Is IHT change on the cards?

It’s been three years since then-Chancellor Philip Hammond asked the Office of Tax Simplification to look into potential amendments to the Inheritance Tax (IHT) regime1. Since then, no changes have been made to the tax incurred when wealth passes onto the next generation; could Rishi Sunak be the one to take up the mantle once more?2

A significant, pandemic-shaped deficit means that some unwelcome tax hikes could be on the cards. And IHT is a logical target for some economists, who see this tax as a way of generating income for the Treasury with little economic impact, as well as driving social mobility.

This was the conclusion of research from the Institute for Fiscal Studies (IFS) entitled Inheritance and inequality over the life cycle: what will they mean for younger generations? The paper found that inheritances have comprised an increasing proportion of national income over the past 50 years – something that could influence policymakers’ decisions around the taxation of wealth transfer.

Inheritance inequality

According to the IFS, those born in the 1980s can expect inheritances worth an average 16% of their lifetime income – against just 9% for those born 20 years earlier. This trend is likely to lead to rising levels of wealth inequality between rich and poor families. Arguably, a stricter IHT regime could help lessen the impact.

Younger generations’ fortunes largely depend on how wealthy their parents are, with the 1960s and 1980s generations whose parents occupy the top fifth of the wealth scale expecting a lifetime boost of 17% and 29% from their inheritances, respectively. By contrast, the boost is just 2% and 5% respectively for those whose parents are on the lowest rung.

This means that not only are there differences by age, with the younger group benefiting more, but also by differences in parental wealth, which delivers a significant benefit. However, with ‘levelling-up’ an unequal UK, high on our cash-strapped government’s agenda, IHT is a likely candidate for reforms – and that could hit wealthier families hard. It’s best to prepare for a range of scenarios and take professional advice for the best financial strategy.

1gov.uk, 2018

2gov.uk, 2019

The value of investments and income from them may go down. You may not get back the original amount invested. A pension is a long-term investment. The fund value may fluctuate and can go down. Your eventual income may depend on the size of the fund at retirement, future interest rates and tax legislation. Inheritance Tax Planning is not regulated by the Financial Conduct Authority.

Residential Property Review – August 2021

Transition to eco homes hotting up

With climate issues becoming ever more urgent, policymakers and the housing industry are increasingly turning their attention to sustainable property development.

Making homes greener will play an important part in the UK’s efforts to achieve net-zero emissions by 2050: new and existing homes together account for 20% of the UK’s greenhouse gas emissions. As such, any improvements the sector makes could translate into a major environmental benefit.

The government’s Future Homes Standard, which comes into effect in 2025, commits to making all new-build homes in England ‘future-proofed with low carbon heating and world-leading levels of energy efficiency.’

Meanwhile, in response to growing interest in eco-friendly homes, several lenders have started offering green mortgages. Typically, these allow buyers of energy efficient homes to get lower rates on certain mortgages.

Some commentators, however, have been critical, suggesting that the current range of green mortgages is too limited in scope. It is suggested that the next steps may involve offering incentives to homeowners for improving less efficient homes, rather than simply rewarding buyers of A or B-rated properties.

Sales spree ahead of Stamp Duty changes

A race to beat the Stamp Duty holiday deadline has pushed UK house buying to its highest level since records began.

According to Savills, the non-seasonally adjusted estimate for residential property transactions in June rose to a monthly record of 213,120. This was double the June average for 2017-2019 and more than three times June 2020’s coronavirus-impacted total.

June is traditionally a busy month for transactions. This year, though, the buying spree was further fuelled by the imminent tapering of the Stamp Duty holiday. Until June, buyers in England and Northern Ireland paid no tax on the first £500,000; the nil-rate threshold has now been reduced to £250,000 until 1 October, when the threshold reverts to £125,000.

Analysts believe there will inevitably be some slowdown in the coming months, although the market is not expected to grind to a complete halt. Agreed sales remain above average with increases in activity especially noteworthy for higher value homes.

Enquiries dip as new instructions fall again

A scarcity of new instructions and relatively high level of enquiries is still causing an excess of demand over supply in the UK residential property market, according to the July survey published by the Royal Institution of Chartered Surveyors (RICS).

The net balance for new instructions in July fell to -46% (down from -35% in June), a fourth successive monthly decline. The survey also reported an easing in demand following the Stamp Duty changes, with new buyer enquiries falling to a net balance of -9% in July (from +10% a month earlier). Although this slip in enquiries ends a run of four successive monthly increases, demand remains ahead of supply.

