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4 Ways The New Budget Will Impact Your Household Income This Year

4 Ways The New Budget Will Impact Your Household Income This Year

By Alex Pritchard

Are you aware of how new budgetary changes will impact your household income this year? Getting clear on your financials and business outgoings will support you to steer clear of debt and make better investment decisions.

 

While there have been no significant developments in this tax year in comparison to the previous 12 months, the small changes that have been implemented will affect everybody to some degree.

 

In this blog, we’re going to explore the financial changes that are likely to impact you the most in this tax year.

 

The four main issues are:

  • Your personal allowance has been frozen

Whilst your tax-free personal allowance remains static at £12,570 if you receive a pay rise in line with inflation, all of the additional money is subject to tax (fiscal drag) (because your allowance hasn’t increased).

  • You will pay more national insurance

National insurance rates have increased by 1.25% for the basic tax rate payer, which means you will pay more to the government (the funds have been earmarked to help fund the gap in social care costs, support the NHS and take care of the costs of the pandemic). If you’re in the higher UK tax bracket, you’ll now pay 3.25% instead of 2%, which over a year can add up to a sizeable amount, leaving you with less.

  • Increased cost of living

Utility bills and fuel costs have increased, and the same groceries you bought at the start of the year are now likely to cost more.

  • Increased mortgage payments

If you have a variable rate mortgage, you will already have experienced an increase this year, and you are likely to experience at least one more hike in 2022.

 

At least three out of these four changes are likely to affect most of the UK’s employees, but there are also challenging times ahead for business owners.

 

What’s new for business owners this fiscal year?

 

Small and medium-sized businesses are likely to be less prosperous this year because of fiscal drag, which means you’re working the same hours for less profit.

 

The national insurance rate for employers has increased to 15.05% from last year’s 13.8%.

In short, this means that small and medium-sized business owners are likely to find the next year more financially challenging. It’s wise to explore the changes and consider your best options, so here are two suggestions that may suit you:

  • Pass the cost to the consumer

This may or may not support you given that your personal allowance is static and you pay more national insurance. Weigh up whether passing the cost to the consumer means you will need to sell less and potentially have to work less; or will you have to work harder to sell at a higher price?

  • Nurture your investments

Make sure that your investments are well placed given the country’s changing financial landscape. It’s important that any investment portfolios are diverse and as viable as they were pre-April. 

 

What else do I need to know in 2022–2023?

 

You might also like to bear in mind the following:

 

  • Pension

Fiscal drag will also impact your pension. You can put a maximum of £40k a year into your pension pot, but due to the rise in the cost of living, its buying power is reduced.

 

  • Inheritance tax

This tax remains the same (£325k allowance), so even though your assets are rising in value, the percentage of tax you pay has not changed. The government has a set allowance that enables a married couple to each give away up to £175k, but there are terms and conditions, such as your house must be worth in excess of £350k, and to get the most out of it, you can only give the funds to direct descendants.

 

Whilst overall there are no substantial financial changes for 2022–2023, the smaller changes will give you less return for your efforts. The government is spending more than it is bringing in, which means we pay more tax to cover those costs.

 

However, if you take the time to enlist the help of an independent financial adviser, there may be legitimate allowances and tax reliefs available to you (depending on your personal circumstances).

 

If you’d welcome our input, expertise and experience, please get in touch by emailing me at alex@applewoodindependent.co.uk or David at david@applewoodindependent.co.uk.

 

The views expressed in this article are those of the author and do not constitute financial advice. Applewood Independent Ltd is authorised and regulated by the Financial Conduct Authority. For financial advice designed for you and your specific circumstances, please contact the author using the contact details provided in this article or, alternatively, contact the Applewood Independent Ltd office on 01270 626555.

The value of your investment can go down as well as up, and you may not get back the full amount invested.

Past performance is not a guide to future performance.

Why You Might Want To Consider Investing In Commercial Property

Why You Might Want To Consider Investing In Commercial Property

The goal of investing is not only to make money in boom periods but to limit your losses during the difficult times; choosing to invest in commercial property is likely to help you do exactly that.

