Category: news
The 2022/23 end of tax year guide: 7 allowances to make use of before 5 April 2023
The 2022/23 tax year ends on Wednesday 5 April. After this date, many allowances reset, and it could be your last chance to use some of them.
Allowances can help your money go further by reducing your tax liability. Reviewing your finances before the deadline could help you identify some allowances that could be right for you.
This guide explains how seven useful allowances work:
- Marriage Allowance
- ISA allowance
- Dividend Allowance
- Capital Gains Tax annual exempt amount
- Pension Annual Allowance
- Inheritance Tax annual exemption
- Gifts from your income.
Download your copy of ‘The 2022/23 end of tax year guide: 7 allowances to make use of before 5 April 2023’ to find out more.
If you have any questions about your financial plan and which allowances make sense for you, please get in touch.
Investment market update: November 2022
Globally, inflation and recession risks continued to affect markets in November.
Head of the International Monetary Fund (IMF) Kristalina Georgieva suggested that inflation could be nearing its peak.
However, the Organisation for Economic Cooperation and Development (OECD) urged central banks around the world to keep raising interest rates to tackle moderate levels of inflation. So, while some of the pressure may be starting to ease, households and businesses are likely to still face challenges in 2023.
Remember, while markets may experience volatility, you should focus on your long-term goals. While it is impossible to guarantee returns, markets have historically recovered from downturns.
UK
Official statistics show that the UK economy contracted by 0.2% in the third quarter of 2022. This means the economy is on the brink of recession. Inflation also increased to another 40-year high in the 12 months to October to 11.1%.
Against this backdrop, new prime minister Rishi Sunak and chancellor Jeremy Hunt delivered the autumn statement.
In sharp contrast to the mini-Budget delivered just a few months ago under the leadership of Liz Truss, the autumn statement increased taxes. Key changes were made to the Capital Gains Tax annual exempt amount, Dividend Allowance, and the threshold for paying additional-rate Income Tax.
Hunt also confirmed that the State Pension triple lock would be maintained. This will give pensioners a record rise in income as the State Pension will increase by 10.1% in April 2023.
In response to high inflation, the Bank of England (BoE) increased its base interest rate again. The rate is now 3% and the highest it’s been since the financial crisis. The central bank also warned that the UK could face a prolonged recession.
The economic and political turmoil meant that Britain lost its title as Europe’s largest equity market to France.
The Standard & Poor (S&P) Global Purchasing Managers Index (PMI) for the UK manufacturing sector fell to 46.2 in October. A reading below 50 suggests the sector is contracting and it’s the lowest reading since May 2020 when the pandemic affected operations. The war in Ukraine, weaker demand from China, and ongoing challenges related to Brexit were linked to the downturn.
People reigning in their spending are affecting the retail sector. Data from the Office for National Statistics (ONS) suggests that retail sales are still below their pre-pandemic levels.
Several high street brands, including Joules and Made, have fallen into administration due to the challenging circumstances.
The economic uncertainty is affecting households too.
The UK jobless rate increased to 3.6%, according to the ONS, which also found that wages are lagging behind inflation.
A report from think tank the Resolution Foundation found that two decades of wage stagnation is costing the average British worker £15,000 a year. The report suggests that wages will not return to the level before the 2008 financial crisis in real terms until 2027.
Budgets are being stretched by household essentials. A report from Kantar Worldpanel found that grocery inflation hit 14.7%. This means that the average grocery bill has increased by £682 in a year.
With inflation in mind, it’s not surprising that a GfK report found that British consumer confidence is at a record low.
Consumer confidence is also affecting the housing market, with many people reluctant to move or increase the amount of debt they have as interest rates rise.
Figures from Nationwide show that house prices fell by 0.9% month-on-month in October. Many experts are predicting that house prices will fall in 2023. Savills predicts a fall of 10%.
In turn, this is affecting UK builders, as new orders fell for the first time since May 2020, when the first Covid-19 lockdown was in force.
Europe
The situation in Europe is similar to the UK, with recession risk and high inflation affecting business confidence.
According to Eurostat, inflation across the eurozone hit 10.6% in the 12 months to October. The energy crisis is the biggest factor pushing up the rate of inflation as prices were 41.5% higher than they were a year ago. There’s also significant variance between the countries that are part of the eurozone. France had the lowest rate of inflation at 7.1%, compared to 22.5% in Estonia.
Unsurprisingly, concerns are having a knock-on effect on businesses. The S&P Global PMI for manufacturing in the eurozone fell to a 29-month low of 46.4. The reading shows the sector is contracting, which could indicate the region is in recession.
As Europe’s largest economy, Germany is often used as an indicator of the region. German factory orders fell 4% month-on-month, partly driven by a fall in foreign orders.
