As I pen this post, it is roughly 9 am on Friday 18th February and the UK is preparing for Storm Eunice to arrive.
Topic: News
Monthly Vlog – January 2022
The Beginning of The End?
After this week’s announcements that we are winding back ‘Plan B’ measures, it seems we may, just finally, be entering the end-game of the pandemic.
Covid Update – 10th December 2020
It has been a while since I have needed to pen one of these updates, however unfortunately yesterday’s announcements necessitate the need for me to communicate with clients once again about our Covid operating procedures.
Omicron
On Monday last week, I penned the introductory paragraphs for our Investment Review document which will be issued early next year to Buckingham Gate clients.
Monthly Vlog – November 2020
Cost of Living Rises as Prices Surge – 22nd November 2021
Article written by Andrew, Charles, Chris, Mark and Will, Portfolio Management Team at Square Mile.
Last week saw UK inflation surging to its highest level for a decade, hitting 4.2% in October. This was both higher than the markets expected and more than twice the Bank of England’s (the Bank) target of 2%.
The Close Call
It seems like we have been talking about an increase in interest rates for some time now. Although we seem to have had a ‘close call’ today with the Monetary Policy Committee voting 7:2 in favour of holding rates at the historic low of 0.1%, they did comment that interest rates could rise “from now onwards”.
Monthly Vlog – October 2021
In this month’s Vlog, Matthew provides updates on the market and the performance of the Buckingham Gate Portfolios. Matthew speaks more about so-called ‘transitory’ inflation and explains how we are going to approach registering our clients’ trusts. Matthew tells of the outcomes (or lack of) from the 2021 Budget announcement and lastly explains that we will be bringing you some more advanced financial planning ideas in future vlogs.
Care Fees Update, National Insurance & Dividend Tax & Budget Date
Care Fees Update
We have this week finally seen the much-hyped changes to care fees announced.
This is an issue that has been ignored and deferred by successive governments. There have been countless consultations and suggestions over the years, but none of them have really moved far off the starting line. But now we have a new care fees system.
I think most people will now be aware of the key points which are as follows:
The ‘full fees capital means test’ limit will be increased to £100,000. This means that if you have over £100,000 of capital assets (including the family home, unless it continues to be occupied by a partner, relative or dependent aged over 60), you will be responsible for your care fees in full.
There will also continue to be a lower limit of £20,000 below which assets will not be taken to fund care fees.
For those with assets between £20,000 and £100,000, there will be a partial contribution required towards care fees, with this increasing the closer you are to the £100,000 asset limit.
In addition to the above, there will remain a (very significant, but far less publicised) income based means test that says that if you have sufficient income to pay your own care fees (regardless of capital), then a contribution could still be required.
All of the above will be subject to a cap on what an individual will be expected to contribute to their care fees. The cap will initially be set at £86,000. Beyond this point, no individual will have to pay towards their care costs.
So far so good, however, as usual, we have been looking beyond the headlines to try and find some of the devil in the detail.
The most significant point not really being covered in the mainstream media is that the whole set of rules above only apply to your personal care costs, not your ‘hotel’ costs (‘hotel’ costs being the cost of staying in accommodation, food, utilities etc).
As such, the amount an individual could pay in their lifetime for how they would view their ‘care fees’ could well be much greater than the £86,000 cap when you factor in the ‘hotel costs’.
Now, to be clear, this has always been the case. Hotel costs have always been assessed separately from actual personal care fees, but people often don’t appreciate that there is this distinction.
As such, the new proposals are a welcome addition to the care fees system and at least provide some degree of certainty.
What is perhaps more interesting is that these proposals could well pave the way for insurers to re-enter the long-term care market and produce the first real insurance products for long-term care in several decades.
We will continue to monitor developments and will of course report on anything significant that becomes apparent in the months ahead.
National Insurance & Dividend Tax
In order to pay for the above, the government has introduced an additional 1.25% levy to be added to national insurance as an interim measure and then split out as essentially a third kind of tax on employment income.
Moving forward, you should see your income tax, national insurance and a ‘health and care premium’ on your payslips.
In addition, the dividend tax rates have also had 1.25% added, meaning the basic rate of dividend tax will rise from 7.5% to 8.75%. Dividends will still represent a tax efficient income source for most people, although of course these changes make them slightly less attractive.
What they also do is increase the relative attractiveness of capital gains as a form of ‘income’, especially when levied on shares and bonds, as this is charged at a basic rate of 10% and a maximum rate of 20%, even for higher rate taxpayers.
Budget Date
Finally, we do now also have a confirmed budget date of 27th October 2021. This budget will be particularly telling as the UK continues to recover from the Covid pandemic.
We will of course continue to monitor any proposed tax changes and will report to clients anything that might be relevant to their financial planning.