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Your Window on
Wealth
S P RI NG 2022
Effective tax planning strategies can help shield you from the chill this spring.
Striking a balance this spring
As well as being a season of hope and renewal, spring is also viewed as the ideal time to declutter and reorganise. The last couple of years have taught us the importance of achieving balance in our lives – this extends to our finances too, making now an opportune time for investors to review and rebalance their portfolios to ensure investments remain aligned to their long-term financial goals. Concerns surrounding inflation, rising interest rates and immense global political tensions have all combined to create a potentially disconcerting backdrop for investors during the early part of this year, as markets search for a stable footing. The good news is that many investors with long-term retirement goals tend to have time horizons that extend beyond inflationary cycles and any market volatility experienced is a normal investment phenomenon. History shows that investors who are patient and stick to their plans are more likely to achieve their financial objectives. Diversification is one strategy that withstands the test of time. What now for the global economy? A ‘disrupted recovery’ The current mix of uncertainties has led the International Monetary Fund1 to downgrade its global growth forecast when its latest economic musings were released in January.
Tax year 2022/23 – get your ducks in a row
While the international soothsayer does expect the global recovery to continue in 2022, it is now predicting a ‘disrupted recovery’ with growth forecast to moderate from 5.9% in 2021 to 4.4% this year – half a percentage point below the previous forecast made in October. Macro matters Last year’s gains in growth due to rebounding activity now appear to be behind us. Although the pandemic will continue to impact growth rates, the outlook for macroeconomic policy is likely to become increasingly critical. Indeed, the path of the global economy this year looks set to be largely shaped by central bank policies; specifically, their ability to keep inflation expectations anchored while allowing a supportive environment for growth.
While there's minimal change in the operation and structure of the taxation of UK individuals, the ‘no change’ element is significant. Excluding the 1.25 percentage point increase to National Insurance and Dividend Tax rates from April 2022, while we await the new Social Care Levy, the big tax freeze is on. Stemming from the Spring 2021 Budget when most major tax rates, bands and allowances were frozen until 2025–26, freezing is often regarded as a stealth tax. Estimates from the Institute for Fiscal Studies suggest by 2025 there could be five million higher rate taxpayers, a 900,000 increase2; they summarise, ‘Freezing things for a long period makes a big difference.’ By way of example, frozen allowances, growth in assets and accumulation of unspent income could see more people falling into the Inheritance Tax (IHT) net. 2
IFS, March 2021
Time to review your portfolio With the investment landscape undoubtedly changing, now seems an opportune time to spring clean your portfolio to ensure your investments continue to work as hard as possible for you. We can arrange a review to make sure your investment strategy is firmly aligned to your current personal circumstances and that your portfolio is well-balanced, diversified, tax-efficient and inflation-proofed where possible. IMF, 2022
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The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. The Financial Conduct Authority (FCA) does not regulate Will writing, tax and trust advice and certain forms of estate planning. INSIDE THIS ISSUE: In the news // Taking positive steps to achieve financial freedom // Inheritance Tax reporting – in the know // Fund inflows notch up second-best year on record // Vast number of pensioners holding ISA savings in cash // Net-Zero Asset Owner Alliance boosts efforts on climate change // Pension wealth outweighs property wealth