Delaunay Wealth’s Post-Budget Analysis. What Does It Mean for YOU?

All change at The Treasury.  A brand-new Chancellor delivers a new Budget.  Lloyd French of Delaunay Wealth Management examines what it all means for your financial planning future.

At the risk of stating the completely obvious, things have moved on rapidly since our last blog.

In just a few short weeks, not only do we have a previously unheard-of Chancellor in post at Number 11, we appear to be living almost in a different world.  One that’s  unprecedented in post-war Britain, and that could change everything we know.

I say could.

On the Coronavirus, I will simply say this: none of us know what our economic and financial future will be; also, uncertainty has a knack of blindsiding us.  Here at Delaunay we’ll wait and see, with caution.  Uncomfortable episodes in history are just that by definition; in other words, they ended.

Forewarned is forearmed, and if you’d like to discuss your options, we’re just a phone call away on 0345 505 3500.

So, what happened when Rishi Sunak stood up in Parliament to deliver his speech?

A Gigantic Budget

Firstly, we’d like to say that we’re non-partisan. We’re taking an apolitical stance here.  This notwithstanding, most if not all commentators viewed the Budget as a robust one, to put it mildly.  It seems there’s been a turnaround.  Austerity is no more, indeed this is a tax and spend budget with a strong emphasis on buoying up our economy and supporting the NHS in the face of the current pandemic (although the news is moving fast).  £40 billion has been added to public spending.  An amount of note.

Also, out of interest, the “B” word (Brexit) was mentioned just twice, which surprised many.

Secondly, we’re not accountants, so we’ll highlight the key take-aways from the Budget that focus on our areas of expertise: financial planning, investments and pensions.

The Pension Taper Allowance

A key issue for many of my clients, the pensions taper allowance has at last been addressed.

Currently, higher earners are disincentivised to invest in a pension scheme, and it’s all about tax.  Your pension allowance, should you earn over £150,000 for example, is less than £40,000, with the allowance decreasing as your salary rises.  This situation has been a bit of a body blow, not least to higher earners in the NHS.  But now, there’s more positive news. The Chancellor has revealed plans to raise the point at which the tapered annual allowance kicks in, from £110,000 to £200,000.  And, it all starts next month.

But.

Beware.  If you have a total income of more than £300,000, the minimum annual allowance will be reduced to £4,000 (down from £10,000) at the same time.

Pensions Tax Relief

Interestingly, no change here. Nothing to report.  However…

Entrepreneurs’ Tax Relief

A BIG change. Widely anticipated, indeed promised in the government’s election manifesto as a must-reform issue, Entrepreneurs’ Tax Relief has been slashed dramatically – by 90%, in fact.

Formally a means of enabling a business owner to qualify for Capital Gains Tax relief if they sell shares in their business, the lifetime limit on the relief has been reduced from £10 million to £1 million. A strong reform, then, but not abolished altogether, as had been mooted.

National Insurance

The NIC threshold will rise from £8,632 in the current tax year, to £9,500 in the 2020/21 period.  This could save around £100 per year for a typical worker or employee.  There are plans to increase the threshold further, to £12,500 – all part of the government’s plans to offer tax cuts to the lower paid.

Tax Efficient Investments

Short and sweet: as expected, there are no changes to the business relief qualification rules also no change to the rules on Venture Capital Trusts, Enterprise Investment Schemes and Seed Enterprise Investment Schemes.

In our opinion, this is encouraging.  Helping small, high-growth companies can be good for the investor and supports UK economic growth. But, there’s still a clear-cut, unequivocal warning from us with these types of investments.  They are NOT secure, and you MUST seek qualified advice before considering them.

Here at Delaunay, we’re an authority in tax efficient investments, so get in touch if you’d like to know more.

Junior ISAs

Good news for parents, we think.  If you’re saving for your children’s future, you’ll now be able to invest twice as much into a Junior Individual Savings Account than previously.  What’s more, you can start saving very soon: 6th April 2020, in fact.

Parents and grandparents will soon be able to save up to £9,000 a year into a JISA, rather than £4,368.

(There’s no change for us grown-ups, though; the limit for 2020/21 will stay at £20,000)

And finally,

Capital Gains Tax Reporting

If you’re a UK resident and sell your 2nd home, you’ll have just 30 days from completion to tell HMRC and pay any Capital Gains tax you owe. This could include rented property, a home you’ve inherited, or a holiday home.

And, there are penalties if you don’t act quickly. There’s a penalty and interest on what you owe. What’s more, this new reporting legislation applies to non-UK residents with properties here.