Commenting on the findings, Simon Rubinsohn, RICS Chief Economist, said, “Although the tapering in Stamp Duty is beginning to have some impact on RICS activity indicators, the overall tone to the market remains firm.“

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House Prices Headline statistics

House Price Index (June 2021)* 139.3*

Average House Price £265,668

Monthly Change 4.5%

Annual Change 13.2%

*(Jan 2015 = 100)

  • Average house prices in the UK increased by 13.2% in the year to June 2021
  • On a non-seasonally adjusted basis, average house prices in the UK increased by 4.5% between May and June 2021
  • House price growth was strongest in the North West where prices increased by 18.6% in the year to June 2021.

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House Prices Price change by region

Region   Monthly Change (%) Annual Change (%) Average Price (£)
England   4.9 13.3 £284,029
Northern Ireland
(Quarter 2 – 2021)		 2.9 9.0 £153,449
Scotland 2.4 12.0 £173,961
Wales   4.6 16.7 £195,291
East Midlands 5.1 14.3 £226,846
East of England 4.5 12.1 £327,017
London 2.5 6.3 £510,299
North East 5.9 15.3 £149,521
North West 6.8 18.6 £200,222
South East 2.7 10.5 £355,948
South West 5.5 13.7 £294,906
West Midlands Region 5.7 15.0 £231,429
Yorkshire & The Humber 7.1 15.8 £194,518

Source: The Land Registry
Release date: 18/08/21 Next date release: 15/09/21

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Average monthly price by property type – June 2021

Property Type Annual Increase
Detached
£410,054		 15.6%
Semi-detached
£254,441		 13.5%
Terraced
£218,484		 14.0%
Flat / maisonette
£221,211		 8.4%

Source: The Land Registry
Release date: 18/08/21


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Residential market outlook


“There is a continued drumbeat of demand for more space among buyers, both inside and outside, funnelling demand towards houses, resulting in stronger price growth for these properties. Sellers will need to consider this when it comes to pricing expectations.“

Gráinne Gilmore, Head of Research at Zoopla
Source: Zoopla August 2021

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Contains HM Land Registry data © Crown copyright and database right 2017. This data is licensed under the Open Government Licence v3.0.

All details are correct at the time of writing (19 August 2021)

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 Market Review – August 2021

Investment in student accommodation nears £2bn in H1

The latest data from Knight Frank shows that investor appetite for purpose-built student accommodation (PBSA) was strong in H1, despite the sector being adversely impacted by the pandemic, with restrictions limiting international travel and disrupting study for a large proportion of students. The sector is in a strong position to bounce back as face-to-face teaching resumes and a pursuit for the ‘university experience’ incites students.

Total investor spending for the first half of the year reached almost £2bn, as deal volumes rose, and investors looked beyond short-term disruption. Cumulative deal volumes to the end of June were 47% higher than the same period last year and 4% higher than in 2019. Recent UCAS data shows increased optimism for the scale of demand this autumn, with year-on-year rises evident from both UK and overseas applications.

Summarising the uptick in investment transactions, Knight Frank believe it shows that investors, ‘have confidence in the sector’s ability to deliver long-term, stable income streams. It also reflects a wider pivot which has taken place over the last 18 months, from institutional investors towards residential assets across all age groups. Rising student numbers and ongoing low supply ratios in many university cities are also driving investor demand for PBSA.’

Indicators point to improving market sentiment in Q2

The newly compiled Commercial Property Survey from the Royal Institution of Chartered Surveyors, for Q2 2021, clearly highlights an improvement in overall market sentiment, with 56% of respondents currently feeling that market conditions are consistent with an upturn, this is an increase from 38% in Q1 this year.

The industrial sector continues to experience sharp growth in interest from both investors and occupiers. Respondents to the quarterly survey refer to a continuation in the sharp contraction in availability of leasable industrial space, with the net balance falling deeper into negative territory at -48%, compared with -39% in Q1. Over the next year, respondents expect strong industrial capital value growth across all UK regions.

Encouragingly, trends in demand in the office sector seem more stable than the previous quarter. Although both secondary and prime retail values are predicted to decline, projections are less negative than in previous surveys. Retail availability continues its upward trajectory. Across the retail and office sectors, returning net balances of +52% and +40% respectively in Q2, were recorded.

Demand varies widely at a sector level, with current sector net balances measuring +63% for industrials (versus +57% in Q1), -3% for offices (versus -34% in Q1) and -25% for retail (versus -55% in Q1).

