Inheritance Tax and gifting guide

Inheritance Tax and gifting guide

If your estate could be liable for Inheritance Tax (IHT), gifting is one solution for passing on wealth while reducing the bill that could be appropriate for you. Our latest guide explains the basics of IHT and what you need to consider if you want to make gifting part of your long-term financial plan.

The guide covers:

  • What Inheritance Tax is and when it has to be paid
  • What Potentially Exempt Transfers (PET) are and how they affect IHT
  • Gifting allowances that allow you to pass on wealth or assets to loved ones free from IHT
  • How a charitable legacy can reduce an IHT bill
  • Reliefs that allow you to gift certain assets free from IHT

Click here to download your copy of the guide.

IHT can significantly reduce what you leave behind for loved ones, but there are often things you can do to reduce the bill. If you’re worried about IHT, please contact us. We’ll help you put a plan in place that considers your legacy, including gifting where appropriate.

Please note: The Financial Conduct Authority does not regulate estate or tax planning.

How to be with family over the festive period this year

How to be with family over the festive period this year

This year has been challenging for many of us. With families restricted on when they could meet up due to the Covid-19 pandemic, many have been looking forward to Christmas and the time traditionally spent with loved ones.

Reports suggest that up to three households can form a bubble and get together for a few days around Christmas. However, the new year is expected to involve restrictions. Even with the ability to form a bubble, you may not be able to see all your family and friends as you normally would over the festive period. But that doesn’t mean you can’t celebrate together.

Keep in mind too, that Covid-19 restrictions may change at short notice. While it’s hoped that families will be able to spend Christmas day together, there’s no guarantee and it will depend on how the situation develops.

While a ‘normal’ Christmas and new year are unlikely, there are ways you can be with loved ones over the coming weeks.

Plan video calls to mark usual traditions

If you’re not able to be together, video calls are a great way of keeping in touch and carrying out the usual traditions.

Having a plan for the most important ones can mean loved ones are still involved in the celebrations, even if you can’t be together. That might mean using Zoom to schedule a call so you can watch grandchildren open their Christmas presents in the morning or swapping Christmas cracker jokes in the afternoon. Scheduling the calls can help everyone organise their day and ensure things aren’t missed simply because other things are going off.

Think about the parts of Christmas that are the most important to you and your family when arranging calls.

Go for a socially distanced walk

Getting outdoors for a walk in winter can be magical. While most of us often spend Christmas indoors, a walk can be a great opportunity to spend time with loved ones. A walk around a local park that’s covered with frost can really put you in a festive mood. Plan ahead and take a flask filled with hot chocolate or mulled wine to get you into the holiday spirit too.

Remember to check local restrictions before making plans outside of a bubble and stick to the social distancing guidelines where possible.

Discover online games and quizzes

If your family is a fan of playing board games and quizzes when together, finding online alternatives can be a fun way to connect this year.

For board game fans, there are plenty of options online. If you have a family favourite, try giving it a search on Google, the most popular ones often have online or app-based options. But if you’re looking for something new, there are dedicated websites worth exploring, including Board Game Arena and Tabletopia. Both have free to play options and premium games that you need to pay for.

For quizzes, there are once again plenty of online options to try. But if you have a quiz expert in your group, asking them to put together some questions can make the game more personal to you. Kahoot! is an excellent app that lets you host a quiz with each player using their phone to answer questions.

Don’t give up traditional games either, with a bit of creative thinking, you can set up a game of charades or Pictionary over a video call too.

Plan ahead

Making plans for Christmas always means thinking ahead, from when to get the turkey to putting up the decorations. But this year’s restrictions mean a little more planning can go a long way.

For instance, pass presents on to recipients before the big day, ensuring they’re able to open them even if plans are forced to change last minute. The postal service is always busy this time of the year, but expect more delays than normal as people turn to online shopping options. So, order gifts and send any cards as early as possible.

While a plan can help you get the most out of Christmas this year, they may have to change too. Expect the government to amend restrictions and guidelines both nationally and regionally as new information is available. Keep in touch with friends and family to make sure everyone is clear on what your plans are over the festive period.