There are exceptions, though, such as if you sell your property at a loss, sell it to a spouse or partner, or if a binding contract for the sale was made before 6th April, 2020.  Again, contact us for the full picture.

So, an interesting budget. It certainly created waves, but this can only be our views on the headlines. Any questions?  We’d be happy to help.  Call Delaunay Wealth on 0345 505 3500. Please note that the value of your investment and any income from it may go down as well as up. You may not get back the original amount you invested.

Tax treatment depends on individual circumstances. Both your circumstances and tax rules may be subject to change in the future.

VCT, EIS and SEED schemes are high risk, and not appropriate for everyone.

Your Pensions allowance. Why You Need to Use it Before 5th April 2020

Lloyd French of Delaunay Wealth Management knows a thing or two about the often-complicated world of personal pensions. Here, he offers some straightforward advice on why you definitely need a pension and what to know about the pensions allowances before the end of the 2020 tax year.

Let’s get back to basics:

Your retirement.  Think of it as the longest holiday of your life; a time to travel, take up new hobbies, and enjoy a bit of the dolce vita after a long hard-working life. Or, simply enjoy your garden and your home.  And why not?  You’ve earned it.

Why should you have a pension?  Because at the risk of stating the obvious, unless you win the lottery, you may not be able to benefit from the one, without the other.  A pension is an ideal way to save for your retirement, and, generally speaking it’s an extremely tax-efficient way of doing so.  There are some powerful tax incentives for those saving for their golden years this way.

In a nutshell, put money into a pension, and you could reduce your tax burden.

Don’t Do it Alone

Whatever your retirement hopes and dreams, we don’t want to burst your bubble – but proceed with caution.

In our opinion, it’s worth seeking expert financial advice regarding pensions and finding out how the right scheme could best deliver your financial life goals. Whether you’re a pension novice or a sophisticated retirement saver, pensions can be tricky to grasp. Many people find themselves confused by the range of pension options out there.

Importantly, the end of the tax year – 5th April 2020 – will soon be upon us, so don’t delay if you need some guidance . There may be ways for you to reduce the tax you pay through full use of your pensions allowances and we’d be happy to advise you.  Here at Delaunay Wealth, we understand pensions inside out, so get in touch on 0345 505 3500.

Your at a Glance Guide to Pensions Allowances

The government wants us to put money into a pension.  So much so, in fact, that it offers incentives, and good ones at that, for us to do so.

Your annual allowance is the amount you can put into your pension pot in any single tax year.  In other words, the money you can save towards your retirement from 6th April through to the following 5th April and claim tax relief.  This amount is based on your earnings for the year and is capped at £40,000.

So, up to £40,000 for every 80p you invest pays £1 into your pension.

Higher rate and additional rate taxpayers can claim extra relief.  A £1 contribution could effectively cost as little as 55p.  And, for both standard higher and additional rate taxpayers, Capital Gains Tax doesn’t apply, which makes saving for your retirement very attractive indeed.  More money to enjoy your later years, in other words.

(However, for high earners there’s the taper allowance to be aware of, which we’ll flag up to you later on.)

Your annual allowance factors in all of your private pensions, if you have more than one. This includes the amounts that you or your employer pay into something called a defined contribution scheme, as well as any increases in a defined benefit scheme (where the amount you’re paid is based on how much you earn and how long you’ve worked for the company).

Carrying It Forward

If you do not use all your annual allowance in a particular tax year, you may be able to carry it over to the next one. The equally good news is that this carry-over entitlement can also be applied to any unused allowance from the previous three years; you’ll need to have made the maximum allowable contribution in the current 2019/2020 tax year (your earnings, capped at £40,000), however.

Carry forward may be useful if you’re self-employed, for example; perhaps you have big contrasts or differences in your earnings year on year.  If so, this is an excellent, flexible choice, we think.

Again, we’d recommend that you take qualified advice.  It goes without saying that there are more detailed nuances underneath our “headlines”.

Also be aware of:

Your Lifetime Allowance

There’s a limit on the value of pay outs from your pension plans that can be made to you before an extra tax charge is triggered.  In brief, it’s £1,055,000 in the 2019-20 tax year, but will increase in line with inflation.  This doesn’t include your state pension, you’ll be pleased to hear.

Your pension is a long-term commitment so it may not seem relevant; however, your contributions could exceed your allowance over a period of time. As ever, forewarned is forearmed.

The Taper Allowance

Here at Delaunay, we’d like the new Chancellor to address the taper allowance issue as soon as possible.  And, we do think it’s an issue.

