2022 January – Market Updates

The year started with no gentle easing back into the swing of things for markets which kicked the New Year off with big falls in both equities and bonds. This followed the release of the minutes of the last US Federal Reserve rate setting meeting which showed the bank was a lot more worried about inflation than it had been letting on.

Tech stock have seen their biggest decline in almost a year as investors favour value stocks on hopes that Omicron is milder than previous variants and will lead to less economic disruption.

The two year Treasury yield climbed to its highest level in almost two years on Friday, while notching a fourth straight week of gains as Fed Policy Markes continued to set the stage for tighter financial conditions.

UK short dated bond yields had the highest close since March 2019. The British short dated government bond yields had the highest close in almost three years tracking yield for US government debt higher as markets weighed the prospects of an early rate rise by the US Fed.

Chinese shares climb over the last month as official data showed economic growth topped 8% last year. Numbers from China’s National Bureau of Statistics shower the Chinese economy grew by 8.1% in 2021. China’s GDP rose 4% from a year ago topping Reuters poll than predicted a 3.6% increase.

Oil hits seven year high as Houthi attack on UAE rattles regional tensions. Yemen’s Houthi rebels claimed responsibility for the attack which took place Monday morning and caused fires that resulted in three petroleum tanker explosions near state oil firm ADNOC’s storage facilities.

Charity Walk

The AJ Wealth Management Ltd team are doing a 10km walk for charity.  This will take place on 25thAugust 2018.

We have chosen Cancer Research UK for our fund raising event.  All of us know someone who has been touched by cancer and it is for this reason that Cancer Research UK has been selected.

Cancer Research UK’s life-saving work relies on donations as it is not government funded..

We are asking for your support for this very worthwhile cause by making a donation and together we can save more lives by beating cancer sooner.

All you need to do is ctrl + click on the link below to make your donation:

 

https://fundraise.cancerresearchuk.org/page/ajwealth-giving-page

 

THANK YOU FOR YOUR SUPPORT

 

 

 

 

 

 

 

The Cost of Care

In 2016/17 the average weekly cost of a room in a residential care home in the UK was £600 and a room in a nursing home cost £841. However, these are only averages, the bill could be considerably higher depending on where you live. Someone who is paying their own fees will quickly start amassing a sizeable bill, especially as the average figures quoted here include fees for rooms that are funded by local authorities, who consistently pay less to care homes than self-funders do. Serious medical conditions, including dementia could also mean even higher costs. If you are being assessed for a move to a care home and you own your own home, its value will be part of the means test, unless a spouse, partner or relative aged over 60 is lived there. The financial assessment will also consider any income and savings and investments. However, some assets may be excluded and there are ways to protect your estate so that it is your beneficiaries that receive your assets, please contact the office and make an appointment to see Angela Jellings, who is qualified in Long Term Care Planning. The sooner you act, the better it is for your beneficiaries.

The new Residence Nil Rate Band Allowance

The new residence nil rate band could increase the inheritance you can leave your children by up to £100,000 from April, rising to £175,000 by 2020. This means that for a husband and wife they have an additional £200,000 NRB. To benefit from this additional amount, the family home must pass to direct descendants - that is, children or grandchildren. And to be entitled to the full amount, clients will need to keep the value of their individual estates below £2M. Beyond this, the allowance will be tapered, and lost altogether once values pitch beyond £2.35M. But there are planning strategies that may help some clients stay below the taper threshold, including lifetime gifting made at any time. The residence nil rate band is in addition to the standard nil rate band, which will remain frozen at £325,000 until April 2021. The additional amount will be phased in starting at £100,000 and increasing by £25,000 a year until it reaches £175,000 in April 2020. These are the maximum amounts. The available allowance will be reduced if the value of the property is less than this, or if the value of an individual’s estate exceeds £2M. Just like the standard rate band, the residence nil rate band will also be transferable between spouses and civil partners on death. So the allowance is not lost if the family home passes to the survivor on first death. This could mean if the second spouse dies after April 2020, a couple could benefit from a combined nil rate band of £1M (2 x £325,000 plus 2 x £175,000). It also doesn’t matter when the first spouse died or even if they owned a property at all. The first spouse may have died many years before the introduction of the RNRB and the property held in the sole name of the survivor. Even so there will still be allowance which can be transferred to the surviving spouse. For further information please contact AJ Wealth Management Ltd.

Retirement Income – Increasing your State Pension

If you are drawing your state pension (or if you are due to start drawing your pension before April 6th) the Government is now offering you the option of purchasing a bigger state pension.

You can purchase up to £25 a week of extra income, and the cost will depend on how much you buy and your age. The income purchased will be inflation linked and guaranteed for life.

A 65 year old man would pay £890 to secure an extra £1 of income each week. To purchase the maximum £25 would therefore cost £22,250. This represents an income yield of 5.8%. An 85 year old would pay only £394 for each £1 extra making their income yield in excess of 13%. You should bear in mind though that it will take some time to make back your capital outlay. It will take the 65 year old man 17 years and 6 weeks before he breaks even on the amount paid. This option is therefore unlikely to be suitable for those who are in poor health or have a lower life expectancy.

