A plan to grow the economy

With the Office for Budget Responsibility (OBR) predicting the UK economy will expand by 0.8% this year, and by 1.9% in 2025, Jeremy Hunt delivered his last Spring Budget ahead of the General Election, highlighting reforms aimed to ensure the tax system is simple, fair, keeps pace with economic developments, and supports public finances. 

Expectations are that the rate of inflation will fall below the Bank of England’s 2% target level in “a few months’ time,” with the OBR forecast showing the government is on track to meet its fiscal rules to grow the economy, reduce debt and halve inflation. 

Changes to National Insurance contributions (NICs) 

In line with speculation, following reductions to NICs announced during the Autumn Statement, the Chancellor announced further changes, specifically a reduction in the main rate of employee NICs by 2p in the pound from 10% to 8%, and a further 2p cut from the main rate of self-employed NICs, meaning the main rate of Class 4 NICs for the self-employed will reduce from 9% to 6%. 

UK savings in focus 

In order to promote more investment in UK assets, the government announced the introduction of a UK Individual Savings Account (ISA) with a £5,000 annual allowance in addition to the existing ISA allowance of £20,000. It will be a new tax-free savings product for people to invest in UK-focused assets (a consultation regarding implementation will be running to 6 June 2024). And a British Savings Bond will be delivered through National Savings & Investments (NS&I) in April 2024, offering a guaranteed interest rate, fixed for three years. 

The 2024/25 tax year JISA (Junior Individual Savings Account) allowance remains at £9,000. 

IHT consultation 

It was announced that there will be a consultation on moving to a residence-based regime for Inheritance Tax (IHT). No changes to IHT will take effect before 6 April 2025, nil-rate band remains at £325,000 and the main residence nil-rate band at £175,000, with taper starting at £2m (estate value). From 1 April 2024, personal representatives of estates will no longer need to take out commercial loans to pay IHT before applying to obtain a grant on credit from HMRC. 

Reviewing non-dom status and Child Benefit 

In addition, it was announced that the non-dom status will be replaced by a new residence-based system from 6 April 2025. The government also announced an intention to move to a residence-based regime for Inheritance Tax (IHT), with plans to publish a policy consultation on these changes, followed by draft legislation for a technical legislation, later in the year. 

Changes to the Child Benefit system included an increase to the threshold for the High Income Child Benefit Charge to £60,000 in April. The rate of the charge will be halved, so that Child Benefit is not lost in full until an individual earns £80,000 per annum, and by April 2026, the Child Benefit system will be based on household rather than individual incomes. 

And pensions… 

The government remain committed to the pensions Triple Lock. The value of the new State Pension will increase to £221.20 per week in April, while the basic State Pension increased to £169.50 per week. 

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. 

News in Review

“We have turned a corner after the shocks of the past few years”

Inflation has fallen to its lowest level in almost two and a half years, according to data released by the Office for National Statistics (ONS) last week. The Consumer Prices Index (CPI) increased by 3.4% in the 12 month period to February 2024, reducing from the 4.0% figure recorded in January.

Food prices were cited as one of the largest downward contributors to the monthly change, with the annual rates for most types of food products easing between January and February. The largest effect came from price reductions in bread and cereals.

Following the data release, Prime Minister Rishi Sunak commented, “We have turned a corner after the shocks of the past few years,” before adding that “we are in a new economic moment.” Mr Sunak believes that this year will “prove to be the year that the economy bounces back.”

The reduction to 3.4% was slightly lower than economists’ expectations of a 3.5% in the year to February. The better-than-forecast data has led to predictions that the Bank of England (BoE) will begin reducing interest rates in the coming few months.

MPC hold firm

Last week, during their second meeting of the year, the BoE’s Monetary Policy Committee (MPC) voted to retain Bank Rate at 5.25%by a majority of eight to one. One member of the committee preferred to reduce the rate by 0.25 percentage points to 5%.