Why?  Because it makes pensions investments a much less attractive proposition for higher earners, and it’s all about tax.  Simply defined, the more you earn, the lower your pension allowance is. For example, with an annual income of above £150,000, the allowance is less than £40,000.  Earn over £210,000 and it descends to a de-motivating £10,000 – in our opinion.

The Earnings Trap – There’s a Solution

If your total income is more than £100,000, you will lose £1 of your personal allowance for every £2 of earnings over the £100k mark.  Earn over £123,000 and you lose the entire allowance.  In effect you’ll be taxed at 60% – don’t forget that in addition to tax of 40%, you lose your personal allowance of £12,500, too (20%).  Sounds punitive?  Well, yes it does.  You could ask your employer to pay you less, but we’re guessing that suggestion won’t go down well.

There is a solution and here it is:  Paying a lump sum into a pension reduces your income and thus restores your personal allowance.  You’re now eligible for tax relief.

Employer pension contributions for owner managed companies

Are you an owner manager paying tax on your salary and dividends?  Consider paying a pension contribution directly from your business as an employer contribution rather than as an employee as that way your business gets tax relief on expenses that meet the “wholly and exclusively for a business purpose” test. This could be a very tax efficient way of putting business profits directly into your pension whilst bolstering your retirement savings.

Summary

Pensions, then.  An excellent longer-term way to plan for your retirement.  Life moves at a fast pace and seems to accelerate every year.  What seems eons away probably isn’t, and now is the time to seek advice, not least because we think it’s a complex subject.

We’re living much longer, with better health and a renewed lust for life when we retire. Wouldn’t you rather know that the outlook is set fair?  Whilst none of us know what the future may bring, Delaunay will be pleased to offer you the benefit of our pensions expertise and advice.

Contact Lloyd French on 0345 505 3500 to discuss which pension schemes are best for you.

 

Tax treatment depends on individual circumstances. Both your circumstances and tax rules may be subject to change in the future. Not all areas of Estate Planning or tax planning are regulated by the Financial Conduct Authority.

January 2020 Newsletter

Welcome to our January Newsletter.

The next three months offer a great opportunity to review still unused reliefs, allowances and tax saving opportunities for 2019/2020. And of course, to plan in advance for the following tax year to maximise your tax efficiency.

Questions to ask yourself include:

  1. Are you making the full use of tax advantaged savings such as ISA’s and pensions?
  2. Are your tax allowances fully utilised, or are there missed opportunities?
  3. For families, are you using allowances for both partners?

January’s newsletter will cover the following topics:  

  • Delaunay blog: Predictions for 2020? What could the Election Result Mean for Your Financial Planning?
  • Budget 2020: six key personal finance areas in the spotlight
  • 8 proven methods for small businesses to save money
  • Self assessment tax returns

From pensions and tax efficient investments through to protecting your assets – if you would like bespoke advice on how best to manage your business or personal finances, we’d love to talk to you.

Read the full newsletter here

* Not all areas of estate planning or tax planning are regulated by the Financial Conduct Authority. Tax treatment depends on individual circumstances. Both your circumstances and tax rules may be subject to change in the future.

Predictions for 2020? What Could the Election Result Mean for Your Financial planning?

Lloyd French of Delaunay Wealth Management offers you some informed speculation on what the new year could have in store for us from a financial planning point of view.

It’s a new year and, we hope, an exciting new decade full of possibilities. As an experienced financial planning specialist, I hope that 2020 brings you and your family everything you wish for, not least, of course, your financial goals.

Welcome to the New Year

January is a new start and many of us are making commitments for 2020. Have you made any yet?  It’s most certainly the time to make plans and in our opinion, a good opportunity for some positive financial resolve and purpose. Resolutions, in other words.  And, crucially, to commit and act on them without delay.  Why?  Because time is short.

The tax return deadline of 31st January will be upon us very soon, swiftly followed by the tax year end on 5th April.  So, now is the right moment to review your position with a financial advisor.  Whilst we all pay tax to fund our public services and are happy to do so, a specialist could help you to reduce your tax burden, as well as offering advice on tax-efficient investments.

(We’d be happy to help, by the way, so feel free to contact us on 0345 505 3500).

And There’s Been an Election

There’s something else to bear in mind.  The election results.

We also have a newly invigorated and substantially reinforced (in terms of MPs) Conservative government.  Through a return to power with 360 seats out of 600, our UK government now has its biggest parliamentary majority since the late 1980s, indeed since Margaret Thatcher was re-elected in 1987.

