Are you financially fit?
Are you tuning into Joe Wicks’ daily workout on YouTube? If you are, over 2 months since it started at the beginning of lockdown, good for you!
This is also a great time to get motivated to be financially fit. With many of us still working from home, it feels a little like the time between Christmas and New Year when you have more time on your hands to reassess and review your financial paperwork.
Here are some of the key checks we would advise you to review during this quieter time.
Don’t forget your new tax allowances
Every individual has a number of annual tax allowances in a given tax year. Lockdown heralded the start of a new year tax year in April, which means there are many tax reliefs that you can make use of from now, even if your activity levels are restricted for the time being.
Suggested tax allowances to review include your isas, pension tax relief and capital gains tax. Furthermore, if you are in a civil partnership or are married, you should review your assets in the round to see how best to make use of the tax allowances available to you as a couple. Tax reliefs most definitely favour married couples.
Contact us to discuss your individual circumstances and see how you can work as tax efficiently as possible over the new tax year.
Review your investments
Now is also the perfect time to review your investments, whether in stocks or shares you hold or in your pension. Although stock markets are severely depressed, this affords an opportunity to make changes and potentially invest in your otherwise expensive stocks and shares that are trading at a lower price due to COVID-19.
If you are close to retirement, your risk appetite may be low but may also want to take advantage of the current opportunities. You could consider setting up monthly contributions to new investments and review your position regularly, rather than investing in large lump sums to minimise your risk position.
You may also have lots of different pensions from different workplaces that you could consolidate and bring under one scheme. This reduces unnecessary administration in the future, whilst also allowing for a review of your existing investments and to position yourself more tax efficiently.
Review your cash position
With interest rates so low, holding cash is not the best option versus investing in stocks and shares or property. However, with the backdrop of COVID-19 and the difficulty to forecast for the future, you may want to consider holding cash in National Savings & Investments (NS&I).
NS&I may not always offer the best interest savings rate but they consistently pay out more than banks and building societies over a given period of time. If, for example, you placed £100,000 in a NS&I income bond account, you could generate more than £2,213 interest in two years versus the cash sitting in a bank account.
Are you thinking about your inheritance tax position?
Now is a good time to reduce your inheritance tax (IHT) position on your estate by gifting to your children or grandchildren, especially if they are directly affected by COVID-19 and require funds to cover debts, keep a business afloat or need help to pay school fees.
Gifting is the easiest way to both reduce your IHT position and support loved ones during your lifetime, and perhaps when they need it most. But be careful you understand IHT rules to avoid issues with HMRC further down the line and you and your beneficiaries may end up paying too much tax.
See more information here on how best to gift and manage your IHT position, looking at both opportunities and risks.
Where there is a will….
The pandemic has prompted more people to review their finances and moving will writing, or review of an existing will, has moved to the top of the 'life admin' list.
Shocking stats show that more than half of UK adults do not actually have a will in place, perhaps because it leads to difficult conversations with loved ones or people think they have plenty of time to get organised. However, there is nothing like a pandemic to focus the mind on your own mortality!
If you are keen to get organised and review or put your will in place, please get in touch and we can put you in touch with a trusted adviser.
The idea of getting financially fit might sound exhausting but the reality is that you should be reviewing your financial position around once a year in normal times. If, however, you get into good habits and start now when you have more time on your hands, a review each year going forward should be much easier. Certainly much easier than a Joe Wicks workout!