 

Nothing is ever guaranteed when it comes to finance, but if you want to have a more secure high-performing investment portfolio, it will benefit from diversity. We’ve discussed the importance of a diverse portfolio in previous blogs (such as How Do We Invest Your Money So You Don’t Lose It All?). In this blog, we’re going to explore why investing in commercial property could be worth considering.

 

What do we mean by commercial property?

 

Commercial property investments are a slower moving asset class, which means the rewards might be incremental; but they’re often also a safer bet, which means there’s less risk of you losing all your money overnight.

 

The average portfolio, if it has the support of an independent financial adviser, is likely to include a property fund. However, it’s rare for people who make the investments themselves to choose “commercial property”, because it doesn’t immediately compare well to equities. 

 

In rising markets, equities have the potential to do very well; but while they tend to go up four out of five years, the one year in which they dip could cause financial struggle. If your investment portfolio is not diverse, you won’t benefit from some protection against this.

 

How well did commercial property perform over the last 18 months?

 

Over the last 18 months, commercial property investments achieved double-digit returns. The latter part of 2021 was more stagnant in terms of equities, but from January to March 2022 everything lost value, with the exception of commercial property funds (see the illustration below).

 

At Applewood Independent the funds that we run are up by nearly 2% this year, and over the period of a full year they’re up by 17.5%.

Image courtesy of Trustnet.

 

Is this a strong indicator of performance?

 

For the first part of 2021, commercial property funds were not performing as well as the equities but they continued to rise incrementally. In a falling portfolio where all other assets have lost money (unless you invested in gold!), commercial property funds such as BMO Property continue to provide a degree of investment stability.

 

For example, this fund has a building (of many) that it owns and rents out and it has a tenant who pays the rent and 17 years remaining on the lease. Even if the world is on fire, this type of investment is considered “business as usual”. Although it’s tempting for investors to create a portfolio that is geared towards outright performance, it’s likely to offer less protection than a diverse portfolio that includes commercial property.

 

When is commercial property likely to be a sound investment?

 

Although the performance of commercial property is unlikely to illuminate the sky with fireworks, it’s in turbulent times – such as during the pandemic or the tragic war in Ukraine – that they come into their own and show their true value in terms of offering a degree of financial stability.

 

If as an investor your sole aim was to make money as quickly as possible, you might decide to put all your money in one fund, or go to the casino (but that would be a big gamble!). As independent financial advisers, we help you to make decisions that support a sophisticated and diverse portfolio, and one that is more likely to carry you through boom and bust periods.

 

How do we choose where to invest?

 

We use our experience, expertise and information gained from meetings with the manager of BMO Real Estate Partners, Guy Glover (with whom we’ve established a working relationship), to help clients gain the benefits of diversification. He runs a cautious fund and loves to find true value in bricks and mortar. We’ve seen the benefit of these investments time and time again, and in particular how they play out in falling markets as well as how they perform in growing markets. 

 

Many property funds struggled during lockdown because it was challenging to place a value on them; no one was certain what the post-pandemic world would look like. However, there’s plenty of evidence to confirm that if you want a high-performing investment portfolio, it’s wise to consider commercial property. 

 

Either way, it’s essential to create a diverse portfolio so that you make money in boom periods and protect your hard-earned cash by losing as little as possible in more challenging times.

 

I hope you’ve found our explanation useful as to why we find commercial property worth considering as part of our balanced and diverse portfolios. If you’d value our independent financial advice when it comes to how to invest your hard-earned cash, please get in touch by emailing me at alex@applewoodindependent.co.uk, or David at david@applewoodindependent.co.uk

 

The views expressed in this article are those of the author and do not constitute financial advice. Applewood Independent Ltd is authorised and regulated by the Financial Conduct Authority. For financial advice designed for you and your specific circumstances, please contact the author using the contact details provided in this article or, alternatively, contact the Applewood Independent Ltd office on 01270 626555.

The value of your investment can go down as well as up, and you may not get back the full amount invested.

Past performance is not a guide to future performance.

