Newsflash!

Budget March 2012

The Economy

The Independent Office for Budget Responsibility (OBR) has revised upwards the UK forecast for 2012 from 0.7% to 0.8%.   The forecast for 2013 is 2%, for 2014 2.7% and for 2015/16 3%.   UK inflation is set to fall from 2.8% for 2012 to 1.9% for 2013.

Pensions

WEF April 2013 a new single-tier state pension will be introduced to be set above the means test at a minimum of £140 a week.   The Government is due to examine linking the state pensions age to life expectancy.

Child Benefit

This will be phased out when someone in a household has an income of more than £50,000, decreasing by 1% for every £100 earned over £50,000.   Only those earning more than £60,000 will lose the benefit completely.

Tax

WEF 21 March 2012

  • there is a new 7% stamp duty on properties worth more than £2m
  • there are also plans (15% stamp duty rate on properties worth over £2m within corporate envelopes) to clamp down on stamp duty avoidance by using companies to buy expensive properties.

WEF April 2013

  • the 50p top rate of tax levied on earnings of £150,000 or more will be cut to 45p
  • the personal income tax allowance will be increased to £9,205
  • age-related income tax allowances will be removed for new pensioners and replaced with the same personal allowance as the rest of the UK
  • there will be a new cap on tax reliefs set at 25% of total income for anyone claiming more than £50,000 in a year
  • Corporation tax will be reduced to 24%, with a further 1% reduction in 2013 and in 2014.

There will also be a simplified tax return process for small firms with a turnover of up to £77,000.

WEF April 2013/14

  • the higher income tax band will be reduced from £42,475 to £41,450.

 

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What should you do with your deposit monies?

Wednesday, 04 February 2009 14:29
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What should you do?

With the possibility of interest rates falling to 0% by the summer, what should you do with your deposit monies? Deposits still remain one of the safest places for your capital and you should make sure that you have readily accessible cash for emergencies. However, if you have surplus funds and are looking for a way to improve the return on cash deposit accounts for the medium to long term, corporate bonds may be just what you are looking for.

In our opinion corporate bonds are one of the most promising growth areas at present, in that they have potential for capital gain and also provide a good income which can be taken or reinvested to further improve the possibility for growth in exchange for some risk.

What is a corporate bond?

When you buy a corporate bond you lend money to a company. In return you will receive interest and the company undertakes to repay the loan on a particular date. The level of interest and the capital to be paid back is fixed at outset which is why they are known as 'fixed interest investments'. Bonds are traded on the market so prices may go up as well as down and you could get back less than you invest. The credit crunch has meant that many financial institutions at present are in need of cash and have been forced to sell bonds at lower prices, resulting in tumbling prices and surging yields in excess of 6%.

What should you do next?

  • As the corporate bond market is complex we suggest that you invest through a fund. This will not only gives you access to a number of bonds but also means you will have expert fund management.
  • Bonds will also be regularly bought and sold within a fund with the aim of maximising returns so the income you receive is not fixed because bonds may not reach maturity within the fund.
  • With taxes likely to rise don't forget your annual ISA allowance. Within an ISA the income and any capital growth from corporate bonds is tax free, so not only are you buying into an asset class that is presently very cheap, you could also receive a competitive level of interest which can be rolled up tax free enhancing any capital growth while you wait for a recovery in valuations.
  • If you have already made use of your ISA allowance or you have larger sums to invest, investing in corporate bonds via a unit trust, OIEC, ICVC, a personal pension or a self invested personal pension also makes sense as you will still be able to benefit from the potential appreciation and the yield after tax is still attractive.

However corporate bonds are very different from cash as they are not guaranteed and can fall in value as well as rise. You should only invest for the medium/long term and ultimately you could get back less than you invested originally. Tax rules referred to are those that currently apply and they can change over time and any benefit to you will depend on your individual circumstances.

Whilst this information gives you a brief overview of the corporate bond market, it should not be read as a recommendation as it does not take into account your individual circumstances and attitudes. Before you proceed, do give us a ring to discuss your personal needs and circumstances or visit The CFM ISA Discount Service page.

Last Updated on Thursday, 23 April 2009 08:06