A pinch and a punch…but no April fools!

01 April 2022

Planning your money and household finances will be more vital than ever during the next tax year, starting on 06 April 2022. If you are reading this and have not used this year's annual tax allowances, you may already be too late, with some providers imposing time restrictions to process payments. Talk to us if you get stuck, please!

The planning of money is not necessarily restricted to a single individual or couple: it can encompass a family's financial future and wellbeing. The cascading of wealth from grandparents and parents to children and grandchildren is not uncommon, especially as younger generations are feeling the financial squeeze on their budgets due to inflationary pressures and rising debt costs. We often hear about the 'Bank of Mum & Dad', but often it is the 'Bank of Granny & Grandpa' that is helping out. This is confirmed in a survey in August 2020 by Legal & General here: https://www.legalandgeneral.com/landg-assets/personal/retirement/_resources/documents/bomad-2021.pdf

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The Chancellor made no changes to the current inheritance tax allowances and thresholds in his Spring Statement of 23 March, and perhaps has little scope to help in this regard in future times. Remember that he has frozen the current tax thresholds and allowances for another four or so years, and this is really going to be felt in the times ahead.

Many readers of our blogs and website will know that we are advocates of having a Will, which is up to date and reflects your plans for your wealth and assets in the event of death. Having Powers of Attorney (health and wealth) is usually a good idea; however, you might want to seek some legal advice on this.

Gifting money to the family, either as lump sums, or regularly, might be an attractive and problem-solving solution to some, but there are limits, as you might expect when it comes to tax. Examples might be the annual gift allowance (£3,000 in a tax year, which can be backdated one year), or gifts from surplus income, which is a lesser-known allowance. Seek advice on this latter allowance because the amount you can gift usually needs to be calculated and records need to be kept and updated regularly.

Keeping the tax take down when it comes to an estate's value is an important consideration for a significant number of people. Not many like the idea of their estate paying 40% tax where applicable. Interestingly, Guildford was widely reported as the inheritance tax capital of the UK in 2018, and that is no laughing matter.

There should be no April fools when it comes to money planning and getting it wrong can be expensive. Talk to the team at Chapters Financial to plan your future funds and, where appropriate, how funds can be effectively gifted to future generations.

No individual advice is provided during the course of this blog.

Keith Churchouse FPFS
CFP Chartered FCSI
Chartered Financial Planner

Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899