How Global Events Can Negatively Impact The Value Of Your Investments

How Global Events Can Negatively Impact The Value Of Your Investments

It’s often said that when America sneezes, the rest of the world catches a cold; in other words, its stock market is so dominant that whatever happens within the US has a knock-on effect around the globe.

 

At the turn of the year, the Federal Bank of America announced rising interest rates in the US and cut quantitative easing by up to 50%, which had a big downward trend on global stock markets; it’s likely you will have experienced this as fluctuations in the value of your investments in the first quarter of 2022.

 

What is causing turbulence in the US stock market?

 

The value of tech stock is big in comparison to the rest of the US stock market, so any fluctuation within that has a significant knock-on effect.

 

Its value has been negatively impacted because companies such as Amazon, Netflix and Tesla saw share prices soar during the pandemic, but rising inflation and interest rates have since contributed to a significant decrease.

 

Earlier this year, Facebook announced that its user numbers had decreased for the first time in history, causing a drop in its share price. Because so many people signed up to Netflix during the Covid-19 pandemic, the number of new subscribers has also fallen recently; as a result, their share price has dropped too.

 

How might this impact your investments?

 

As we discussed in an earlier blog Why Your Portfolio May Decrease Even If The FTSE 100 Index Has Gone Up, the value of a handful of large companies that dominate the FTSE 100 index has gone up, whilst the value of the rest of the mid and smaller companies has fallen. This imbalance leads to volatility.

 

For example, the following industries have experienced a significant increase in value:

 

  • Oil companies. We have seen the price of oil rise from $60 per barrel to a peak of  $140, before dropping back to $100 (more on this shortly).

 

  • Banks have gone up because interest rates have risen three times in the UK already this year; they’re making a better margin on what they charge people for loans and debt.

 

  • Pharmaceutical companies have performed well as more than five billion people in the world have now received at least one Covid-19 vaccination. 

 

  • Mining and mineral companies have enjoyed success as the world’s economies opened up and, in the UK, returned to pre-pandemic levels (so much so that the price of nickel had to be suspended a number of times as the price had more than doubled!).

 

What else is having an impact on the value of the stock market?

 

The war in Ukraine has led to increased volatility in the stock markets and a decrease in the share value of organisations with assets in and around the conflict zones. We hope and pray that a peaceful solution can be found to stop the suffering and the ongoing violence for the people of Ukraine.

 

Some of the volatility that investors are experiencing comes from the energy crisis because Russia produces 50% of the world’s energy. Over the last ten years, the UK has become less reliant on Russia for energy (28% of UK energy comes from a green source), so we now rely on it for approximately 5% of our energy; but Germany, for example, relies on it for half of its energy supplies. It will take time to implement change and for the positive effects of that to ripple out.

 

Rising oil and gas prices impact almost everything in the world. At a basic level, you need a tractor in order to harvest a field, and a lorry to take a product to a factory or to a train for onward transportation. All of this is impacted by the cost of oil rising from $60 per barrel to almost double (at the time of writing).

 

Hopefully, within the next six months there’ll be a resolution to the conflict for the people in Ukraine. The UK will have potentially phased out its use of Russian oil by the end of the year (as proposed by the UK government) which will help to reduce and stabilise oil and gas prices – which should, in turn, reduce market volatility.

 

What can you do to help protect your investments?

 

If you’re an investor, it’s wise to seek independent financial advice. At Applewood Independent we know that stock markets tend to recover over time; knee-jerk responses to cash in investments are more likely to lead to financial losses.

 

If you’d welcome input, expertise and experience from Applewood Independent, please get in touch by emailing me at david@applewoodindependent.co.uk, or Alex at alex@applewoodindependent.co.uk.

 

The views expressed in this article are those of the author and do not constitute financial advice. Applewood Independent Ltd is authorised and regulated by the Financial Conduct Authority. For financial advice designed for you and your specific circumstances, please contact the author using the contact details provided in this article or, alternatively, contact the Applewood Independent Ltd office on 01270 626555.

The value of your investment can go down as well as up, and you may not get back the full amount invested.

Past performance is not a guide to future performance.

 

10 Ways To Spot An Investment Scam And Protect Your Assets

10 Ways To Spot An Investment Scam And Protect Your Assets

Have you ever been tempted to invest your hard-earned cash in an offer that seemed too good to be true? You made a wise choice if you decided against it!