In what the report declared a ‘noteworthy development‘, capital value projections are now only ‘marginally negative for hotels‘, with the latest net balance shifting significantly from -47% in Q1 to -4% in Q2.

Rising student numbers and ongoing low supply ratios in many university cities are also driving investor demand for PBSA

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Commercial property currently for sale in the UK

  • Regions with the highest number of commercial properties for sale currently are South West and North West England
  • Northern Ireland currently has the lowest number of commercial properties for sale (26 properties)
  • There are currently 1,324 commercial properties for sale in London, the average asking price is £1,550,639.

Region No. properties AVG. asking price
London 1,324 £1,550,639
South East England 1,143 £2,074,320
East Midlands 745 £1,007,808
East of England 733 £633,795
North East England 777 £349,285
North West England 1,270 £446,614
South West England 1,516 £536,991
West Midlands 1,137 £488,318
Yorkshire and The Humber 1,117 £316,941
Isle of Man 51 £486,457
Scotland 1,102 £304,831
Wales 755 £422,476
Northern Ireland 26 £412,121

Source: Zoopla, data extracted 19 August 2021

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Commercial property outlook

Occupier demand – broken down by sector



  • A headline net balance of +16% of contributors reported a pick-up in overall tenant demand over Q2, compared to -5% in the previous quarter
  • A net balance of +63% reported an increase in demand for industrial space
  • Retail and office sectors remain in negative territory at -25% and -3% respectively.

Source: RICS, UK Commercial Property Market Survey, Q2 2021

Availability – broken down by sector

  • There is a continuing drop in the availability of industrial space, with the latest net balance falling to -48% in Q2
  • Availability remains on an upward trajectory for office and retail, returning net balances of +40% and +52% respectively in Q2.

Source: RICS, UK Commercial Property Market Survey, Q2 2021

All details are correct at the time of writing (19 August 2021)

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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.

Younger investors and social media

The Financial Conduct Authority (FCA) is concerned about how much influence social media could be having on younger investors, who could unknowingly be taking on significant financial risks.

According to the FCA, this younger, more diverse group of investors is highly reliant on social media platforms such as Instagram, YouTube, and TikTok for investment tips and advice, but they tend to lack the knowledge and understanding required to make informed choices.

A mismatch of confidence and resilience

The FCA expressed concerns that these investors are confidently investing in riskier products despite a ‘striking’ lack of awareness of any associated risk. Shockingly, 45% did not associate ‘losing some money’ as a potential risk.

This group also shows low levels of financial resilience, with the findings showing that a significant loss could have a fundamental impact on the lifestyles of 59% of inexperienced investors.

Five questions to ask yourself

A digital disruption campaign has been launched by the FCA to raise awareness of the risks, prompting people to ask themselves five questions:

1.            Am I comfortable with the level of risk?

2.            Do I fully understand the investment being offered to me?

3.            Am I protected if things go wrong?

4.            Are my investments regulated?

5.            Should I get financial advice?

Take care of your financial future Its pays to take advice – we can help develop an investment plan suited to your long-term goals and risk profile.

The value of investments and income from them may go down. You may not get back the original amount invested. A pension is a long-term investment. The fund value may fluctuate and can go down. Your eventual income may depend on the size of the fund at retirement, future interest rates and tax legislation.

News in Review

“Employers are keen to re-build following an incredibly turbulent 18 months for business”

With double jabbed people, as well as those aged under 18 in England and Northern Ireland, no longer legally required to self-isolate if they are identified as a close contact of a positive COVID-19 case, many will be breathing a sigh of relief, not least businesses who have struggled with staff shortages. A recent survey of 700 company directors conducted by the Institute of Directors (IoD), revealed that 44% of businesses are currently experiencing staff shortages, a situation which risks undermining the recovery and fuelling inflationary pressures.

While 21% of directors attribute shortages to employees forced to self-isolate due to COVID contacts, a massive 65% of directors said it’s due to the UK’s long-term skills gap, with 40% struggling because of a lack of potential workers from the EU.

Senior Policy Advisor at the IoD, Joe Fitzsimons, commented, “Employers are keen to re-build following an incredibly turbulent 18 months for business… the issue of labour shortages is proving disruptive across a huge range of sectors and at all levels. Ensuring that workers are available with the right skillset to perform effectively is a crucial pre-requisite for recovery.”

