A key part of your estate plan is setting out how you’d like to pass on assets to loved ones. There’s more than one option to consider, so read on to find out more.

Your estate plan should consider how you’ll use your assets during your life and what you’d like to happen to them when you pass away. Last month, we explained what you may need to consider when taking stock of your estate and how the value of your assets may change during your lifetime. This is an important step to understanding your estate and who you’d like to benefit from it.

Now, read on to find out your options when you want to pass on assets.

3 useful options to consider when passing on wealth

1. Leave an inheritance through a will

A will is a common way to leave assets to loved ones when you pass away. It’s a legal document where you set out exactly how you’d like assets to be distributed.

There are several different ways you can pass on assets through your will. For instance, you may leave a proportion of your estate to each beneficiary, or you may choose to name specific assets you’d like them to receive.

Even if your affairs are straightforward, you should still take the time to write a will. Without a will, your assets will be passed on according to intestacy rules, which may not reflect your wishes. Not having a will could also lead to delays in the probate process and conflict among beneficiaries.

2. Place assets in a trust

A trust can be a useful way to pass on wealth during your lifetime or when you pass away while retaining more control over the assets if you wish to.

A trustee that you choose will manage the assets placed in a trust on behalf of the beneficiary. You can set out how you want the trustee to use or distribute the assets.

You may create a trust for a child and state you want them to have the assets when they reach the age of 25. Or you can set up a trust to provide an income for loved ones without giving them control of the assets held in it. 

Trusts may be right for your estate plan if you want the assets to be used in a specific way, or you want to ensure they remain within the family, for example, to protect assets being lost in a divorce.

Trusts can be complex, and you may not be able to reverse the decisions you make. So, taking both financial and legal advice before you proceed can be useful and ensure the trust acts in the way you want.

In some cases, you can use a trust to reduce a potential Inheritance Tax (IHT) bill, as, provided it meets certain conditions, the assets placed in a trust are no longer yours. You may need to consider IHT if the total value of your estate exceeds the nil-rate band, which is £325,000 for the 2023/24 tax year.

3. Gift assets during your lifetime

While leaving an inheritance is the traditional way to pass on wealth, gifting during your lifetime could be beneficial too. Not only could you lend loved ones financial support during key moments in their life, but it also means you get to see the impact of your gift.

According to a report from the Institute for Fiscal Studies, around 5% of adults receive a substantial gift over a two-year period. This rises to around 30% among adults in their 20s and early 30s.

The research found gifts are most commonly received to mark milestones, such as purchasing a home or getting married, or in response to an unexpected life event, including being widowed.

When making gifts, it’s essential you consider your own long-term financial security; could gifting mean you have to adjust your lifestyle later in life or that you couldn’t weather a financial shock? Reviewing your financial resilience first means you can feel confident when gifting.

If your estate could exceed IHT thresholds, it’s important to note that some gifts could be included in your estate for IHT purposes for up to seven years. These are known as “potentially exempt transfers”.

Some gifts are immediately outside of your estate when calculating IHT, so if you’re thinking about gifting to reduce a tax bill, making use of these could be valuable. Please contact us to talk about gifting and IHT to create a plan that’s tailored to you.

Contact us to talk about your estate plan

When you’re deciding how to pass on wealth, there’s no right or wrong answer. Your circumstances and priorities play a key role in what makes sense for you. Please contact us if you have any questions about passing on wealth and creating an estate plan you can rely on.

Read our blog next month to learn more about IHT and the steps you could take to reduce a potential tax bill and leave more to your family.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The Financial Conduct Authority does not regulate tax planning or estate planning.

Do you have multiple pensions? It could make it difficult to manage your pension savings during your working life and when you retire. In some cases, consolidating them could be beneficial.

This guide explains what you need to know about transferring your pension savings, so you have fewer pots to manage. It could help you feel more in control of your retirement and, in some cases, reduce the amount you’re paying in fees.

However, there are reasons why consolidating your pension may not be right for you:

• You have a defined benefit pension
• Your pension has additional benefits
• You may need to pay an exit fee
• You could benefit from using “small pot” privileges.