The toys topping Santa’s list this Christmas

The toys topping Santa’s list this Christmas

If you’re struggling for Christmas inspiration when searching for gifts for children, then don’t panic, there’s sure to be something that will delight them in this list.

Despite the current economic uncertainty, new research by Rakuten Advertising has found families still plan to celebrate with gifts. Seven in ten people plan to spend the same amount over the festive period as they usually would. Shopping habits are changing to reflect restrictions, with 66% increasing online spending and 50% purchasing more from local businesses, finding the perfect present is still a priority.

Shopping for children can be difficult. There are so many options to choose from, so what’s featuring on Santa’s list the most this year?

1. Star Wars The Child Animatronic Edition

The Mandalorian has become the must-watch show on Disney+. So, it should come as no surprise that its loveable The Child character, dubbed Baby Yoda by fans, is featuring on many Christmas wish lists. The animatronic toy features motorised movements, will make sounds and ‘use the force’ when it’s patted on the head three times; it’s perfect for fans of Star Wars. For younger children, you can buy a plush version too, ideal for having a cuddle with!

2. Botley 2.0

STEM toys that encourage children to explore science, technology, engineering and maths have become hugely popular. Botley 2.0 is a coding robot that comes with endless challenges and obstacle pieces. Children can programme Botley to do a sequence of up to 150 steps, helping them to learn to code from the get-go. As well as coding, it’s designed to enhance problem-solving and critical thinking skills too, while still being fun and imaginative.

3. Feathers and Feeling Peacock

For toddlers and young children, the bright colours, lights and sounds of this interactive peacock are perfect for capturing their attention. The eight emotion feather tails can be taken on or off, with each leading to a different reaction from the peacock, helping young children to explore emotions. It also helps them discover colours, shapes and numbers. With three different modes of play, it’s a toy that can grow with them too.

4. Earth Heroes

Books have long featured on children’s wish lists and this year Earth Heroes is set to be one of the bestsellers. The book features 20 people that have made a difference to tackling climate change. Among the inspiring individuals are David Attenborough and Greta Thunberg. The colourful illustrations make it a beautiful gift for children and offers a selection of stories from around the world that show the different ways people are taking action.

5. Lego’s Adventures with Mario Starter Course

Lego has become a staple on the Christmas gift list and continues to be a favourite among children. One of the most sought after sets this year features Mario and takes you back to the original video game. Using traditional Lego bricks and new obstacle pieces, children can create their own adventure course with an interactive Mario. Seven action bricks trigger different reactions from the character as kids try to beat their top score.

6. Laser Battle Hunters

For kids that love cars, Laser Battle Hunters is the next step. It comes with two remote-controlled vehicles that go faster than the average toy and can drift, perfect for getting away from your opponent. The aim is to use the built-in infrared cannon to blast the other car three times to win. It can be used in single-player mode too, giving players 60 seconds to hit the targets as many times as possible as it races around and returns fire.

7. Rollin’ Rovee

Rollin’ Rovee is an interactive friend for infants and toddlers, with different modes of play to suit the child as they grow. Each of the play modes includes lights, music and activities that are designed to get little ones moving. The toy can clap, play peek-a-boo and roll over so crawling babies can chase it. As they get older, children will be able to play with a ball with Rollin’ Rovee and learn the alphabet, numbers and more.

8. Paw Patrol Dino Patroller

If you know a child that loves watching the action of Adventure Bay in Paw Patrol, the latest toy from the franchise will let them play out their own rescue missions. The new Dino Patroller is motorised and includes a projectile launcher, perfect for going on prehistoric missions. The toy comes with a figure of Paw Patrol member Chase and, of course, a T-Rex that’s in trouble.

9. Hatchimals Crystal Flyers

Hatchimals have featured on letters to Santa for a few years now, and this year Crystal Flyers are popular. The pixie’s glittery wing will spin and flutter when turned on allowing her to fly. Children can then use their hands to guide her in the air to make her do acrobatics and dance.