Interestingly, this was the first meeting since September 2021, that no one on the nine-person committee voted for an increase and two members who voted to raise rates at the last meeting in February, shifted to a ‘hold’ vote this time.

The decision to retain Bank Rate was widely expected, BoE Governor Andrew Bailey commented on the outcome, saying the economy is “not yet at the point” where rates can be lowered, but that things are “moving in the right direction.”

One area of concern seems to be that despite the slowdown in inflation, ‘key indicators of inflation persistence remained elevated,’ according to the BoE, adding that inflation in the services sector ‘remains elevated at 6.1%.’ Something they’ll no doubt keep a close eye on over the next month or so before the next MPC meeting which will conclude on 9 May.

Meanwhile, across the pond…

Last week, the US Federal Reserve held its key interest rate steady, with the Federal Open Market Committee voting to retain the benchmark borrowing rate in a targeted range between 5.25% – 5.5%, as widely anticipated.

The current federal funds rate level is the highest in over 23 years. Officials have implied three quarter-percentage point cuts by the end of 2024, the first reductions since the beginning of the pandemic. The likelihood of these three cuts in 2024 has been derived from the banks ‘dot plot,’ which is essentially a matrix of anonymous projections from the 19 officials who comprise the Federal Open Market Committee (FOMC).

Although choosing not to elaborate on the timing of any reductions, Fed Chairman Jerome Powell said he expects the cuts to come, as long as the data complies, “We believe that our policy rate is likely at its peak for this type of cycle, and that if the economy evolves broadly as expected, it will likely be appropriate to begin dialling back policy restraint at some point this year.”

Global equity markets rallied on the prospect of interest rate cuts in the coming months by the UK, US and Europe.

Consumer confidence…

On Friday, the latest data from GfK showed that overall consumer confidence remained flat in March at -21, mirroring the February reading. The index measuring consumers’ confidence in their personal financial situation over the last year was up one point to -13, while the same measure looking ahead to the next 12 months, increased to a reading of 2, which is 23 points higher than this time last year. This personal finance measure is the first positive reading and the highest score since December 2021. Client Strategy Director at GfK, Joe Staton, commented on the recent data set, “This is welcome news given the challenges faced by Britons of fiscal drag, higher costs for fuel, rising council taxes and utilities eroding any increases in wages or other income. But is there a note of worry this month? Look back to last year and it’s clear the improvements in consumer confidence seen most months since January 2023 have vanished.”

Here to help

Financial advice is key, so please do not hesitate to get in contact with any questions or concerns you may have.

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.

All details are correct at time of writing (27 March 2024)

Residential Property Review – March 2024

RICS responds to the Spring Budget  

The Royal Institution of Chartered Surveyors (RICS) has released a statement in response to the Spring Budget.  

On 6 March, the Chancellor announced that twenty more towns will join the Long-Term Plan for Towns, each receiving £20m. RICS was supportive of this investment, as well as the government’s deeper devolution deal with the North East Combined Authority. 

However, from RICS’ perspective there was still room for improvement. The leading professional body expressed that, with housing still an issue in the UK, they had hoped for a more detailed plan regarding the delivery of new and better homes.  

Justin Young, Chief Executive Officer at RICS, commented, “We look forward to hearing more on specifics such as placemaking and supply side measures, alongside supporting our high streets and net zero targets, ahead of any election.” 

Majority of sellers made a profit in 2023 

Data from Zoopla has found that, despite house prices falling last year, 93% of UK house sellers made a profit in 2023.   

While the average profit on a UK home was £74,000, the specific amount of capital gains made varied depending on location. The average sold price was highest in London (£517,000), with the average seller in the capital making £15,100 per year of home ownership. Meanwhile, those in the North East gained £4,250 each year as they sold their home for a lower average price of £151,000. 

The time spent in the property also dictates the amount of profit made. The general expectation is the longer you have owned the home, the more you are likely to make. However, as Izabella Lubowiecka, Senior Property Researcher at Zoopla explained, “those who bought when property prices last peaked, just before the 2007 financial crisis, saw more modest gains compared to those who bought after, when house prices dipped.” 

