News Updates - April
11th April 2019
What Brexit means for your wealth
Brexit is back in the headlines (has it ever gone away?). There’s been a lot of noise. But for all the talk of chaos and pandemonium, it’s pretty clear where markets think we’re heading. The papers are going on about chaos and losing control and “humiliating defeats” and having fun with headlines, but that’s all Westminster bubble stuff. As far as markets are concerned, it looks as though no-deal is pretty much off the table. Sterling shot up and, while it’s since edged a bit lower, that’s what you’d expect. If there is a risk now, it’s probably more that we end up with elections in the UK when there is still no agreement on exactly what to do about Brexit. Phillip Hammond might have been pretty upbeat on the economy, waving potential carrots in front of his colleagues in the House of Commons – but none of that money will be forthcoming if there’s no agreement on a way forward. But ultimately, all of this is admin. While politicians are distracted by Brexit, markets might just be glad to enjoy a bit of respite from the risk of yet more interventions. In short, very little has changed. British assets still look reasonably cheap, particularly relative to others. If you’ve been letting Brexit put you off, possibly stop fretting about it.
Delay in probate fee change
Under new rules announced back in November by the Government, probate fees will rise from the current flat £215 charge to up to £6,000 for the largest estates. The changes were expected to come into effect on 1 April but ongoing Brexit chaos has seen the date pushed back by at least three weeks, with Parliamentary scheduling taken up by debating Britain’s exit from the European Union. The increase to probate fees must be approved by Parliament before changes can be implemented. If the legislation is approved, the new fees will come into force 21 days later. It is still possible that the increases could be voted down and fail to become law, although lawmakers suggest this is extremely unlikely. The new system – a hike of up to 2,700% – will see the probate fees rise according to the value of the estate. More than 280,000 families a year will be stung by the extra costs, with 56,000 forking out between £2,500 and £6,000.
The impact of a Corbyn government on your wealth
Millions of investors, large and small, are terrified by the idea of a Labour victory at the next General Election. Their fear is understandable according to some commentators. Labour intends to force large companies to hand over 10% of their shares to employees. They say they will raise the minimum wage and increase corporation tax. They will renationalise the railways, water firms and the electricity sector, as well as Royal Mail. They will scrutinise the salary structure of any company supplying the public sector. And they may make it harder for certain businesses to be taken over, particularly by overseas predators. Corbyn and Shadow Chancellor John McDonnell have also pledged to increase public sector spending, which may well feed through to rising inflation. And they are keen to squeeze anyone they consider too wealthy, by raising taxes and taking pot shots at the City. It is a recipe almost guaranteed to unnerve businesses and markets. So, if Corbyn were handed the keys to 10 Downing Street, the stock market would almost certainly tumble in response. Shares would fall, the pound would weaken and most investors would panic. More than half the shares in the UK are owned by large, international investment firms too. They have already begun to withdraw money from our stock market, appalled by the prolonged Brexit agony. If Corbyn came to power, that process would almost certainly accelerate.
HMRC loan charge charges on
The UK's tax authority has made a final appeal to contractors facing the controversial loan charge to settle ahead of an imminent deadline. The 2019 loan charge is aimed at tackling a type of employment tax avoidance the authorities call "disguised remuneration". Instead of facing a large tax bill in one year, HM Revenue and Customs says people can settle and spread the cost.
But many of those facing the charge argue that it is unfair. Some say they face "financial ruin" as a result, and an influential Lords committee said it had heard "disturbing evidence" about HMRC's approach. MPs are debating the topic, and there have been calls for a delay to the charge - which effectively comes into force on Friday. Under these schemes, an estimated 50,000 workers - mostly contractors - were paid by way of a loan, an arrangement that was intended to avoid tax and National Insurance contributions. HMRC said it never approved these schemes and had always said they did not work. The charge will add together all outstanding loans, over the course of up to 20 years, and tax them as income in one year. Those affected will have to pay by the end of January next year.