Whilst remaining strictly apolitical, here at Delaunay Wealth this strength in numbers could deliver greater stability and more certainty over the next five years.  Uncertainty is at an end, at least for now.  A government with a substantial majority has leverage, whatever side they’re on.

Two things we know, then: We will be leaving the European Union – without a doubt.  Getting “Brexit done”, in other words.  And, there’s going to be a Budget on March 11th. This will be Sajid Javid’s first as Chancellor and I’m sure he will want to make an impact.  What’s going to be in the Budget?  I don’t know, I’m afraid.  Nobody does, but I know what I would like to see raised;  or at least presented to the House for legislation discussion and amendment.

Strictly in my opinion, of course, a few pieces existing legislation could do with re-examining.

Such as?

Pensions Taper Allowance

Introduced in 2016, in a nutshell, the taper allowance appears to deliver a degree of disincentive for higher earners looking to contribute to a pension.

It works like this:

Normally, your pension contributions can reduce your taxable income. Why?  Because the government actively encourages people to save for their later years through tax relief.  Make payments into a pension scheme and your reward is a lower tax bill through an annual allowance.  More cash in your bank.

However, this annual allowance gradually reduces the tax allowance for those on higher incomes.  If you earn more than £150,000 your pension allowance will be decreased below £40,000.  Earn more than £210,000 and the annual allowance sky dives to £10,000 a year.

This retrospective pension charge has affected NHS doctors and other workers in key, high profile occupations, not least because anecdotally, they’re turning down work or refusing overtime. Fewer essential expert resources for us, and bad news for them, as earning more means losing their pension tax relief allowance.

The thing is, the government pledged to have a look at this situation within its first 30 days in power and that’s well, now, really.

The other issue I’m expecting to see in the Chancellor’s March 11th Budget is:

Capital Gains Tax, especially Entrepreneur’s Relief

A review of Entrepreneur’s Relief was promised in the Conservatives’ election manifesto, so it could be a shoo-in on Budget day.  Along with a firm commitment not to raise Income Tax, VAT or National Insurance – all good – was a clear indication that this form of tax relief will be reformed, although probably not scrapped entirely.

So, could this be the time to remind you to speak to financial planning expert right now if you’re considering selling your business?  There could be, repeat could be, some tax changes coming our way.

Introduced in 2008, Entrepreneurs’ Relief enables a business owner potentially to qualify for special CGT relief if they sell shares within their business.  You would qualify for this as a sole trader selling part or all of the business and currently, entrepreneurs pay a preferential 10% on the first £10m of gains.  This is worth a lot of money, of course.  Bear in mind, too, that this relief also applies even if you are a higher rate taxpayer.

Any gains above £10m are taxed at the full rate of 20%.

Changes in 2018/2019 tightened up the rules of qualification and the length of time shares needed to be held, but there could be further changes on the way. Maybe even a doubling down on the rules.  Of course, this could take some time (there is the small matter of leaving the EU after all), but if you’re a business owner, I’d advise you to seek advice sooner rather than later.

In my opinion, Capital Gains Tax is a complicated subject in general, so anything that streamlines these tax issues can only be good.  I, for one am intrigued to see what the Chancellor plans for us.

None of us has a crystal ball but one thing we do know:  the government has a lot to do.  As do we all!

Has this article raised questions in your mind?  Don’t sit there wondering, here at Delaunay Wealth we’d be very pleased to hear from you.

How to Make the Most of Your Tax Efficient Investment Allowances

Lloyd French of Delaunay Wealth Management offers timely, user-friendly “use it or lose it” advice to investors keen to maximise their investments into tax efficient savings.

Are you ready for the end of January filing deadline and the end of the tax year in 2020?

As a financial planning specialist, every day’s a school day.

I spend a great deal of time keeping up to speed with all the legislative changes and developments affecting pensions, investments and tax. In recent years, there have been several of them.

These days, it’s harder to make tax efficient investments than it used to be. Quite a lot harder, in my opinion.

A rather bold statement perhaps, but it seems that the government is after your money, and increasingly so.  We all pay tax and it’s our civic duty to do so, of course.  Our taxes fund the health service, education, defence, public order services and many other things besides.   However, as an investor, you’ll most likely want to do everything possible to reduce the amount you pay to HMRC. The good news is that with robust financial advice, you can do this legitimately.

Act soon.  Even better, act now.

Time is marching on.  The 31st January self-assessment deadline is looming.  Before you can even blink the 5th April tax year end will be upon us.  Would you prefer to pay less tax through maximising your tax efficient investment allowances?  Well, of course.