Download “Your guide to pension consolidation: The pros and cons you need to know” now to read more about pension consolidation and understand if it could be the right decision for you.

If you have any questions about your pension or retirement, please get in touch.

Just six months ago, Kwasi Kwarteng stood up in the House of Commons and delivered his controversial “mini-Budget”.

The announcements ultimately brought down the short-lived Truss administration, with current chancellor, Jeremy Hunt, announcing a series of policy measures in November 2022 aimed at calming the markets.

Having taken “difficult decisions to deliver stability and sound money”, the chancellor has delivered the next part of his plan: “a Budget for growth”.

Read on to find out who were the winners and losers from the 2023 spring Budget.

Winners

Over-50s returning to work

In his speech, the chancellor said that “older people are the most skilled and experienced people we have”. So, he announced steps to make it easier for those over 50 to work for longer.

Firstly, the government announced an enhancement to the “midlife MOT” strategy – offering reviews to help individuals take stock of their finances and wellbeing to prepare for a more secure retirement.

Hunt also introduced a new kind of apprenticeship – called a “returnership” – aimed at over-50s who want to return to work.

The chancellor also announced some significant pension reforms aimed at encouraging more over-50s to remain in work, or to return to work. This brings us to…

Pension savers

The Lifetime Allowance (LTA) restricts the amount of tax-efficient pension savings an individual can accrue in their lifetime.

Having reached a peak in 2012, the LTA has been frozen at £1,073,100 since 2020.

To encourage people to remain in work, rather than retiring to avoid punitive tax charges for exceeding the lifetime limit, Hunt made the unexpected decision to abolish the LTA. The government will remove the LTA tax charge from April 2023, and completely abolish it in a future Finance Bill.

In addition, the Annual Allowance that restricts the amount that you can save tax-efficiently in any one year will also rise, from £40,000 to £60,000 in April 2023. You will also continue to be able to carry forward unused Annual Allowances from the three previous tax years.

Finally, many high earners are also affected by the Tapered Annual Allowance. The chancellor announced that the minimum Tapered Annual Allowance will increase from £4,000 to £10,000 from 6 April 2023.

In addition, the adjusted income threshold for the Tapered Annual Allowance will also be increased from £240,000 to £260,000 from the same date.

These are major steps that will allow pension savers to accumulate significantly more tax-efficient pension savings over their lifetime, and reduce some tax disincentives to work.

In addition, once an individual flexibly accesses their defined contribution pension savings, the total tax-relieved pension savings they can make each year is restricted to the level of the Money Purchase Annual Allowance (MPAA).

To support those who have left the labour market to return and supplement their income, or build up their retirement savings, the government will also increase the MPAA to £10,000 from April 2023.

Parents with young children

In what is likely to be a key battleground ahead of the next election, the chancellor announced an expansion of free childcare.

In an attempt to boost growth and get more people into work, working families will have access to 30 hours of free childcare each week for children aged between nine months and four years.

This is alongside boosts to subsidised childcare for parents on Universal Credit including upfront support.

Support will be phased in until every single eligible working parent of an under-five gets this support by September 2025.

Households with high energy bills

Back in November, Hunt announced that the government’s Energy Price Guarantee – an initiative of the Truss administration – would continue in its present guise until April 2023.

Under the guarantee, for six months from 1 October 2022, the average household has been paying energy bills equivalent to around £2,500 a year.

In April 2023, the guarantee was set to rise to £3,000, however the chancellor announced that the Energy Price Guarantee would be extended by a further three months.

This is designed to keep bills at £2,500 on average and the Treasury says this will save the average family £160 on top of the energy support measures already announced.

Drivers

With inflation remaining high, the chancellor argued that now is not the right time to uprate fuel duty with inflation, or increase the duty.

So, he announced a one-year extension of the 5p cut in fuel duty, saving the average driver £100 on top of the £100 saved so far since last year’s cut.

In addition, the chancellor announced an increase of £200 million to the “potholes fund”, taking the annual amount allocated to £700 million. The increase is expected to fix the equivalent of up to 4 million additional potholes across the country.