The new state pension comes into force on 6th April 2016. The weekly pension payment for those commencing taking their benefits is expected to be £151 a week. Currently the state pension is only £115 per week. This initiative will allow those people who are happy to give up their capital the opportunity to increase their ongoing benefits.

2015/2016 Tax Rates and Allowances

Income Tax

Tax Free Personal Allowance  – the amount of gross income you can earn before you are liable to paying income tax

Personal Allowance (Born after 5 April 1948) £10,600
Personal Allowance (Born between 6 April 1938 and 5 April 1948) £10,600
Personal Allowance (Born before 6 April 1938) £10,600

Personal allowance withdrawn by £1 for every £2 of income over £100,000

Married Couples Allowance

Available to a qualifying individual born before 6th April 1935 aged 75 or over 10% of the amount below is allowed to be deducted from the tax bill of a qualifying individual personal allowance is reduced by £1 for every £2 over the income limits for tapering - up to the minimum married couple's allowance level

Married Couples Allowance £8,355
Minimum Married Couples Allowance £3,220

Transferable Tax Allowance

Available to a qualifying spouses/civil partners born after 5th April 1935 equivalent to 10% of the personal allowance spouses or civil partners not liable to taxes in the higher rate or above can transfer up to the amount available to their spouse or civil partner. the recipient receives a tax bill deduction of 20 percent of the amount transferred

Transferable Tax Allowance £1,060

Blind Person's Allowance

Additional Personal Allowance £2,290

Income Tax Bands and Percentages

*0% starting rate is for savings income only - if your non-savings income is above the starting band level, the 0% rate will NOT apply and the basic rate percentage will be used instead.

Band Limits Percentage
Starting Rate (Savings only *) £0 - £5,000 0%*
Basic Rate £0 - £31,785 20%
Higher Rate £31,786 - £150,000 40%
Additional/Top Rate Over £150,000 45%

Dividend Tax Bands and Percentages

Band Limits Percentage
Ordinary Rate £0 - £31,785 10%
Upper Rate £31,786 - £150,000 32.5%
Additional/Top Rate Over £150,000 37.5%

National Insurance Contributions

National Insurance Rates and Allowances - Find your classification by looking up your NIC letter on your payslip/return

Shared Banding For All NICs

Lower Earnings Limit (Weekly) £112
Upper Accrual Point (Weekly) £770
Upper Earnings Limit (Weekly) £815
Primary Threshold (Weekly) £155
Secondary Threshold (Weekly) £156

Rates for Class 1 NICs

Between Primary Threshold and Upper Earnings Limit 12%
Above Upper Earnings Limit 2%
Employers' Rate Above Secondary Threshold 13.8%
Class 1A Rate On Employer Provided Benefits 13.8%
Employees' Contracted Out Rebate 1.4%
Employers' Contracted Out Rebate 3.4%
Married Women's Reduced Rate Between Primary and Upper Earnings 5.85%
Married Women's Reduced Rate Above Upper Earnings 2%

Self Employed Class 2 and Class 4 NICs

Class 4 Lower Profits Limit (Annual) £8,060
Class 4 Upper Profits Limit (Annual) £42,835
Class 4 Rate Between Lower and Upper Profits 9%
Class 4 Rate Above Upper Profits 2%
Class 2 Earnings Exception Limit £5,965
Class 2 Weekly Amount £2.80
Class 2 Weekly Amount (Share Fisherman) £3.45
Class 2 Weekly Amount (Volunteer Development Workers) £5.60

Voluntary Class 3 NICs

Weekly rate £14.10

Corporation Tax Rates and Limits

From 2015/2016 the corporation tax rate is unified at 20% for all company sizes, eliminating the marginal relief.

Small Profits Rate n/a
Main Rate 20%
Small Profits Limit n/a
Marginal Relief Lower Limit n/a
Marginal Relief Upper Limit n/a
Marginal Relief Fraction n/a

Capital Gains Tax Rates and Annual Exempt Amounts

Individuals, Personal Reps and Trustees for Disable People £11,100
Other Trustees £5,550

CGT Tax Rates

Individuals - Basic Rate Taxpayer 18%
Individuals - Higher Rate Taxpayer 28%
Personal Representative of a Deceased Individual 28%
Gains Qualifying for Entrepreneurs' Relief 10%

Inheritance Tax

Nil rate band* £325,000
Rate of tax on excess 40%
Rate of tax on chargeable lifetime transfers 20%
Agricultural/business relief 100%
Certain other business assets relief 50%

*Unused nil rate band percentage transferable between spouses

Exempt Gifts

Small gifts per done £250
Annual per donor £3,000
Parental gift on marriage £5,000
Grandparent gift on marriage £2,500
Other marriage gifts £1,000

Pensions

Lifetime Allowance £1,250,000
Annual Allowance £40,000