The bad news is that if you don’t utilise your tax allowances, you may lose them. In many cases you can’t carry them over to the next tax year. The good news is that this blog will explain how it all works in clear, jargon-free language.

By the way, Delaunay Wealth Management can offer advice on both mainstream and more sophisticated investments, so do take advantage of our expertise.  Get in touch through this website or on 0345 505 3500.

What are Tax Efficient Investments?

In brief, when we think of “tax efficient investments”, we’re referring to investment opportunities through which you receive government-approved tax benefits.  You could say that a financial decision is tax efficient if you pay less tax than an alternative financial structure that achieves the same end.

The following are worth knowing about.

1. ISAs, or Individual Savings Accounts

Generally, you can invest up to £20,000 in an ISA; they’re a form of tax-free savings.  For the risk averse, a cash ISA is a good idea for a possible short-term gain.

However, as a financial planning specialist, my expertise is in Stocks and Shares ISAs (although you can combine this with a cash ISA).  These tend to be risky, but you could see a potentially higher return over a longer-term period with a well-balanced portfolio of stocks and shares investments.

There’s no income or capital gains tax to pay on the profits from share price increases, nor on interest earned on bonds or dividend income.  You keep it all.

2. Pensions Allowances

An often-complex subject, and in our view, definitely worth taking expert advice on (and certainly if you’re a higher earner), not least because the UK government appears actively to be discouraging pensions for this income bracket

However, here are the headlines:

When you save into a pension, the government rewards you in the form of tax relief.  In other words, you pay less tax.  Although there are exceptions, everyone has a pension annual allowance, set either by the lower rate of £40,000 or your qualifying income. In other words, your income and tax band can affect the amount you contribute to a pension and the tax relief you can claim.

Let’s touch on those aforementioned exceptions: If you’re a high earner and your annual income is more than £150,000, the tax relief you can get on contributions is limited to a reduced annual allowance.

This is called a taper allowance and it decreases proportionally according to your earnings. As an example, for every £2 of adjusted income over £150,000, your allowance will go down by £1, with the minimum tapered annual allowance being £10,000.

Also, be aware that in the case of pension tax relief you can carry forward any unused allowances from the past three tax years in certain circumstances.

Finally, anyone can make contributions of up to £3,600 per year into a pension, receiving basic rate income tax relief, currently at 20%.  This also applies to children, so making these types of investments on behalf of your offspring or your grandchildren makes these  personal pension schemes well worth considering.

3. Capital Gains Tax Allowance

You will pay Capital Gains Tax (CGT) on the profits you make when you sell or transfer certain assets. For higher rate taxpayers, the amount you pay is 28% on your gains from residential property, or 20% on gains from other chargeable assets. There’s a tax-free CGT allowance of £12,000.

Again, this is a “use it or lose it” situation.  You can’t carry over this allowance.  Nevertheless, consider the following:

  • You may be able to split your sales of shares over two or more tax years, thus reducing your tax burden. This way you would take advantage of more than one year’s CGT allowances.
  • You could offset losses against gains to see if any allowances can be used.
  • Transferring income producing assets to a lower earning or non-tax paying spouse or partner could reduce your CGT tax bill.

 

4. High Risk, High Reward?

If you have been, or will be able to maximise your annual allowances on your ISA and/or through  pensions investments, or you’re after additional ways to mitigate tax, the following may be of interest.

There are special tax-efficient investments which provide funding to small businesses,  and through investing in these you can reclaim a proportion of the income tax you have previously paid and in some circumstances defer CGT.

However, in our opinion, they’re risky.  Sometimes very risky.

We can’t say this strongly enough: They should not under any circumstances be considered without taking professional advice.

For example:

  • A Venture Capital Trust invests in small, start-up companies whose shares are traded on the stock market. Naturally, not all of these fledgling enterprises are going to succeed, so you could make substantial losses.
  • An Enterprise Investment Scheme offers several robust tax incentives for higher rate taxpayers willing to invest in small, unquoted companies.
  • A Seed Enterprise Investment Scheme downsizes even further. Investing in even smaller start-up companies than those in the EIS, is simultaneously high-risk and outstandingly tax efficient.  Or, it can be.

A word of caution. Again. Do take qualified advice before considering any of the above schemes.

So, there you have it.  A fairly high-level, whistle-stop guide to making the most of your tax-efficient investment allowances.  On a personal note, working with our clients to help them maximise their investments and legally minimise their tax burden is the result of several years’ experience.  It’s highly satisfying knowing how different taxes interact and how best to optimise reliefs and allowances on behalf of my clients.

