 Investing involves the risk that your capital goes down as well as up; you may get back less than you invested. The commentary below is not intended as a recommendation for you to personally buy or sell any of the investments mentioned nor to take any investment action whatsoever. If the year ended today, the global stock market would be up about 12% in GBP and more than 15% in USD – a good year in almost anyone’s books. However, for many investors it probably doesn’t feel so good.  The most frequently asked question from our younger, higher-earning clients right now is whether they should use capital to pay down their mortgage. The answer? It depends but generally if the mortgage amount is not too high and the borrower has sufficient income and capital to live their life then it often makes sense to keep the mortgage and invest the money instead.  Pension Contributions vs Salary or Dividend If we assume that you are an additional rate taxpayer, you will pay 50-55% in tax when you take money out of your business as salary or a dividend. You will pay 33.75% in tax if you take it via your pension. This is largely because pension contributions made from your company are treated as an expense and so are not subject to corporation tax. It’s also because the first 25% of withdrawals from your pension is tax-free.  Investing involves the risk that your capital goes down as well as up; you may get back less than you invested. The commentary below is not intended as a recommendation for you to personally buy or sell any of the investments mentioned nor to take any investment action whatsoever. Recent press reports have suggested that both major political parties are likely to change the rules around inheritance tax (IHT). It is widely rumoured that the Conservative Government will either reduce or eliminate IHT in the March budget. At the same time, a recent report in The Times suggested that, if elected, Labour would remove some popular exemptions to IHT including potentially the smaller companies exemption and the agricultural exemption. Therefore, it seems that regardless of who forms the next Government there is considerable downside risk to assets that target IHT mitigation. According to research by Micap (reported in CityWire), about £6.3 billion or 7.5% of the AIM market is held by IHT-focused products whilst an additional £8.8 billion is held in IHT products that hold private companies. That’s quite a large amount of investment for which the fundamental rationale may soon disappear.  Investing involves the risk that your capital goes down as well as up; you may get back less than you invested. The commentary below is not intended as a recommendation for you to personally buy or sell any of the investments mentioned nor to take any investment action whatsoever. It was just over a year ago that I last wrote a ‘market update’. In many ways, not a whole lot has changed since then. In short, the relatively positive view we expressed in Sept 2022 has proved to be correct. So what happens next?!  There are principally three ways that family wealth erodes over time: Spending, Inflation & Taxes Here's what you can do about them.  With interest rates as high as they are currently, it is tempting to simply take the rate on offer from your bank and avoid the riskiness that comes from investing in shares. Additionally, higher and additional rate taxpayers are finding supposed value in buying government bonds directly, which offers a significant tax benefit relative to earning interest from a bank. But the long term investor is still very likely to be better off invested in shares, even after the tax break is considered.  Here are 5 relatively straightforward ideas for reducing your taxes and increasing your after-tax investment returns. In all the examples, there is an element of 'use it or lose it'. In other words, you need to act before the end of the tax year (April 5th) in order to get all of the benefits mentioned.  Most people don’t realise how much tax they can save just by investing in liquid assets like stocks and bonds for the long term. Below is an outline of how £1 million could be invested at what would very likely be an extremely low rate of tax. We’ll call it ‘pretty much tax free’. Not every idea will apply to every person but hopefully the exercise will show that there are lots of ways to invest for the long term in a very low tax way - which, all else equal, will lead to significantly greater wealth creation than routes that incur higher tax (like, say, investment properties...).  05 September 2022 Investing involves the risk that your capital goes down as well as up; you may get back less than you invested. The commentary below is not intended as a recommendation for you to personally buy or sell any of the investments mentioned nor to take any investment action whatsoever. What's Happened Financial markets have continued to have a tough time. The summer rally, which appeared material, has fizzled and global stocks are almost back to the lows they hit in June. |