Swimmers

Hunt talked about the risk to swimming pools and other community facilities of rising costs.

In response, he announced a £63 million fund to keep public leisure centres and pools afloat.

Pubgoers

In a populist measure, Hunt announced his “Brexit pubs guarantee”.

While duty rates of all alcoholic products produced in, or imported into, the UK will increase in line with inflation, from 1 August, draught relief in pubs will be up to 11p lower than the relief for supermarkets. This is in addition to changes already due to come into effect in August.

As Hunt said: “British ale is warm but the duty on a pint is frozen.”

Losers

Businesses with larger profits

Back in 2021, when he was chancellor of the Exchequer, Rishi Sunak announced that Corporation Tax would rise in April 2023 for businesses making more than £250,000 in profits.

The Budget confirmed that this increase will proceed in April as planned – with around 10% of companies paying the top rate.

Companies with profits of less than £50,000 will continue to pay Corporation Tax at 19%.

However, businesses will be able to offset 100% of their UK investment in IT equipment, plant, and machinery against profits to reduce their tax bills. This is an effective cut to Corporation Tax of £9 billion a year, and the government aim to make the scheme permanent when it is responsible to do so.

Taxpayers

In his November statement, the chancellor reduced the Income Tax additional rate threshold from £150,000 to £125,140, increasing taxes for those on high incomes.

He also announced that Income tax, National Insurance, and Inheritance Tax (IHT) thresholds would be maintained at their current levels for a further two years, to April 2028.

Over the next five years, this is likely to see many people pay more Income Tax, as rising earnings push them into a higher tax bracket.

In addition, as house prices and asset values rise, it is likely that more and more estates will face an IHT bill over the next five years.

Savers

While it may now be possible to contribute more to your pension tax-efficiently, the subscription limits for tax-efficient ISAs were frozen at:

• £20,000 for an adult ISA
• £9,000 for a Junior ISA.

Smokers

In the Budget document, the Treasury confirmed that duty rates on all tobacco products will increase by RPI plus 2% from 6 pm on Budget day.

The rate on hand-rolling tobacco will increase by RPI plus 6% and the minimum excise tax will increase by RPI plus 3% this year.

Get in touch

If you have any questions about whether you are a winner or a loser from the spring Budget, and how it will affect you and your finances, please get in touch.

All information is from the spring Budget document and the government’s spring Budget bulletin.

The content of this spring Budget summary is intended for general information purposes only. The content should not be relied upon in its entirety and shall not be deemed to be or constitute advice. 

While we believe this interpretation to be correct, it cannot be guaranteed and we cannot accept any responsibility for any action taken or refrained from being taken as a result of the information contained within this summary. Please obtain professional advice before entering into or altering any new arrangement.  

On Wednesday 15 March 2023, chancellor Jeremy Hunt presented his spring Budget.

Focusing on the government’s aims to halve inflation, reduce public debt, and boost economic growth, Hunt delivered his first official Budget alongside the latest economic and fiscal outlook from the Office for Budget Responsibility (OBR).

“Despite continuing global instability, the OBR report today that inflation in the UK will fall from 10.7% in the final quarter of last year to 2.9% by the end of 2023.”

Hunt opened his speech by admitting that, in the autumn, the government “took difficult decisions to deliver stability and sound money”.

Today, he promised “a budget for growth”.

“Not just growth from emerging out of a downturn. But long-term, sustainable, healthy growth that pays for our NHS and schools, finds good jobs for young people, provides a safety net for older people […] all whilst making our country one of the most prosperous in the world.”

Here are the key points of the spring Budget, and what they might mean for you.

Encouraging early retirees back into work

Jeremy Hunt’s primary focus with his spring Budget is to encourage Britain back to work. Around 7 million working aged adults are classed as “economically inactive”. Of these, more than a million people have taken early retirement.  

To address this issue and to stop pension limits “from acting as a barrier to remaining in work”, the chancellor announced increases to pension allowances and abolished the Lifetime Allowance.