In summary, it goes without saying that paying tax is our duty as responsible citizens. We all contribute to a civilised society, and we’re happy to do so.  Nevertheless, I’d rather you kept more of your hard-earned money when it’s possible to do so.

Use it or lose it, so get in touch as soon as you can.

Meet Lloyd French, MD of Delaunay Wealth

In this blog we’d like to shine the spotlight on Delaunay’s Managing Director, Lloyd French.

Lloyd is the driving force and ‘face’ of the firm, and as such we wanted to find out more about him, the business and his plans for the future.

Tell us a little bit about how Delaunay started out and how it’s developed as a business since the early days –

Having spent 15 years as an employed financial adviser I was made redundant at the end of 2011 and felt that it was a good time to set up my own practice as I had many loyal clients that I had worked with for years and a good network of accountants and solicitors regularly referring me work so I felt positive it would be successful. In the past seven years the business has developed very well as we have grown the number of clients that have joined our Wealth Management Service by significantly and increased our Assets Under Management by £40m. Most of these new clients have been referred to us by other professional advisers such as Accountants and Solicitors but we are also lucky enough that our existing clients regularly refer us to their family, friends and work colleagues as well.

Where does the name Delaunay come from? –

“The Delaunay” was the name of the restaurant I had the first breakfast with my team having decided to set the business up. We were throwing potential business names in the hat and I suggested the name of the restaurant, Delaunay, as I liked the name. Several meetings later with my team and marketing specialists it was shortlisted and when we googled the name (to check it wasn’t an offensive French word) to see what it meant and it turned out it’s a term used in aviation which in layman’s terms means triangulation and maximising angles, it was as if it was meant to be and a marketing persons dream so we went with it hence triangles feature in our logo and marketing material as well as maximising angles in our financial planning strategies.

Tell us more about your background, motivations and ambitions –

For over 20 years I’ve specialised in helping people solve their investment and pension problems.

I use my personal in-depth experience within the financial service sectors to offer clear, invaluable guidance and proven techniques to successfully support clients needing step-by-step advice around financial planning, tax efficient investing and the management of their underlying assets.

I’m proud of what’s been achieved during my career to date as well as the success of my company to date.

Years of positive customer feedback are testament to the passion I have for putting my clients first and working collaboratively and transparently with them to achieve positive financial outcomes and their long-term commitment to our partnership.

I am going to build the business’ passive ongoing fee income to £1,000,000 per annum within the next 5 years by attracting and retaining clients. Our firm’s ethos, systems, support team and skills are complimentary to attracting and retaining clients who have a minimum of £500k of liquid investable assets.

My goal is to provide our clients with a Financial Planning advisory service that enables them to receive financial leadership, creativity and trust. It’s important to me that it’s an enjoyable process for our clients, but also for me as well.

We purposely keep our initial fees low, when compared to the marketplace, for investors who have more than £100k to invest, in that they are capped at £3k.

This is because we prefer to be incentivised in building and retaining long term relationships with our clients, rather than maximising initial earnings. In many cases the initial fee we charge will not cover the time cost or advice risk associated with implementing their investment plan.

Our business model is only successful if we manage to deliver a service that ensures our clients are happy to stay with us for the long term, as clients can leave at any time should they wish.

First and foremost we are financial planners and not investment advisers. We offer a fully audited and holistic financial planning service.

What has been the biggest challenge for the firm so far? –

Preparing for and going through the application process of becoming Directly Authorised with the FCA

What do you feel is the biggest strength of the company? –

Aligning our interests with clients by encouraging long term relationships by capping our initial adviser fees and charging an annual adviser fee. Working alongside our clients other professional advisers

Give us an idea of your “typical” client, if that even exists –

Business owners, Entrepreneurs, High Net worth/wealthy individuals, Trusts, Age 50 – 75, Income £150k per annum plus, Investable assets of £500k plus

Where would you like to see Delaunay in 5 years’ time? –

I am going to build the business’ passive ongoing fee income to £1,000,000 per annum within the next 5 years by attracting and retaining clients. Our firm’s ethos, systems, support team and skills are complimentary to attracting and retaining clients who have a minimum of £500k of liquid investable assets.

October 2019 Newsletter

Welcome to our October Newsletter.

In the lead up to the Brexit deadline, we share a range of useful articles and resources to help you manage and plan your personal finances, to include:

  • 25 Brexit need-to-knows
  • Cashflow modelling – an overview
  • Children’s savings accounts
  • Checklist – preparing for retirement

Did you know that we offer a health check of your existing financial plans? There are many factors directly and indirectly influencing your personal finance options, and it’s good practice to review your financial health – much like your physical health – on a regular basis. Why not contact us today to arrange yours?