Improved market activity expected to boost property transactions in 2024 

Buyer and seller activity showed signs of improvement in February as the residential property market appears to be slowly bouncing back.  

Last month, buyer demand was up 11% year-on-year according to Zoopla. This is likely due to the lower cost of borrowing since there has been no increase to Bank Rate since August 2023.  

The number of sales agreed also saw a boost of 15% when compared with February 2023, with the North East of England and London experiencing the most noticeable rise in sales. 

Richard Donnell, Executive Director of Research at Zoopla, reflected, “Momentum in the sales market has been building over the last five months. I believe the housing market is on track for 10% more sales in 2024 than in 2023, totalling 1.1 million, as greater supply boosts the potential for more sales.” 

All details are correct at the time of writing (20/03/24) 

It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor. No part of this document may be reproduced in any manner without prior permission. 

Commercial Property Review – March 2024

Commercial property industry largely disappointed by the Spring Budget 

The Chancellor’s Spring Budget has been mostly met with disappointment from the commercial property industry, with many experts left wanting a stronger financial commitment to the sector’s development.   

Jeremy Hunt announced that Multiple Dwellings Relief (MDR) on Stamp Duty Land Tax in England and Northern Ireland will end on 1 June. Melanie Leech, Chief Executive of the British Property Federation, expressed concern for the build-to-rent sector in light of this, stating that “the government should be doing everything in its power to encourage more long-term investment into professionally managed rental homes.” 

Head of Commercial Research at Knight Frank, Will Matthews, did find some aspects of the Budget “helpful”, in particular investment into growth sectors such as innovation, life sciences, and film studios. However, Matthews determined that “the sums and measures involved were not game-changing.” 

Dr Walter Boettcher of Colliers is hopeful that the commercial property industry will feel long-term benefits of government investment, concluding that “ongoing reforms to pension and other savings platforms that encourages a larger and wider range of domestic investment sounds encouraging.” 

Chinese developers are net sellers of UK commercial property 

In the last three years, Chinese property developers have sold £1.4bn worth of UK real estate, data from MSCI has found. 

Developers in China have been struggling since 2021, when the country’s property market started to crash after property giant, the Evergrande Group was declared to be in default. China’s biggest developers are therefore continuing to make money where they can by selling up in Britain, despite having spent £12.8bn on British commercial property between 2014 to 2020.  

With Britain now ‘the top European investment location’ according to INREV, Chinese developers may be capitalising on buyers returning their attention here in hope of an investment opportunity. Despite this, it is still not a prime time to be selling real estate, according to Chris Gore, a Principal at Avison Young, who cautioned that, “Right now you wouldn’t be selling unless you really had to.” 

Investment outlook for commercial property  

The latest Investment Outlook from Carter Jonas predicts that 2024 will see more investment transactions than last year but that it will still register lower than the long-term averages. 

The property consultants do not foresee a major market correction as a result of the UK General Election which will take place by January 2025 at the latest. However, from analysis of historic data, Carter Jonas envisage that market activity will slow in the months before and after the vote. 

When it comes to the office sector, the report anticipates that those with correct green credentials and in prime locations ‘should benefit from rental growth in the short to medium term’. However, offices which do not have these ‘will likely continue to fall in value until a point is reached where it becomes economically viable to either refurbish them or change the use.’ 

All details are correct at the time of writing (20/03/24) 

It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor. No part of this document may be reproduced in any manner without prior permission. 

News in Review

“Britain looks to be out of recession already”

New UK growth statistics released from the Office for National Statistics (ONS) last week showed that monthly real gross domestic product (GDP) is estimated to have increased by 0.2% in January, following a 0.1% contraction in December.