Pensions Lifetime Allowance abolished

Following conversations with senior doctors in the NHS and other experienced professionals, the pensions Lifetime Allowance (LTA) has been abolished.

The LTA is the maximum amount of tax-efficient pension savings you can accrue in your lifetime and includes the total value of your pensions, including your contributions, your employer’s contributions from your workplace pension, tax relief, and investment returns.

From April 2023, there will be no limit on the amount of tax-efficient pension savings you can accrue.

Pensions Annual Allowance increased

The chancellor announced that the Annual Allowance will increase from £40,000 to £60,000 from 6 April 2023.

The Annual Allowance is the amount that you can save into your pension each tax year (6 April to 5 April) while still being able to benefit from tax relief. In the 2023/24 tax year, this will now be £60,000.

Money Purchase Annual Allowance to increase

Another useful incentive to encourage experienced people to return to work, the chancellor announced an increase to the Money Purchase Annual Allowance (MPAA).

The MPAA limits the amount of money you can save tax-efficiently into your pension after you have started drawing flexibly from your defined contribution pension savings.

The MPAA will increase from £4,000 to £10,000 from April 2023.

Tapered Annual Allowance to increase

From April 2023, the minimum Tapered Annual Allowance will increase from £4,000 to £10,000. The adjusted income threshold for the Tapered Annual Allowance will also be increased from £240,000 to £260,000 from 6 April 2023.

These announcements have increased the amount people can put aside for their pensions

In abolishing the LTA and increasing the Annual Allowance, MPAA, and Tapered Annual Allowance the government has increased the amount people can put aside for their pensions each year and save over their lifetime, all while minimising tax. The hope is that this will also dissuade people from retiring early.

Savers and investors see key subscription limits frozen

The annual subscription limit for adult ISAs will remain at £20,000.

Junior Individual Savings Accounts (JISA) and Child Trust Fund accounts will also remain static at £9,000.

No changes to planned Corporation Tax rises, but a new incentive to invest

From April 2023, Corporation Tax will increase from 19% to 25%. In acknowledgement of this move and to limit the impact of the increase, Hunt will allow businesses to offset 100% of investments in infrastructure and factory and machinery assets against profits for tax purposes.

The full force of this tax rise will hit those businesses with profits exceeding £250,000. Meanwhile, companies with profits of between £50,000 and £250,000 will get marginal relief.

For those with profits of less than £50,000 there is no change. They will continue to pay Corporation Tax at 19%.

Plan for business growth

As part of the Treasury’s plan to stimulate the UK’s sluggish economic growth and to spur regional activity outside London, up to 12 successful investment zones will receive funding of £80 million each over five years. This money can be directed towards tax relief for businesses, training, and infrastructure.

Eight places in England have been shortlisted to host investment zones. These are:

• East Midlands
• Greater Manchester
• Liverpool
• North East
• South Yorkshire
• Tees Valley
• West Midlands
• West Yorkshire

A further four zones will sit across Scotland, Wales and Northern Ireland.

Energy price guarantee extended

The energy price guarantee (EPG) that limits the typical annual bill to £2,500 has been extended.

The EPG had been due to change in April, with the ceiling increasing to £3,000 a year, but now the present level will remain for a further three months, until the end of June 2023. Hunt said: “This temporary change will bridge the gap and ease the pressure on families, while also helping to lower inflation too.”

The chancellor added, “This measure will save the average family a further £160 on top of the energy support measures already announced.”

Fuel duty

As petrol and diesel prices continue to be volatile, the chancellor announced continuing support for households and businesses by extending the temporary 5p fuel duty for a further 12 months.

“That saves the average driver £100 next year and around £200 since the 5p cut was introduced,” Jeremy Hunt said.

This one-year extension will cost £6 billion.

Draught Relief

In good news for beer drinkers, Hunt announced that he would “significantly increase the generosity of Draught Relief”. From 1 August, the duty on draught products in pubs will be up to 11p lower than the duty in supermarkets.

As the chancellor said, “British ale may be warm, but the duty on a pint is frozen.”

Get in touch

If you have any questions about how the spring Budget will affect you and your finances, please get in touch.