10. A classic board game with a twist

A board game is a great way to spend some time as a family over the festive period. This year, there are a few classic games that have been given a twist to keep you entertained. Whether the original is a family favourite or you want to try something new Uno Flip, Cluedo Liar’s Edition or Monopoly Sore Loser are an excellent addition to the presents under the Christmas tree this year.

 

Lasting Power of Attorney: Why is it something we put off?

Lasting Power of Attorney: Why is it something we put off?

Naming a Lasting Power of Attorney is something that we should all do. It’s something that can provide us with security if we’re unable to make decisions. While it’s often something that’s associated with being elderly, it’s just as important for younger generations to take this step too.

A Power of Attorney gives someone you trust the power to make decisions on your behalf if you’re unable to. When you think about situations in which you would need this, most people think of losing mental capacity through dementia. But Kate Garraway’s story has recently highlighted why it’s important to have a Power of Attorney in place even when you’re healthy.

Kate Garraway’s experience highlights the importance of a Power of Attorney

ITV presenter Kate Garraway has featured in the news throughout the Covid-19 pandemic after her husband took ill. Her husband Derek has been hospitalised with Covid-19 since March and has been in a coma for much of the time. In his early 50s, Derek isn’t someone you’d usually associate with losing mental capacity. However, Kate has spoken out about the challenges.

In an interview with ITV, she said: “One of the practical problems – which a lot of people would have experienced if they’ve got the absence of someone in their life – like many things, the car is entirely in Derek’s name, the insurance is in Derek’s name, a lot of our bank accounts. There are lots of financial goings-on which are making life very complicated because I can’t get access to things because legally, I haven’t got Power of Attorney.”

The lack of a Power of Attorney means that loved ones can be left dealing with a financial mess and inability to manage it while you’re unable to make decisions. It can lead to complications and affect your financial security in the future.

Power of Attorney doesn’t just cover financial issues either but may cover the decisions about your health and care. If you’re ill, for example, a Power of Attorney will be able to make decisions about the type of care you have, including life-sustaining treatment. Without a Power of Attorney, you may be left in a vulnerable position.

3 reasons you might be putting off naming a Power of Attorney
1. “I’m too young to need one”

Needing a Power of Attorney is often associated with losing mental capacity due to age. However, accidents and illness can happen at any time. It’s a step that can protect you should the unexpected happen.

A Power of Attorney isn’t always permanent, it can be temporary until you’re able to make decisions again. It’s also important to note that you may want a Power of Attorney to make decisions on your behalf even if you have mental capacity. Handing financial decisions over to someone you trust while recovering from an illness can mean you’re able to focus on what’s most important.

2. “It will never happen to me”

This is a common reason for not naming a Power of Attorney. It can seem like a hassle for something that you will never need to use.

While it’s true that most people that name a Power of Attorney, thankfully, don’t need to use them, it acts as protection just in case. The chance of your home getting damaged in a fire is very small, but you still take out building insurance to give yourself peace of mind. View naming a Power of Attorney in a similar way; you hope it won’t need to be used, but it’s there in case you do.

3. “My partner will be able to make decisions on my behalf”

If you’re married or in a civil partnership you may mistakenly believe your partner will be able to make decisions on your behalf. However, no one has the automatic right to make decisions for you.

Not having a Power of Attorney can not only leave you in a vulnerable position but your loved ones too. Even if you hold a joint bank account, one party losing mental capacity can mean the account is frozen as it cannot be operated independently of each other.

Naming a Power of Attorney is simple and can protect you

Despite thousands of people putting off naming a Power of Attorney, it’s a simple step to take.

You can fill in the forms online here or download paper forms to post here. You can ask a solicitor to help you if you wish, but the forms are relatively straightforward, and you don’t need to use a legal professional. Once the forms are completed, you need to register a Power of Attorney with the Office of the Public Guardian for it to be valid. This is a process that takes between eight and ten weeks and costs £82 per Power of Attorney.

