house prices will either stay flat or perhaps rise by 1% or so. The FT points out that if growth stays below inflation for the next three years house prices will, though, will revert to their historical averages… which might not be a terrible thing.
Over 65s drive UK spending
U.K. household spending — excluding mortgage payments — rose to £554.20 pounds per week in 2017, climbing back to pre-crisis levels of more than a decade ago for the first time, according to a report by the Office for National Statistics – that’s an increase from £533 the previous year. Transport accounted for the biggest proportion of expenditure at £79, more than housing and recreation. Both transport and recreation rose by more than £5 a week each. Of note, 65-74 year olds spent more than double than under 30’s on culture and recreation (a fifth of their disposable income).
Tax rise for under 50s on the horizon?
The Government Actuary’s Department (GAD) said the state pension fund, which is funded by national insurance contributions is under considerable strain due to Britain’s ageing population.
The GAD believes that “class 1” contributions from employers and workers need to rise from the current 22 per cent to 27 per cent by 2035. This would result in national insurance contributions from these groups raising from £90billion to about £113billion.
Pension-led funding for small businesses
Despite the relatively benign economic impact to date the impact of Britain’s decision to leave the EU has had a big impact on uncertainty among businesses. Add that to a mix of higher costs, weak domestic growth and lacklustre consumer demand and it’s clear that optimism has been dampened among British small businesses – the Federation of Small Businesses said confidence among members fell to four year low of -2.5 in the last quarter of 2017. Against this backdrop the Mail explores how personal pensions could help fund small businesses by an injection of capital. Pension-led funding and it is an option available to business bosses who have either a self-invested personal pension (Sipp) or a small self-administered scheme valued above £50,000.
An antidote to Blue Monday
AS the Christmas becomes a distant memory, and we peak at the festive bills (and the festive bulge) some bright sparks have dubbed the 15th January ‘Blue Monday’ where a series of forces coalesce to make us all feel incredibly sad. The FT provides an antidote in the form of some useful money saving tips to combat the woe if you’re looking at a holiday, namely 1) clearing your cookies that holidays and travel companies used to raise the price 2) Never buy an excess waiver from a car hire company 3) make sure you book your travel insurance to start the day you buy your holiday.
Sterling in 2018
The Euro is unlikely to post large gains versus the British Pound in 2018 according to experts as they set out their forecasts for coming months. There is certainly a more constructive tone to forecasts for the Pound at the start of 2018 when compared to the same time – Its revival, currency analysts say, reflecting growing optimism in the markets about a “soft” Brexit. The Times point out though that Sterling remains vulnerable in this environment and that the rollercoaster has a long way to go.
Bitcoin bites would-be property owners
Many younger investors who have enjoyed a whopping windfall on Bitcoin have been trying to channel their new-found fortune into UK property having converted their profits to Sterling. However, mortgage lender and brokers have been turning would-be investors away for fear of breaching ant-money laundering regulations. The trouble has come from satisfying the challenge of tracing the source of the money. This is, of course, where the advantage of cryptocurrency not being regulated by a central bank, becomes rather more a hindrance.
Tax rise in insurance products
The removal of capital gains tax indexation allowance (for Insurers) doesn’t sound like anything to worry about, unless you are on the board of an insurer. But policyholders may stand to be left, indirectly, with lower returns as insurers complain of what they are calling a £250 million annual stealth tax.
The paradise payers raised more questions than than answers but one certainty, as reported by the Guardian is the sheer volume of tax-avoidance schemes (particularly those including creating offshore accounts in tax-free countries) are being offered to the wealthy like never before. Tax avoidance has never been more commoditised and commentators have highlighted some (pre-panama / paradise) emboldened intermediaries offering packages like packaged holidays.
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