All information is from the spring Budget document and the government’s spring Budget bulletin.

The content of this spring Budget summary is intended for general information purposes only. The content should not be relied upon in its entirety and shall not be deemed to be or constitute advice. 

While we believe this interpretation to be correct, it cannot be guaranteed and we cannot accept any responsibility for any action taken or refrained from being taken as a result of the information contained within this summary. Please obtain professional advice before entering into or altering any new arrangement.  

Investors should expect further volatility in the markets in 2023, experts suggest.

Economies around the world are facing recession due to factors including high inflation and rising interest rates. The International Monetary Fund’s Kristalina Georgieva predicts that a third of the global economy will be in recession this year.

The World Bank also has a similar outlook, as it cut its global growth forecast from 3% to 1.7% after risks identified six months ago materialised. The organisation warned that fresh setbacks could lead to the second global recession in three years.

As an investor, remember that volatility in the markets is normal. Take a long-term view of your portfolio’s performance and focus on your overall goals rather than short-term market movements.

Here are some of the factors that affected markets in January 2023.

UK

There was a positive sign that the UK could avoid the long recession that some experts have predicted – the economy grew by 0.1% in November.

The UK inflation rate also dipped slightly to 10.5% in the 12 months to December. It suggests that inflation is starting to ease, but it’s still far higher than the Bank of England’s (BoE) target of 2%.

However, the BoE’s chief economist Huw Pill warned that the UK could face persistent challenges if domestically generated inflation gained momentum. For example, if firms try to maintain real profit margins, it could prolong the high inflation environment.

High energy prices in particular continue to be a challenge for both households and businesses.

Chancellor Jeremy Hunt will slash the current energy support scheme for businesses in March. He told business leaders that the current scheme is “unsustainably expensive”.

Trade body MakeUK, which represents around 20,000 manufacturers, criticised the news. It warned that two-thirds of businesses expect to cut production or jobs as a result of energy prices.

The UK government’s borrowing reached a record high in December, which highlights the cost of the energy support scheme. The government borrowed £27.4 billion, the highest amount recorded since records began in 1993. The high figure was linked to the cost of energy and interest rates rising.

The figure was £9.8 billion more than the Office for Budget Responsibility forecast, potentially leaving little room for Hunt to cut taxes in the upcoming spring Budget. 

According to the Office for National Statistics (ONS), industrial action also affected firms, with a quarter of businesses said they were unable to obtain the necessary goods for their operations during the month.

The ONS data suggests that some businesses plan to make cuts to their staff in the next three months. 5% say they could make redundancies, while two-thirds plan to take action to cut staff costs. Yet, the figures also show that a third of businesses are experiencing a shortage of workers.

Readings from the S&P Global Purchasing Managers’ Index (PMI) indicate that sectors are struggling. A reading below 50 indicates contraction.

• The manufacturing sector ended 2022 in a downturn, with a reading of 45.3. It’s the fifth consecutive month of decline.
• A fall in new orders affected the service sector, but only marginally, with a reading of 49.4.

The ONS has warned that some households could face a significant rise in their outgoings. In 2023, 1.4 million fixed-rate mortgage deals will end, and many of them have an interest rate below 2%. As interest rates climbed throughout 2022, this means homeowners could face a much larger mortgage bill than they expect when their current deal ends.

Figures from the BoE also show that consumers are borrowing more to cope with the rising cost of living. £1.5 billion was borrowed in November. Most of this, around £1.2 billion, was on credit cards and was the highest figure recorded since 2004.

Europe

Inflation in Europe could be stabilising. In Germany, the figure for the 12 months to December 2022 fell to 8.6% from 10% a month earlier. However, food prices (20.7%) and energy costs (24.4%) are still much higher than a year ago.

The PMI data suggests the construction sector in the eurozone is suffering a “sustained contraction” after the reading fell to 42.6. All three of the largest economies the survey covers in the eurozone – Germany, France, and Italy – suffered a drop.

Total output is still in the contraction territory, but it is easing with a reading of 49.3, and the service sector moved back into growth with a reading of 50.2.