There are two types of Power of Attorney. The first covers financial and property affairs and the second covers health and care. You should make sure you have both in place.

If you have questions about Power of Attorney and how it fits into your wider plans, please get in touch.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The Financial Conduct Authority does not regulate estate planning.

The pension basics everyone needs to know

The pension basics everyone needs to know

Most workers are now paying into a pension. But research shows that there is a worrying lack of understanding about how pensions work and why they’re a good option for saving for retirement.

According to Royal London, seven in ten people admit they have little or no knowledge about pensions. Understanding your pension while you contribute can help you get the most out of it and ensure that you understand what it means for your retirement. If you’re unsure about why pensions are used to save for retirement and what happens to your contributions, here are the basics you need to know.

Your pension contributions are invested

The research highlighted that many workers paying into a pension don’t understand what happens to their money.

The money you contribute to a pension is invested. This means the value of your pension can fluctuate depending on investment performance. As you may be paying into a pension for decades, investing aims to help your contributions grow over the long term. As you aren’t making withdrawals from your pension, the returns delivered are invested themselves. This means you benefit from compound growth and your pension can grow even further.

Despite this, just 24% of those with a pension see themselves as an investor. This goes some way to explaining why pension savers aren’t engaging with their investments. Half admitted they have never looked at where their pension is invested. Nearly one in ten (9%) didn’t realise this information was available and 27% didn’t know they could change how their pension was invested.

If you haven’t made any changes, your pension will usually be invested in a default fund. However, pension schemes will offer a variety of funds to choose from. So, it’s worth reviewing these and seeing if alternatives are better suited to your retirement goals. If you’d like some help assessing your pension investments, please get in touch.

Your employer will make pension contributions

If you’ve been automatically enrolled in a Workplace Pension, your employer must also make contributions on your behalf. This applies to most workers.

The minimum they must contribute is 3% of your pensionable earnings. It can boost your pension and make your retirement more comfortable. However, if you stop making pension contributions, your employer no longer has to contribute either. As a result, you’d effectively lose ‘free money’.

You should review your employee benefits and talk to your employer too. Some employers will increase their contributions in line with yours or offer a salary sacrifice scheme that can provide a tax-efficient way to save more for retirement.

You also benefit from tax relief

The tax relief you receive when saving into a pension means it’s a tax-efficient way to save for retirement.

Assuming you stay within the limits of the Annual Allowance, you’ll receive some of the money you’d have paid in tax on your earnings back to add to your pension. It’s a valuable relief that can boost your pension investments. You receive tax relief at the highest rate of Income Tax you pay.

If you’re a basic-rate taxpayer and want to add £100 from your salary to your pension, it would only cost you £80 thanks to the tax relief. For higher- and additional-rate taxpayers, it’s even more valuable as they’d only need to add £60 and £55 respectively.

Again, if you stopped making contributions, you’d lose this ‘free money’ being added to your pension.

It’s tax-efficient when accessing your pension too

Retirement may still feel like a long way off, but how you’ll access the money you’re saving for this stage of your life is important too. A pension is an efficient way to save for your later years.

First, when you reach pension age, you can take a tax-free lump sum of 25% from your pension. It’s a step that can help you reach retirement goals. You can also choose to spread this tax-saving across withdrawals. At the moment, you can access your pension from the age of 55 but this will rise to 57 in 2028.

While an income taken from your pension may be liable for Income Tax, you don’t usually pay tax on investment returns. The favourable tax treatment of pensions means your pension investments can grow faster.

If you’re worried about Inheritance Tax, saving into a pension could also reduce the eventual bill. Please get in touch with us to discuss further how you can minimise Inheritance Tax.

What does your pension mean for your retirement?

Just as important as understanding how your pension works is knowing what kind of retirement lifestyle it will afford you. Understanding how your pension contributions will add up can help you prepare for retirement and means you’re in a position to make changes if needed. Please contact us to arrange a meeting to go through your pensions and retirement plans.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.

The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation which are subject to change in the future.

The Financial Conduct Authority does not regulate estate and tax planning.