UK economic rebound confirmed in Q2

The easing of restrictions helped to support the UK economy, which grew by 4.8% in Q2, according to data released last week from the Office for National Statistics (ONS). In terms of output, growth was primarily driven by retail trade, food service activities and accommodation. Although slightly below Bank of England estimates for 5% growth, the main driver of growth was consumer spending, which increased by 7.3% during Q2, ahead of expectations. ONS data highlighted that the level of GDP is currently 4.4% below where it was pre-pandemic Q4 2019.

Head of Economics at the British Chambers of Commerce (BCC), Suren Thiru, reflected on the Q2 data set from the ONS, “Strong growth in the second quarter may be the high point for the UK economy, with economic activity likely to moderate in the third quarter as staff shortages, supply chain disruption and consumer caution to spend, limits any gains from the lifting of restrictions in July… Against this backdrop, policymakers must guard against complacency over the underlying strength of the recovery. A comprehensive rebuild strategy to turbocharge growth post-COVID is needed, alongside a clear plan for dealing with any future virus response, to give firms the confidence to start firing on all cylinders again.”

Labour statistics released by ONS on Tuesday confirmed that job vacancies have hit a record high, reaching 953,000 in the three months to July. The unemployment rate fell to 4.7% in the three months to June.

Fund inflows bolstered by earnings strength

It has been reported that in the week to 11 August, global equity funds registered inflows for a third consecutive week, with positive economic data and strong corporate earnings from the US, supporting sentiment. Inflows of $10.12bn were received into global equity funds, representing an uplift of 12% on the previous weeks’ figures. The majority of the inflows ($5.6bn) were received into European equity funds, with US counterparts obtaining $2.7bn. In Q2, it has been reported that almost 70% of global firms have beaten analysts’ profit estimates, posting average growth of 143%. Leading the earnings recovery are firms in cyclical sectors such as industrials.

China unveils regulatory plan

Last week, the Chinese government announced a plan outlining tighter economic regulation. New rules are due to be introduced on areas including technology, national security and monopolies. The 10-point plan details the strengthening of laws on science and technological innovation, culture and education. Regulations relating to China’s digital economy, including internet finance, artificial intelligence and cloud computing are also due to be evaluated.

Oil price bounce back – US urges action

As countries have gradually reopened, the oil price has rebounded. In July, members of OPEC (Organization of the Petroleum Exporting Countries) and its allies agreed to boost supply to help stabilise the situation, adding 400,000 barrels a day to their output. According to the White House, this is ‘simply not enough,’ urging the world’s top oil producers to help quell rising fuel prices to support the global recovery.

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.

Keep one step ahead

Nearly a third of homeowners (31%) have said they would only consider purchasing protection insurance if they fell ill1 – which defeats the point as it’s already too late by then.

Other triggers for taking out protection include having an accident (24%) or a change in employment status (25%). A further 22% say there is no circumstance that would make them consider purchasing a protection product.

Other reasons given include:

•             Not thinking they need it (28%)

•             Believing it to be too expensive (25%)

•             Not being able to afford it (22%).

No regrets

Unfortunately, once people experience a change in their circumstances, it is often too late to protect themselves.

Protection policies rarely offer backdated cover, meaning that homeowners could find themselves in unnecessary financial difficulty as they try to meet their mortgage, bills and other essential payments.

Many of those questioned said they wish they had better understood the true value of protection, with one in seven people (14%) regretting not having financial protection in place that would have supported their mortgage payments in the past.

Get ahead

We can help explain the implications of having no protection insurance for you and your family, and advise you on suitable and cost-effective products to protect you financially – before it’s too late.

1MetLife, 2021

The value of investments and income from them may go down. You may not get back the original amount invested. A pension is a long-term investment. The fund value may fluctuate and can go down. Your eventual income may depend on the size of the fund at retirement, future interest rates and tax legislation.

Probate delayed by ‘hidden assets’

Probate software specialist Exizent has published its first Bereavement Index1, with some interesting findings. It shows that many people fail to organise their finances before death, leading to stress and anxiety for those left dealing with a ‘financial mess’.

According to the research, one in seven (14%) of those tasked with administering the estate of someone who has died, begin the process without full knowledge of all the deceased’s accounts and assets. In fact, so many people die without leaving behind sufficient financial information, that 37% of accounts only come to light during probate.

