We’re now approaching the last quarter of the year and the cold weather is starting to set in. A New Year brings new expectations, resolutions and hopefully optimism for what’s to come. With that in mind, now is a good time to consider your goals for the coming year and what financial planning advice you may need to help keep you on track.
When you look back at the changes that have happened this year alone; the launch of the new Pension Freedoms in April; the general election in May; a surprise summer budget in July and the drop in the Chinese stock market in August to name just a few, it can definitely seem like a bit of a rollercoaster ride to try and stay ahead of the game.
That is why our first port of call with you is to ensure we help you plan ahead as much as possible and review your goals on a regular basis. With changes to taxation, pensions, inheritance tax and investments, these are the key areas to consider when planning for 2016.
The start of the New Year also brings us into the tax season and if you need to complete a self-assessment, now is a really good time to start. Look at your income and expenses and pull together the information you need to complete this on time. The New Year can also be extremely frantic so if you have the opportunity to complete your accounts before the end of 2015, you then have the comfort of knowing that it has been submitted in good time and avoid the mad lastminute.com rush.
In addition, this is also a great opportunity to see if your income has changed your tax position and whether or not you are entitled to any new allowances or indeed the opposite. Knowing this ahead of time ensures your financial planning (for the new tax year) can take into account any changes you may need to make to your investments which could save you tax, such as investing more into your pension.
The new Pension Freedoms that were announced by the Chancellor, George Osborne came into effect at the start of this tax year, have already created some debate over whether or not this was a good move for the retirement income landscape. In addition, Auto Enrolment is now ramping up even more as smaller companies are beginning to reach their staging date. So, whether you are saving for your retirement or you are already retired, managing the ever changing pension legislation is a challenge. With the annual and lifetime allowances also being reduced, this is an area where we believe it is vitally important to seek financial planning advice.
Estate planning and passing on a legacy to your loved ones by minimising the amount you have to give to the tax man, is something many of us strive for. Again, changes in the summer budget mean that although initially the main inheritance tax (IHT) nil rate band of £325,000 remains the same until 2020-21, from 2017 there will be a new £100,000 allowance on your main residency gradually increasing to £175,000 by 2020 provided the property is passed to ‘lineal descendants’.
When you take into account that your nil rate band can be transferred to your spouse or civil partner, the new threshold means that people can pass on estates worth up to £1m free of inheritance tax by 2020. However this will not apply to estates worth more than £2m. Has anything changed over the last 6-12 months that would affect your inheritance tax liability? A review of your assets now will allow you to manage your current tax liability and take into account the new legislation when it comes into effect.
Finally, reviewing the performance of your investments enables you to keep on track for your 2016 goals and beyond, maximising tax efficiencies and making the most of opportunities for income and growth over the long term. Again, when looking towards 2016, think about your NISA allowance – have you maximised the amount you can invest or are you prepared to lose that allowance and the tax free income that comes with it? How do your investments affect your capital gains liability? Has your risk tolerance changed?
These are all valid questions to ask yourself and to seek financial planning advice about when reviewing your investments, particularly when your circumstances change. How often you review your financial goals and make those all important changes if necessary, will depend on your individual circumstances.
At Bridge, we don’t want you to fall into the trap of ‘failing to plan is planning to fail’ which is why we recommend reviewing your goals and planning in advance as much as possible.
The purpose of this article is to provide technical and generic guidance and should not be interpreted as a personal recommendation or advice. Note: Auto Enrolment is not regulated by the Financial Conduct Authority.
These links may be useful: www.moneyadviceservice.org.uk and www.direct.gov.uk
Twitter users: Martin Lewis of MoneySavingExpert tweets general advice and also answers some personal finance questions- @MartinSLewis and @Moneysavingexpert
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