Main contributors to growth in the month were services output and construction, which grew by 0.2% and 1.1% respectively, while production output was one area of detraction, falling 0.2% in January. At 1.1%, construction output saw its largest monthly rise since June last year, supported by a 2.6% rise in private sector house building, which had previously been subdued by elevated interest rates.

After the recent news that the UK was in a technical recession, following GDP contractions of 0.3% in Q4 of 2023 and 0.1% in Q3, this new data provides a glimmer of hope for a more positive start to the year. Research Director at the Resolution Foundation, James Smith, commented, “Britain looks to be out of recession already, with strong retail sales helping the economy to grow in January and recent PMI data suggesting that momentum has continued into February.”

However, he went on to caution, “Britain is far from ending its period of prolonged stagnation, with the economy yet to return to its pre-pandemic size on a per person basis. Ending stagnation will require sustained productivity improvements, greater investment and a far stronger export performance.”

US inflation ticks higher

Last week, February consumer price index data released from the US Labor Department showed overall prices increased by 3.2% year-on-year, a slight elevation from the 3.1% figure recorded in January. From a monthly perspective, costs increased by 0.4% in February, following a 0.3% gain the previous month. Main contributors to the monthly increase were rising fuel and housing costs, while food prices remained flat. Since the Federal Reserve started increasing borrowing costs in 2022, inflation has slowed considerably. In a key election year, it is anticipated the Fed will start cutting interest rates as the year progresses.

Surge in mortgage arrears

Key points from The Bank of England’s Mortgage Lenders and Administrators Statistics report for Q4 2023 have shown that ‘the value of outstanding mortgage balances with arrears increased by 9.2% from the previous quarter, to £20.3bn.’ This represents a massive 50.3% increase year-on-year, bringing the proportion of total loan values with arrears (relative to all outstanding mortgage balances) to 1.23%, an increase from 1.12% in the previous quarter, and the highest percentage in over 7 years (Q4 2016).

Housing demand returning

The Royal Institution of Chartered Surveyors (RICS) latest survey of the residential property market has highlighted a more positive trend in buyer enquiries and new listings, with sales modestly picking up in the near-term, with expectations that they will gain further momentum over the coming months. Within the survey, the new buyer enquiries indicator registered a net balance of +6% in February, replicating the January uptick. This ‘second successive reading in positive territory… continues to signal an upward trend in buyer demand,’ according to RICS, who add, ‘When disaggregated, most parts of the UK have seen a recovery in buyer enquiries over the past two months.’ The report shows a continuation in the stabilisation of house prices, with one-year projections indicating a return to growth.

Latest labour statistics

ONS data has shown the UK economic inactivity rate for the three months to January 2024 was recorded at 21.8%, increasing in the latest quarter, and marginally higher year-on-year. Looking closely at the data, a total of 9.2 million people aged between 16 and 64 are not currently in work or seeking employment, over 700,000 higher than prior to the pandemic. A prime reason for inactivity is rated as long-term illness, attributed to a third of working-age inactivity. Other groups include those with disabilities, discouraged workers and early retirees.

Here to help

Financial advice is key, so please do not hesitate to get in contact with any questions or concerns you may have.

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.

All details are correct at time of writing (20 March 2024)

House number 13 – are you superstitious? 

A recent study1 suggests that some Brits are superstitious, as homes numbered 13 are valued lower than the average property. 

Over 10 million houses have been analysed, each with a door number between 1–100. It seems many homeowners would like to be number one, as the first house on the street is worth the most – an average of £393,690. This is nearly £40,000 more than homes that have the ‘unlucky’ number 13 on its door. 

Very superstitious? 

Tim Bannister, Property Expert at Rightmove commented on the findings, “The majority of buyers are unlikely to be put off being the owner of a number 13 home, but it’s interesting to see from such a large data set that there do appear to be pockets of Great Britain that are more on the superstitious side.” 

For this reason, some new developers skip the number 13 altogether, just like hotels have been doing for years with rooms and even floors! If you don’t struggle with triskaidekaphobia (fear of the number 13), you could snap up a bargain in 2024. 

