Friday 6 December 2013

Autumn Statement 2013…..What could it mean to you?

The Chancellor of the Exchequer delivered his Autumn Statement on Thursday 05 December 2013. Most people were expecting a rather bland statement, partly because it is still some 16 or so months away from the next General Election and partly because the UK’s financial resources are still stretched. George Osborne MP did however manage to offer a few surprises, especially towards the end of his speech, partly aimed at small business enterprises.

As with all Budgets and Autumn Statements, the ‘devil is in the detail’, and I have endeavoured to provide a brief outline to the Chancellor’s Autumn Budget Statement below. This is not an exhaustive list, but provides some of the main issues:

Personal Planning & Taxation

State Pension

A rise of £2.95 a week will be applied to the Basic State Pension in April 2014. However an increase to 68 of the State Pension Age will be applied in the middle of the 2030s and on to 69 in the latter part of the 2040s.

ISA Allowance 2014/2015

The current full ISA allowance of £11,520 will increase to £11,880 in the new tax year.

TAXES AND ALLOWANCES
  • With reference to when you start paying Income Tax, the personal tax allowance will increase to £10,000 from April 2014 and be linked to the Consumer Price Index (CPI) thereafter.
  • Due to start in the tax year 2015/2016 (from 06 April 2015) is a tax break for married couples and civil partners, which is likely to cost the Treasury about £700m pa, enables them to transfer £1,000 of income tax allowance to their spouse / civil partner.
  • Capital gains tax (CGT) will be applied on future gains made by the sale of residential property in the UK by non-residents from April 2015.
  • Free school lunches from September 2014 will be made available to infant pupils (Reception, Year 1 and Year 2) at state schools in England, this will cost about £600m a year.
  • Exchange Traded Funds (ETFs) which purchase shares will not have to pay Stamp Duty on the purchase.
Business & Charities
  • Business rate increases will be capped at 2% instead of linking it to inflation (as measured by the RPI) in England and Wales. Re-occupation relief will see some retail premises in England receive discount (of 50%) on their business rates.
  • New tax relief will be introduced for investment in social enterprises and new social impact bonds from April 2014. This may be of interest to Charities and alike.
  • For approximately 1.5 million jobs for young people (under 21 years old), the Employer National Insurance contributions will be removed from April 2015.
  • Over the next two years an extra 20,000 apprenticeships will be created.

In addition to these points, there was significant news on the UK economy.


ECONOMIC GROWTH

  • This year the growth forecasts were revised from 0.6% to 1.4% (2013), for next year up from 1.8% to 2.4% (2014), and to 2.2% (2015), 2.6% (2016), 2.7% (2017) and 2.7% (2018).
  • Support for British businesses of export finance capacity available increased to £50bn.
  • Scheme with the aim of helping 50,000 more people start their own businesses via an increase in start-up loans.
  • The Office for National Statistics has amended their figures for GDP in 2008/09 from a decline of 6.3% to a decline of 7.2%. This effectively wiped £112bn from the UK Economy.
  • The “underlying deficit" in the UK was changed down to 6.8% for this year and 5.6% for next year.
Summary

No individual advice has been given in the course of this blog. This summary is not an extensive or exhaustive list of the Autumn Budget Statement. We hope that some of these highlights are of interest to your future financial planning.

If you would like to discuss any matter in the Autumn Statement with regards to your own individual situation and circumstances or any aspects of financial planning, both personal and business (SME), then please contact the team, either in Guildford or Woking.

Keith G Churchouse FPFS
Director
Financial Planner
Chapters Financial Limited

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

Monday 2 December 2013

USA Leading or UK Lagging?



We have all witnessed a degree of increased globalisation over the last 20 years as a result of the information age.  Many large corporations have expanded their global presence and ventured more into overseas markets than ever before. This in turn has led to the major stock markets, and correspondingly the indices, being more closely correlated over time. 

We are all very aware of the Credit Crunch and the following aftermath in the markets, in currencies, cash-flow and economies around the world. However, we are now starting to witness much more positive data regarding the recovery of the UK economy as well as that of the USA. 

Obviously past performance is not a guarantee of future performance. 

This raises the question, are they recovering at the same rate?

USA Leading?

The Dow Jones Industrial Average (DJIA) closed above 16,000 for the first time on Thursday 21 November 2013, finishing at 16,009.99. This has seen the index growing over 22% from 02 January 2013, when the index opened at 13,104.30.

Even looking at the S&P 500 Index, which some believe to be a better ‘yardstick’ of the US stock market than the DJIA, this has risen 25% from opening at 1,426.19 on 02 January 2013 to close at 1,795.85 on 21 November 2013.

UK Lagging?

In comparison, the rise in the FTSE100 (as an example) is somewhat short of this increase, showing a growth of just 13% from an opening of 5,897.19 on 02 January 2013 to close at 6,681.33 on 21 November 2013. Therefore, if we are using the FTSE100 as the measurement of the recovery of the UK equity market, the UK is only recovering at approximately half the rate of the USA. This is an interesting observation, rather than a direct comparison. 

Some might argue that the difference could be due to the Sterling to Dollar exchange rate at these dates, which is an important consideration. However, the currency exchange rates on these dates were £1 = $1.6249 (02 January 2013) and £1 = $1.6199 (21 November 2013), therefore the impact of the exchange rate is less than 0.5% between these dates.

Which market / economy will correct and when?

The soon to retire Mr Bernanke, Chairman of the Federal Reserve, has already indicated that he may taper or slow down the fiscal stimulus into the US economy. Many economists believe that the markets have already factored in his statement in this regard, but if they have not, the impact may not occur until March 2014. 

The Bank of England has provided its own stimulus to the economy in the form of Quantitative Easing (QE) to the tune of £375BN. In comparison with the USA, it has not increased this QE programme since July 2012.

It is believed that Mr Bernanke will continue to signal the reduction in the stimulus as the US data on production, employment and other economic factors improve. This could mean that the indices in the US stock markets (DJIA / S&P 500) will not rise when compared with the UK index (FTSE 100) as the fiscal stimulus package in the USA is reduced and eventually stopped. How long will this take? I believe it will be at least 12 months before we see a significant correction between the correlation of the USA and UK equity markets, possibly even longer.

No individual advice has been given in the course of this blog. Past performance is no guarantee of future performance. Investment values can fall as well as rise and are not guaranteed.

If you would like to discuss the investment opportunities with regards to your own individual situation and circumstances or any aspects of financial planning, both personal and business (SME), then please contact the team, either in Guildford or Woking.

Simon Hewitt BSc (Hons) DipPFS
Financial Planner
Chapters Financial Limited

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