This has affected business sentiment. A survey conducted by the Association of German Chambers of Commerce and Industry found that 82% of businesses see the price of energy and raw materials as a business risk. This is the highest since records began in 1985.
US
Official statistics suggest that inflation in the US is stabilising. In the 12 months to October 2022, it was 7.7% after a slight dip when compared to the previous month.
Figures from the Bureau for Labor Statistics also indicate that businesses are feeling optimistic. Despite economists expecting a drop in the number of job openings, there was an increase of more than 400,000 in September. The findings suggest that businesses are continuing to invest and feel confident enough to expand their workforce.
Revenue updates from some American companies also paint a positive picture.
Pharmaceutical firm Pfizer raised its 2022 earnings guidance and Covid-19 vaccine sale forecast. It now expects earnings per share to be between $6.40 and $6.50 (£6.20 to £6.30), compared to its previous forecast of $6.30 to $6.45 (£6.11 to £6.25).
US company Uber also saw its shares rise after it beat revenue forecasts. Year-on-year, revenue increased by 72% to $8.3 billion (£8.05 billion) after lockdowns were lifted.
On the flip side, Mark Zuckerberg, owner of Meta (formerly Facebook), admitted he had got it wrong and that things were worse than he had expected. The company is set to cut 11,000 jobs, the equivalent of 13% of its workforce.
Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Experts forecast a recession in 2023. Here’s why and what it means for your investments
Experts are predicting that the UK will face a recession in 2023. While it can be tempting to react to this news by changing your investment strategy, sticking to your long-term plan makes sense for most investors. Read on to find out why.
Several factors are contributing to economic uncertainty, including high inflation and concerns about energy supply. The long-term effects of the Covid-19 pandemic and the ongoing war in Ukraine are two of the reasons for these challenges.
In its November report, the Bank of England said the economic outlook was “very challenging”. It expects the economy to be in “recession for a prolonged period”, adding that inflation was forecast to remain high until mid-2023 when it is expected to fall sharply.
Other predictions also paint a gloomy picture of the UK economy.
According to the EY ITEM Club, the economy will contract by around 0.2% each quarter from the final quarter of 2022 until the second quarter of 2023. Overall, it expects the economy to contract by 0.3% in 2023. This compares to a previous forecast that indicated the economy would grow by 1%.
The organisation noted this is shallow when compared to previous recessions thanks, in part, to the government’s intervention on energy bills.
Hywel Ball, EY UK chair, added: “There are very significant risks to the forecast, with the potential for further surprises or global instability creating additional drags on growth. Businesses will need to think very carefully about their resilience and plan for different scenarios, while also being mindful of the support they provide to their customers and employees.”
Similarly, Goldman Sachs has downgraded its growth forecast for the UK, according to a Guardian report. The investment bank now expects the UK economy to shrink by 1% in 2023.
A recession could lead to market volatility, but history indicates it recovers in the long term
While these predictions can be alarming to an investor, remember, that markets have recovered from previous downturns.
Economic uncertainty can lead to businesses and households tightening their belts, which has a knock-on effect on business profitability and markets. While it’s impossible to predict the markets, history shows us that they have recovered from recessions in the past.
Take the 2008 financial crisis. In the UK, the recession that followed lasted for five consecutive quarters. During this time, the markets fell, but they went on to recover and grow. Investors that panicked and sold amid the downturn would have turned paper losses into real losses and missed out when markets began to rise.
Over the next year, your investment portfolio may experience volatility or a fall in value. While all investments carry some risk, looking at how markets have responded to similar events over the long term in the past can give you confidence.
If you’re tempted to make changes to your investments, here are five things you should do.
1. Focus on your long-term goals
As highlighted above, investment markets have historically delivered returns over the long term. Rather than responding to short-term economic challenges, focus on why you’re investing.
2. Don’t make knee-jerk decisions
It can be easy to make knee-jerk decisions, especially during investment volatility. But the decisions you make can have a long-lasting effect, so it’s important that they are measured. Taking some time to weigh up the pros and cons can highlight where you could be making a mistake by reacting to short-term volatility.
3. Review investments alongside your financial plan
Don’t think of your investments in isolation, they should play a role in your overall financial plan. So, if you’re tempted to make changes, review your options in the context of your wider finances and goals.
4. Consider your risk profile before you make changes
Before you make any investment decisions, you need to consider how they could change your risk profile. Choosing risk-appropriate investments is important. Taking too little risk could mean you don’t reach your goals, while taking too much could mean you’re exposed to more volatility.
5. Speak to us
If you have any questions about the current economic situation or would like to discuss your investment plan, speak to one of our team. We’ll help you understand the effect on your lifestyle and your goals. Whether you want reassurance that your plans are still on track or you’re considering making changes to your investments, we’re here to help.
Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.