1Rightmove, 2023 

As a mortgage is secured against your home or property, it could be repossessed if you do not keep up mortgage repayments 

News in Review

“A plan to grow the economy, a plan for better public services, a plan to make work pay”

Chancellor Jeremy Hunt delivered his Spring Budget last week, during which he provided an economic update from the Office for Budget Responsibility (OBR). The latest projections showed the rate of inflation is expected to fall below the Bank of England’s 2% target level in “a few months’ time.”  The OBR expects economic growth of 0.8% this year, with growth of 1.9% in 2025, higher than the 1.4% figure previously predicted.

The Chancellor said his Budget was “A plan to grow the economy, a plan for better public services, a plan to make work pay… Growth up, jobs up and taxes down.”Headline Budget announcements included:

National Insurance Contributions (NICs)

  • A reduction in the main rate of employee NICs by 2p in the pound from 10% to 8%, following the 2p cut that took effect in January
  • A cut to the main rate of self-employed NICs, meaning the main rate of Class 4 NICs will reduce from 9% to 6%.

Child Benefit

  • The threshold for the High Income Child Benefit Charge will be increased to £60,000 in April
  • The rate of the charge will be halved, so that Child Benefit is not lost in full until an individual earns £80,000 per annum
  • By April 2026, the Child Benefit system will be based on household rather than individual incomes.

New savings products

  • A new UK ISA with a £5,000 annual allowance in addition to the existing ISA allowance. It will be a new tax-free savings product for people to invest in UK-focused assets (consultation re implementation to run to 6 June 2024)
  • British Savings Bonds to be delivered through National Savings & Investments (NS&I) in April 2024, offering a guaranteed interest rate, fixed for three years.

Business taxation

  • From April 2024 the threshold at which small businesses must register to pay VAT will be raised from £85,000 to £90,000.

Non-dom tax regime

  • This regime is set to be abolished
  • From April 2025, new arrivals to the UK will not have to pay tax on foreign income and gains for the first four years of their UK residency
  • After that, they will pay the same tax as other UK residents.

Property taxation

  • From 1 June 2024 Stamp Duty Land Tax Multiple Dwellings Relief will be abolished
  • The higher rate of Capital Gains Tax (CGT) on residential properties will be reduced from 28% to 24%.

Public Sector Productivity Plan

The Chancellor announced a new Public Sector Productivity Plan to restart public sector reform and change the Treasury’s traditional approach to public spending. This includes a £2.5bn funding boost for the NHS in 2024/25, allowing the service to continue its focus on reducing waiting times for patients and £3.4bn to modernise NHS IT systems. The plan also includes £800m of additional investment to boost productivity across other public services, including £230m for drones and new technology to free up police officers’ time for frontline work and £75m to roll out the Violence Reduction Unit model across England and Wales.

Budget reaction

Director of the Institute for Fiscal Studies (IFS), Paul Johnson, commented on the Budget, “The OBR marginally increased its forecasts for economic growth, but the overall public finance picture remains largely unchanged from the autumn. The Chancellor is still on track to stabilise debt as a fraction of national income in five years’ time… While his ambition to improve public sector efficiency and productivity is the right one, and his injection of capital funding into the NHS is a sensible way of doing so, delivering on such plans and securing cash savings will be very tough indeed.”

In other news

Last week new data showed that India’s economy grew by 8.4% in the final quarter of 2023, supported by strong construction and manufacturing activity. Retaining its title as the world’s fastest growing major economy, India is forecast to leapfrog Germany and Japan as the world’s third largest economy in the coming years. The Indian government estimate growth of 7.3% for the 2024 fiscal year to 31 March.

In China, Premier Li Qiang outlined a series of measures last week aimed at boosting its flagging economy, whilst revealing an ambitious 5% growth target for 2024.

Here to help

Financial advice is key, so please do not hesitate to get in contact with any questions or concerns you may have.

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.