Read the full newsletter here.

* Not all areas of estate planning or tax planning are regulated by the Financial Conduct Authority. Tax treatment depends on individual circumstances. Both your circumstances and tax rules may be subject to change in the future.

Inheritance Tax – Property Business Relief

Investor Profile:

• Individuals seeking an investment qualifying for Business Property Relief after two years.

• Ideally suited to those with a life expectancy of less than seven years.

• Looking for the estate to make Inheritance Tax savings after a relatively short period and achieving modest capital growth or income for the duration of the investment.

• Individuals with the appropriate investment risk profile, knowledge and experience of complex investment structures.

Inheritance Tax (IHT) is levied on a person’s estate when they die, and certain gifts made during an individual’s lifetime.

At present, the first £325,000 of an individual’s estate is taxed at 0% this is referred to as the nil rate band and is effectively tax-free. The excess estate over the nil rate band is taxed at 40% on death and chargeable lifetime transfers are taxed at 20%.

For the excess value of an individual’s estate beyond the nil rate band there are various methods of mitigating IHT liability. Generally these make use of the personal allowances and exemptions available and the use of Will and trust planning, and more recently the use of residence nil rate band where applicable.

In addition to these areas of planning, Business Property Relief (BPR) introduced in 1976, was designed to allow family businesses to be passed down through the generations unhindered by inheritance tax. Shares in BPR qualifying companies are deemed to be exempt from inheritance tax if they are held for just two years and at the time of death. This relief is now used widely by investment managers in products that can complement other estate planning solutions such as trusts and gifts.

BPR applies to relevant business assets such the outright ownership of a business or an interest in a business e.g. a partnership, securities in a company which is unquoted and which gave the transferor control of the company immediately before the transfer, or shares in unlisted companies or those traded on the Alternative Investment Market.
To qualify for business property relief, the relevant business property must have been held by the transferor for two years immediately prior to the transfer. If the transferor dies within the two years following the purchase of the property then the property will not qualify for BPR and IHT will become due on the value of the property at the date of death.

There are various schemes which aim to utilise BPR. Typically these schemes offer the investor the opportunity to invest funds into a corporate or partnership structure which will in turn deploy the funds into a qualifying trade or make investments into qualifying unlisted companies with the aim of the investor’s holding qualifying for BPR after the two year initial period.
The investment strategy of these schemes tends to focus on capital preservation rather than high returns which would bring extra levels of risk in order to maintain the investor’s level of capital through the minimum holding period.

An example of how BPR could be utilised is as follows:

An individual aged 75 years has total assets including main residence, investments and savings of £825,000 and wants to consider ways of mitigating his estate’s liability to IHT. Of the total assets there is an amount of £200,000 which is liquid and available for investment.

The table below shows the potential IHT liability reduction available through using these funds to make a BPR investment:

You can download the PDF here.

This summary sheet is purely for illustration purposes and does not constitute an invitation to participate. Any illustrations are not conclusive and do not cover many aspects of these structures. Under no circumstances should an individual consider this a recommendation, nor should they use this summary as an indication as to the potential for participation. The value of investments may fall as well as rise. You may receive back less than the original investment. Any decision to participate should be made with the help of appropriate tax advice.

Relevant Life Policy

In July’s blog post we looked at strategies business owners can implement to protect their business from loss of a key person shareholder.

Today we are going to explore Relevant Life policies which are a lesser-known life policy.

What is a Relevant Life plan?

• An individual Death In Service life assurance policy available for employees of the company which may include directors
• Your business pays regular premiums based on the level of cover
• If the person covered dies or is diagnosed with a terminal illness whilst in employment during the term, the plan pays a fixed, one-off lump sum
• The plan is designed to meet certain legislative requirements that mean your premiums, benefits and options should be treated tax efficiently
Who can take out a Relevant Life Plan?
• To be eligible for a Relevant Life Plan, the person to be covered must be an employee of the business, which can include company directors who are salaried. Unfortunately, Relevant Life Plans are not available for sole traders, equity partners of a partnership or equity members of a Limited Liability Partnership.
• It’s a Single Life Policy, which means each plan covers one person. There’s no option to include joint cover in the same policy.