While still challenging, the pressure easing is reflected in a survey from the Ifo Institute. It found that German business morale is up as the economic outlook improves.

Unemployment figures from the eurozone also indicate that businesses are feeling confident about their prospects. Eurostat reported that unemployment remained at a record low of 6.5% in November.

US

There are positive signs for the US economy – inflation fell and the number of jobs increased.

In the 12 months to December 2022, US inflation fell to 6.5%. It indicates that the cost of living pressures are starting to ease.

The US job market ended 2022 on a high. The Department of Labor reported that 223,000 jobs were added to the economy at the end of the year. Unemployment also fell to 3.5%, taking it to its pre-pandemic low.

Yet, some businesses are still struggling. The PMI for the factory sector suggests it suffered its fastest rate of decline since May 2020, with a reading of 46.2.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

For decades there has been talk of overhauling the five-day working week to improve work-life balance. Now, 100 British companies are embracing change to shorten the working week to four days. With research suggesting it could improve productivity, could more businesses follow suit?

100 companies across the UK have signed up for a permanent four-day working week for all their employees, who will not lose any pay. In total, the companies employ around 2,600 people, so only represent a tiny fraction of the UK’s workforce. Yet, it’s hoped that the positive experience of these businesses will drive more firms to embrace the change.

There are several different ways businesses can manage a shorter working week. While some opt to close completely for a three-day weekend, others rotate the days that staff are off so customers can still access services during normal business hours.

On the surface, reducing the working week by a fifth may seem like it would harm business productivity and profitability. However, research suggests that the opposite could be true.

95% of businesses trialling a shorter working week say productivity hasn’t been negatively affected

It’s still early days for many businesses that have embraced a shorter working week, but it’s often hailed as a success.

The UK 4 Day Week Campaign group is currently coordinating the world’s largest pilot scheme for around 70 companies, which employ 3,300 workers. While they haven’t made the change permanent yet, according to the Guardian, 95% of companies involved in the scheme said productivity had either stayed the same or improved.

88% of companies also said the four-day week was working “well” for them. The findings suggest that many companies have transitioned to a shorter week relatively smoothly.

Of course, a shorter working week does present challenges and, understandably, some businesses are concerned about how it could affect operations.

A report from the Chartered Institute of Personnel and Development asked employers which challenges they faced when implementing reduced working hours. The challenges included:

• This way of working not suiting everybody in the organisation (32%)
• Being unable to achieve the same volume of work or output as before (30%)
• Some tasks requiring someone to be present (26%).

Despite some difficulties, around a third of businesses expect the four-day working week to become a reality for most workers in the next 10 years, and only 1 in 4 employers haven’t considered it already.

As well as potentially improving productivity for some businesses, embracing a shorter working week could have other benefits too.

It’s likely to be an attractive perk for employees that could help improve retention and build an experienced team. When you’re hiring, it could also attract more talent and help you find the right person to fill the role.

At a time when inflation is high, offering a shorter working week could also be a compromise when employees are seeking wage increases to match the rising cost of living.

A shorter working week has also been linked to benefits for the environment, as there will be fewer people commuting, and local economies will be supported as employees will have more free time.

Will the 4-day week catch on?

There’s still a long way to go before a shorter working week catches on, but that doesn’t mean it couldn’t be something that happens during your working life – it wasn’t too long ago that having just a single day off each week was the norm.

In 19th century Britain, Sundays were a holy day and people weren’t expected to work.

The adoption of a longer weekend is often linked to the US, where Jewish factory workers observed Sabbath on Saturdays. It led to a mill in New England allowing a two-day weekend in 1908 to accommodate Jewish employees. It was popular among workers and spread to other industries before the US officially adopted a five-day working week in 1932.

Around the same time, a shift was starting in the UK too. In 1933, John Boot, chairman of the Boots corporation, embraced a two-day weekend when factory improvements led to surpluses but he didn’t want to make staff redundant. The change had a positive effect on productivity and reduced absenteeism.

So, while a relatively small number of businesses are operating a 4-day working week so far, they could be the catalyst for much larger and significant change.