All details are correct at time of writing (13 March 2024)

Financial pitfalls primarily impacting women 

Research1 has shone a spotlight on the financial challenges that prevent women from accumulating the same wealth as their male counterparts. 

The report found that having children continues to have a disproportionately large impact on women’s finances, as do other life events such as the menopause. 

The findings 

Amongst the report’s findings were the following statistics: 

  • A quarter of women continue paying into their pension at the same rate during parental leave, vs 70% of men 
  • Caring responsibilities (outside of childcare) have financially impacted nearly half of women 
  • One in 20 menopausal women have quit work due to their symptoms 
  • Only 55% of women return to work full time after their first child, compared to 90% of men. 

Of course, no two women are the same and each will face different challenges on her journey to financial wellbeing. However, these statistics show that there are common threads here. Women continue to take the lion’s share of caring responsibilities, taking them out of the workplace and reducing their financial security not only in the present, but as they approach retirement as well. 

Let’s do something about it – together  

Despite the financial challenges women face, they remain less likely than men to seek professional financial advice2. As we move into 2024, make a New Year’s resolution – let this be the year that you empower yourself to succeed and get your finances on track for a prosperous future. 

1AJ Bell, 2023 

2Canada Life, 2022 

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 scammers targeting YOU 

According to a study from NatWest1, seven in 10 people have been targeted by scams over the last 12 months. Vulnerabilities brought on by cost-of-living challenges have likely contributed to the high numbers. 

Sadly, 13% of people have fallen prey to such scams, which are growing in both number and sophistication – targeting young and old – no one is immune. 

Avoid, avoid, avoid 

To avoid a scam, you’ve first got to know what you’re looking for. So, here’s a list of the most common scams used over the past year and the proportion of people who were targeted: 

  1. Phishing scams (37%) 

Fake emails or calls from organisations purporting to be from legitimate companies, asking you to provide personal or private data. 

  1. Trusted organisation scams (21%)  

Criminals contact their victims pretending to be trusted organisations such as HMRC, the police or their bank, saying there’s something wrong with their account, they need to pay a fine, or similar. 

  1. Refund scams (13%) 

Similar to the above, but the criminals instead use a potential refund or rebate to tempt victims into sharing personal or banking information. 

Other scams include messages purporting to be from friends/family asking for money (12%), get rich quick scams (12%) and purchase scams (9%). 

Keep yourself (and your money) safe  

Staying vigilant and keeping your guard up around unsolicited calls and messages is key to protecting yourself from scams. Remember: 

• If something seems too good to be true, it probably is 

• Your bank will never ask you to disclose your full PIN or password 

• Don’t respond to unsolicited calls, emails or texts, or open links if you feel suspicious 

• We’re always here to help if you’re ever unsure about something. 

Always be alert to the risk of fraud – double check any details to ensure people or organisations are who you think they are. 

Stay vigilant, protect yourself – knowledge is power. 

1NatWest, 2023 

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.  

Home sweet home 

What makes you feel at home? A recent survey1 has highlighted that, for many Brits, it is about more than just bricks and mortar. When asked what was most important, family photos came top of the list, followed by fresh bed sheets and a full fridge. Books, blankets, and a TV were also popular. 

Comes at a cost 

While the feeling of being at home may be priceless, each household spends an average of £593 every year on items that make them feel more relaxed and comfortable. The biggest spenders are those living in Greater London, with an average of £953 coming out of most bank accounts. Interestingly, 25 to 34-year-olds were found to be the age that spent the most, while over-55s splashed the least amount of cash. 

Protect your possessions 

It is perhaps unsurprising that 55% of respondents said they would be disappointed if their beloved belongings were damaged. However, a third admitted that they did not have home contents insurance; renters in particular are unlikely to have the right cover. 

If you want to protect your prized possessions, or you would like mortgage advice to help find your dream home in 2024, get in touch. 

1Aviva, 2023 

As a mortgage is secured against your home or property, it could be repossessed if you do not keep up mortgage repayments.