Have you ever been tempted to invest your hard-earned cash in an offer that seemed too good to be true? You made a wise choice if you decided against it! 

The Office of National Statistics recently released data showing a 42% increase in investment fraud offences in England and Wales between January and September 2021. In the first half of last year alone, those offences totalled more than £107 million.

Financial fraud is significantly higher than it should be. If you are an investor with us, you can rest assured that your money is in safe hands.

10 ways to spot an investment scam

If you are presented with any of the following scenarios, resist the temptation to invest:

  1. A cold call or request from an unknown person to make a direct bank transfer to a personal account; there is no reason for this to happen in a legitimate investment opportunity.
  2. Invitation to click a link and enter your details on a third-party website: I was once asked to enter my debit card pin code (I didn’t).
  3. Investment opportunities that guarantee a high return: I have seen online adverts promising an 8% guaranteed return on investment. If it existed, we’d all be doing it! It’s a scam; anything that offers more than 1% guaranteed interest per year is untenable.
  4. Unregulated: reject any offer that is not regulated by the Financial Conduct Authority (FCA). The Financial Services Compensation Scheme (FSCS) provides compensation when certain firms providing authorised financial services are unable to meet claims against them. It helps to protect consumers and ensure confidence in the financial services industry.
  5. Requests for extraordinary amounts of personal details: always question who they are and why they need that information.
  6. Downplay risk: if the caller dismisses any potential risk, steer clear.
  7. High-pressure demands that require speed. This is designed to make you react quickly without thinking; there’s no need to work to anyone else’s timescale.
  8. A one-time-only offer: if you’re told that an opportunity is only being made available to you or only available this one time, walk away.
  9. Pressing your emotional buttons: avoid any invitation to invest that tugs on your heart strings (check out this earlier blog on How To See The Hidden Dangers Of Emotions And Ethics In Investing).
  10.  Social media posts are not a reliable source of advice for investments. Avoid them.

 What if  your intuition is telling you something is “off”, but you can’t quite put your finger on the reason?

 How to protect your money 

Here are some ways to help you protect your cash:

  • Stop any unsolicited conversation and take time to think about what’s being proposed.
  • Challenge what you’re being told: a legitimate caller will not rush or try to panic you.
  • Due diligence: do your research. If you are talking to someone who seems “dodgy”, check if their “company” is listed on the FCA register.
  • Use the  FCA Warning List to check out investment opportunities.
  • Be alert to the fact that overseas companies might not be regulated in the same way as those in the UK.
  • Send a cheque when making payments: it is still the most secure way to send your money (they will even bounce if the date or amount is written incorrectly).
  • Security checks: whenever our clients want to withdraw money from their account, we have checks in place to make sure it is them and that the bank account they are asking us to transfer to is one that we have used with them before (to send or receive money).
  • Reject cold calls: the safest thing to do is disconnect the call without giving them any information.
  • Talk to us if you’re a client with Applewood Independent.

 Investment scams are becoming more sophisticated and advanced, but with the right awareness, you can avoid becoming a victim.

For example, within the past few years, we have had to contact two of our clients because we recognised that their email addresses had been compromised and the fraudster had emailed us and requested money be drawn down. We have security measures in place to prevent this type of fraud from happening, and they’ve worked both times.

I hope you’ve found this article a valuable tool to help you protect your hard-earned cash! If you’re looking to invest in a safe and secure way and would like to make the most of our expertise, experience and connections, please get in touch or email me at ​​alex@applewoodindependent.co.uk.

P.S. If you have been targeted by an investment scam, report it to your local police station and to Action Fraud.

The views expressed in this article are those of the author and do not constitute financial advice. Applewood Independent Ltd is authorised and regulated by the Financial Conduct Authority. For financial advice designed for you and your specific circumstances, please contact the author using the contact details provided in this article or, alternatively, contact the Applewood Independent Ltd office on 01270 626555.

The value of your investment can go down as well as up, and you may not get back the full amount invested.

Past performance is not a guide to future performance.