Hartlepool-born Harrison Smith is a financial adviser based in his hometown’s Greenbank business centre and is associated with Emerald Associates. Harrison offers an insight into money matters in an exclusive monthly column for North East Connected.
For the majority of the last month, much of my working day has been spent managing client fears. There has been so much misinformation around, centred on what may or may not happen.
If all the speculation at the start of October was to be believed, we would be living in a different place right now.
On countless occasions, in these columns, I have reiterated that it is not a straight line to what happens in the future. That is why it is so important not to react impulsively.
For the most part this year, American politics has been at the forefront of people’s minds both here and across the pond mainly because of a certain Donald Trump.
Some Americans have wanted a different approach, possibly because of what has been happening globally, and it has been headline news here too.
It has weighed on a lot of people’s minds what direction the world is heading because the US will likely always be a dominant force. The outcomes Stateside have huge impacts everywhere.
It remains to be seen what impact Trump will have after being elected as president for a second term. Anyone who says they know what is coming next is overly confident.
Make sure you don’t significantly change the course of your own plans because of the election result, thinking something might be better for your investments. People who make short term decisions don’t end up where they want to be long term.
Trump will make changes across the board, that’s for sure. But speculation can be a very dangerous thing for markets, so let’s see – it might turn out to be a positive.
While the US election has global implications, closer to home, the recent UK budget has also brought significant changes.
We had our own speculation in the UK building up to Rachel Reeves’s first Labour budget as chancellor. There was a lot of talk about tax free cash and pensions beforehand, and that led to many people taking money out prematurely.
As expected, there were a lot of changes like an increase to taxation, and a new system we will have to get familiar with again. But this isn’t the first budget to make big changes, and I am sure it won’t be the last.
The biggest takeaways for me from the Budget were the Capital Gains Tax rises, pensions becoming liable for inheritance tax from 2027 and the freezing of the inheritance tax thresholds.
And I think the final point is worth looking at in more detail.
The current allowance is £325,000 per person and that doubles for married couples when inheriting each other’s allowance. There is an extra £175,000 per person if passing your main residence to direct descendants.
In essence a married couple should be able to pass up to £1m of their estate to their children free of inheritance tax.
A million pounds might seem a lot, but let’s look at the history of those thresholds.
The additional £175,000 referenced above hasn’t changed since April 2020. That may sound a long time considering the rise in the cost of living, but the main £325,000 hasn’t changed since April 2009 under the last Labour government.
Just consider how much your house has likely gone up in the last 15 years? How much has your salary gone up? Inflation? Imagine if you hadn’t had a pay rise since 2009, it wouldn’t paint a pretty picture would it?
These thresholds are not set to be reviewed before 2030.
What needs to be remembered is that we have two budgets each year, and further change is inevitable.
This reinforces what I have said before, stressing the importance of professional advice, because the tax system is getting more complicated and not simpler.
Now, more than ever, it is important to do what you can to look after what you have got. Don’t forget that – and feel free to get in touch with any questions or concerns.
*For further information or to book an appointment with Harrison check out his adviser
hub https://linktr.ee/harrisonsmithea [linktr.ee] [linktr.ee [linktr.ee]]