Secret accounts

No wonder, then, that nearly 90% of those who have recently lost a loved one found the probate process ‘stressful’ – or ‘extremely stressful’ for one in six correspondents. Secret or hidden accounts were associated with higher stress, with respondents in this situation twice as likely to be ‘extremely’ stressed, while for 40%, probate had mental health implications.

Get organised

Not only will organising your financial affairs and keeping an up-to-date Will ensure your wishes are carried out when you die; it will also save your loved ones a great deal of time and stress. For guidance on getting your finances in order, speak with us.

1Exizent, 2021

Thinking of privately educating your child?

Private school fees have once again increased this year, with an average termly fee of £12,000 (£36,000 per year) for boarding schools and £5,064 (£15,191 per year) for day pupils1.

A lifetime endeavour

As data from the Independent Schools Council shows, sending your child to private school is a significant financial commitment – for many families, it could be their biggest expense after their homes. So, having a saving mindset from day one (contributing regularly to savings accounts and encouraging family members to do the same, for example), or even building up an investment portfolio for those with longer to save, could soon help those funds build up. Investments have the potential – although this is not guaranteed – to outstrip the returns you’ll get from savings accounts.

Getting tax-efficient

Using up those tax-free exemptions and allowances (for example the £20,000 ISA allowance), enables parents to save or invest without paying tax on their interest or returns; they can also make withdrawals without incurring tax. Grandparents can also lower their Inheritance Tax (IHT) liability through lifetime gifts – and see the benefits their money is having while they’re still around.

Other money-raising methods  

Other ways of funding your child’s education include borrowing (either via  a personal loan or remortgaging your property) and withdrawing your 25% tax-free lump sum from your pension if you are over the age of 55. Remember that your own financial security is also important, so make sure you still have enough to fund your retirement.

When you are making a significant and long-term financial commitment, it really is advisable to consult a professional, who can help you achieve your savings goals without compromising your own financial future – so please do get in touch.

1ISC, 2021

The value of investments and income from them may go down. You may not get back the original amount invested.

In the News

Dividends making a slow recovery

It has been a rocky year for dividends, with data showing that investors lost almost £45bn in dividends between Q2 2020 and Q1 2021. Many will therefore be relieved to hear that, while dividends are still falling, they did so in Q1 2021 at the slowest rate recorded since the onset of the pandemic. This is according to the latest UK Dividend Monitor1, which also revealed that half of UK companies restarted, increased or maintained their dividends in Q1, against a third in Q4 last year. Looking ahead, underlying dividends are predicted to increase by 5.6% year-on-year to £66.4bn, and banking dividends are making a slow return with ‘positive signs from miners, insurance, and media companies.’ Ian Stokes, Managing Director of Corporate Markets EMEA (part of Link Group), stated, “During the pandemic, many companies that had been over-distributing permanently reset their dividends to more sustainable levels. Most of these now hope to grow their dividends from this lower base. For others, the effect of the cuts is more transitory so they will bounce back quickly.”

1Link Group, 2021

The value of investments and income from them may go down. You may not get back the original amount invested.

Has COVID changed our investment behaviour?

The mantra of ‘Keep Calm and Carry On’ is likely to have been a well-versed phrase for investors over the past year or so, as the pandemic profoundly impacted the investment landscape. The global impact of the virus has been the catalyst for a seismic shift in public behaviour. Investors should consider the implications of these changes when evaluating prospective investment opportunities.

Social and economic changes

While the pandemic’s impact was unprecedented in many ways, what it has done is to accelerate socioeconomic trends that were already bubbling away beneath the surface. Pointing to the labour market as an obvious example, with previously present, but rather sidelined, flexible and remote working practices rapidly becoming the norm over the past year.

Digital development

The internet has long been part of our lives, but the pandemic has accentuated the importance of digital literacy. Businesses that went into the pandemic with an established online presence and offering, did better than their less-digitally adapted peers, with web presence becoming vital for retailers as e-commerce took centre stage. It has caused typically ‘tech-averse’ groups to make the shift to digital, as older groups most at risk from the virus began shopping online.

ESG under the spotlight

ESG (Environmental, Social and Governance) investment has been around for many years, but the pandemic has sent it mainstream as consumers became more aware of the importance of supporting companies with a vested interest in corporate governance and sustainability issues. Over the past year, what businesses are doing to support ‘wellbeing’, and how they treat their employees and suppliers, have come into the spotlight like never before, driving a new commitment to ESG issues. Sustainability and governance issues have been propelled up the corporate agenda.

The value of investments and income from them may go down. You may not get back the original amount invested.