Setting money aside regularly (for example, paying into a pension) is a good foundation for the future.
But it is also a little bit ‘out of sight, out of mind’. If you have not looked at your investments for a while, it is easy to become detached from them.
With the new tax year only a short time away, could now be a good time to take stock and reacquaint yourself with your financial plan?
Get to know your finances
A lot can happen in 12 months.
A change of career, or a significant life event (such as new children or grandchildren) will significantly impact your lifestyle.
This is why annual reviews are such a key part of financial planning. Together they give us the opportunity to explore some vital questions:
- Are your investments performing within a reasonable range of your expectations?
- Do you have the right balance of stocks, bonds and other securities? And do they match your acceptable levels of risk and what you want to achieve financially?
- Is your estate plan up-to-date?
- And crucially, are your goals the same as when you first made your plan? The beauty of setting a goal is that it is not fixed. These annual reviews can be a chance to reset and think about what is really important.
Get ready for the new tax year
Your annual review is also an opportunity to make sure your financial plans are prepared for new legislation, or changes in tax rules. So, getting them in before the new tax year that starts on 6 April is a really good idea.
We can help you navigate these more technical aspects, making sure you are getting as much value as possible out of the money you have saved.
Here are five key things to look out for in 2023/24:
- Income tax
In Scotland, higher earners are likely to pay more income tax.
For the 2023/24 financial year the threshold for the top rate of tax will reduce from £150,000 to £125,140, while the higher and top rates of tax have risen from 42p and 47p in the pound, respectively. (Elsewhere in the UK, the top rate threshold has come down, but the actual rate has stayed the same).
All the other rate bands and the personal allowance level are frozen for the year ahead. But with salaries rising (on average 6.1% across the UK) some taxpayers could be bumped up to a higher bracket.
- Capital gains (CGT) and dividend tax
Across the UK, cuts to the allowance level for when you start to pay CGT (paid on profits from selling something of value) and dividend tax (paid on the income from your investments) have both been cut, meaning you could pay more tax on your investments and when you sell assets.
The CGT allowance drops from £12,300 to £6,000 (falling to £3,000 in 2024), while the threshold for dividends moves from £2,000 to £1,000 (with a further cut just £500 from April 2024.)
- Inheritance tax (IHT)
The level at when you start to pay inheritance tax remains frozen. Coupled with rising property prices, this means more people could face paying higher levels of IHT.
The IHT threshold – the ‘nil-rate’ band – stays at £325,000 until 2028, while the resident nil-rate band (when you leave your home to direct descendants) is also unchanged at £175,000.
You can read more about what we have had to say on IHT here
- National Insurance (NI)
Last year the UK government took the controversial move to increase NI rates to pay for health and social care. This levy was scrapped though, and no further changes are expected for NI for 2023/24. Employees will pay 12% on earnings between £12.570 and £50,720 and 2% on anything over £50,270.
- Council tax
Council tax could also be going up. The level of tax is set by individual local authorities, but Scottish Government has not set any limit on these rises 2023/24. In England, councils have also been told they can raise the charge by as much as 3% (or even 5% in some circumstances) without holding a referendum.
Get your planning done early
There is another reason why planning early is a good idea – especially if you are looking to access an occupational pension scheme – as there are some reports of delays.
This is partly down to Covid-related backlogs, but there is also an impact from legislation aimed at stopping retirees being defrauded out of their savings. The Pension Schemes Act allows trustees to refuse transfers if they believe there is a heightened risk of the holder being subject to a scam.
The legislation is designed to protect pensions, but with previous estimates that around 5% of all transfer requests had been flagged as causing concern, could also hold up legitimate transfers.
To set up your annual review, or for help and advice on how to manage any of these upcoming changes, please get in touch.
