Newsletter 2025
Happy New Year to you all from The Wright Financial Company!
A bumper year for investors took place over the last 12 months! Lower risk
investors in smoothed Prufunds who prefer lower volatility have seen their
Pension & ISA accounts increase by 7% after charges are deducted and
Investment Bonds by 5.8%. Liverpool Victoria (LV) Smoothed funds have also
performed well with Bond holders seeing up to 9.3% growth, ISA and Pension
holders are seeing up to 12% growth over the year thanks to the inclusion of
BlackRock funds within the portfolios! Non-Smoothed funds for clients investing on various platforms such as Fidelity & Quilter who have a higher risk tolerance have seen the best returns for several years with Jupiter North American equity (29.5%) and Invesco Global equity (21.7%) being the standout funds here. Ethical funds have also bounced back well and Scottish Widows pension portfolios continue to perform.
What IHT changes were announced in the Budget?
At the moment, inherited pensions are not counted for inheritance tax purposes but will be included from April 2025. Rachel Reeves also said shares listed on the AIM stock exchange in estates would be taxed at 20%. From April 2026, tax will be payable for the first time on inherited agricultural assets worth
more than £1m. There are a number of exemptions, as well as allowances for passing on a home to children, or grandchildren. These include any estate that is valued at less than £325,000 (now fixed until 2030) anyone who leaves their estate to a husband, wife or civil partner or somebody who leaves it to certain charities or community sports clubs.
There are additional, significant allowances. If the person who dies leaves their home to their children or grandchildren, the threshold goes up to £500,000. Married or civil partners can also transfer assets free of tax between each other, so one partner automatically inherits the other's unused allowance. So, the estate of someone who can use their late partner's allowance, and leaves a home to their children or grandchildren, won't be liable for inheritance tax on anything under £1m. Anyone can give away up to £3,000 a year, and pay no tax. This is known as the annual exemption. If unused, this allowance can be carried over to the following year, up to a maximum of £6,000. In addition, if you can show that the gift was funded out of income - as opposed to savings - you will not pay inheritance tax. There are also allowances for wedding gifts and small gifts for Birthdays and other special occasions. However, if someone gives a bigger sum, then dies within seven years, then the money may be used as part of inheritance tax calculations.
Bed and ISA might sound complicated, but it's in fact a very easy process. It simply involves selling investments that you hold outside an ISA and using the proceeds to open or top up your existing ISA - all with a single instruction. You can choose to repurchase the same investments, buy
another investment or just hold cash. It's flexible, cost-effective and is a great way to make use of your valuable ISA allowance. This applies to all clients holding Investments in Non-ISA Products such as General Investment accounts or Investment Bonds. All clients should take advantage of this process which in the long term will give you the potential of better investment returns. Investment Bonds are subject to Income tax and although you have no personal liability to basic rate tax, the fund you are in will pay tax so investment growth would be lower than it would be if you held monies in same fund within an ISA, also if gains in a bond on partial or full encashment push you into a higher rate of tax bracket you would be faced with a tax bill whereas in an Isa there is no income tax or Capital gains tax liability. The same applies to a General Investment account (some providers call this a Collective Investment) except here you are mitigating capital Gains tax (CGT). The allowances for CGT do not roll up each year like the tax deferred allowances in a bond. So, if you have no other monies to invest in ISA this year get in touch for advice on this important area of tax planning, it applies to all clients holding Investment bonds and/or General investment accounts, don’t delay the end of the tax year looms.
Your Tax-Free ISA allowance this year remains at £20,000. You can of course incorporate part cash and part Bed and ISA to use your full allowance, for instance a contribution of say £10,000 from your own bank account and £10,000 as a bed and ISA is allowable, meaning you have used the full allowance for the tax year. Just a reminder that a transfer from one ISA to another ISA (cash or stocks and shares ISA)
is unlimited as those contributions were deemed to have been made in previous tax years.
Please contact Richard for further help and advice on 01937 372132 or email
rwright@thewrightfinancial.co.uk or admin@thewrightfinancial.co.uk
Prize Draw time –All you have to do is answer a question. The answer is somewhere in this Newsletter, email the answer back to: -
admin@thewrightfinancial.co.uk 4 lucky winners picked at random will receive M&S vouchers.
This year’s question is: -What is the current ISA allowance? Closing date 30th April 2025.
The Wright Financial Company Limited is authorised and regulated by the Financial Conduct Authority. FCA Registration number: 926034. The Wright Financial Company Limited Registered No: 11793303. Registered in England. Registered Address: Tadcaster Enterprise Park, Commer House, Station Road, Tadcaster LS24 9JF
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