How a Relevant Life policy can cut company costs

Relevant life graphic

* Assume that corporation tax relief is 20% and had been granted under the ‘wholly and exclusively’ rules. In both cases we’ve assumed a payment of £1,000 each year for the life cover on an employee who’s paying income tax at 40% and employee’s National Insurance at 2% on the top end income. We’ve also assumed that the employer is paying corporation tax at the small profits rate of 20% and will pay the employer’s National Insurance at the contracted-in rate of 13.8%.

This summary sheet is purely for illustration purposes and does not constitute an invitation to participate. Any illustrations are not conclusive and do not cover many aspects of these structures. Under no circumstances should an individual consider this a recommendation, nor should they use this summary as an indication as to the potential for participation. The value of investments may fall as well as rise. You may receive back less than the original investment. Any decision to participate should be made with the help of appropriate tax advice.

You can also download this fact sheet as a PDF.

What can Delaunay Wealth Management do?

  • Advise you on the most appropriate policy to be fully underwritten
  • Work with your tax advisors to undertake a business valuation for these purposes
  • Ensure the Business Risk Plan is regularly updated to reflect the value of the business
  • Introduce you to a legal firm experienced in drafting the documents to go with such a transaction

Contact us for more information
T: +44 (0)345 50 53 500 E: mail@delaunaywealth.com

Managing Risks within your Business

How would your business cope with the loss of a key person shareholder?

The basics of business risk management and protection

Legal and General tell us there is a £1.1 trillion business protection gap and this is one of the major potential areas for concern for owner-managed business (OMBs). Managing all the risks and fully protecting a business is often thought to be lengthy and complicated. But actually, the principles are similar to any other type of risk management.

Clearly there are many business risks but these are the main ones to consider:

  • The loss of key individuals having a serious impact on your profits
  • Covering all of your business borrowings
  • Succession planning or the death or incapacity of a business partner

A business protection strategy could help a business continue in the event of a key person, partner or director falling terminally or critically ill or dying.

 

What is Key Person Protection?

It’s simply a company insuring itself against the financial consequences it may suffer as a result of the death (or critical illness, if chosen) of a key team member. Key people are the individuals whose skill, knowledge, experience or leadership contribute significantly to the company’s profitability and continued financial success.
A key person may be one of a number of people within a company, such as the chairman, managing director, marketing manager, computer specialist or sales manager – anyone whose death could lead to a serious financial loss for the business.

How does it work?

The business is the owner and the policy proceeds, if payable, will be paid to the company as replacement profits. The company then uses the proceeds to work its way through the loss of that key person.

Whether or not the premiums will be tax-deductible, or the proceeds taxable, will very much depend upon the circumstances for each individual business and we would recommend considering this aspect closer with your tax advisers before finalising the policy.

What is Shareholder Protection?

The loss of a partner or director will often de-stabilise a business and can quickly lead to financial difficulties. Partner/Director Share Protection means if the worst does not happen, the remaining directors or partners have the necessary finance to stay in control of the business. This gives them the chance to re-structure and manage relationships with the bank, creditors, supplies and key customers.

How does it work?

In the event of a partner or director dying, falling terminally or critically ill, Partner/Director Share Protection can provide a sum of money to the remaining partner(s) or director(s). This means that in the event of a valid claim, the policy could pay out an amount sufficient to purchase the deceased or critically ill partners/directors interest in the business. This secures the interests of the remaining shareholders without putting the future of the business at risk. In addition, the surviving family of the deceased have converted shares in a company, that they have little understanding or involvement in, in return for cash which is likely to be much more appropriate for their needs.

“Effectively it puts money in the right hands at the right time – when it’s most needed”

Download the full version PDF Managing Risks in Your Business

 

What can Delaunay Wealth Management do?

  • Advise you on the most appropriate policy to be fully underwritten
  • Work with your tax advisors to undertake a business valuation for these purposes
  • Ensure the Business Risk Plan is regularly updated to reflect the value of the business
  • Introduce you to a legal firm experienced in drafting the documents to go with such a transaction

Contact us for more information
T: +44 (0)345 50 53 500 E: mail@delaunaywealth.com

Delaunay Wealth Management Limited is authorised and regulated by the Financial Conduct Authority (806635). Registered in the UK at: Wey Court West, Union Road, Farnham, Surrey, GU9 7PT. Company Registration Number: 08107472 The Financial Conduct Authority does not regulate taxation and trust advice and employee benefits.

Should you have cause to complain, and you are not satisfied with our response to your complaint, you may be able to refer it to the Financial Ombudsman Service, which can be contacted as follows: The Financial Ombudsman Service, Exchange Tower, London, E14 9SR www.financial-ombudsman.org.uk

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