Budget 21
Autumn 2021 Budget: what’s coming up?
The communication teams at the Treasury have been busy in the run up to the Autumn Budget on Wednesday. After a weekend that, according to The Times, contained no less than 11 announcements covering £26 billion of expenditure, you might think that there is not much left for Mr Sunak to talk about when he addresses Parliament on 27 October.
We now know to expect extra spending on Manchester trams, the NHS, post-16 education, incentives for UK investment by overseas companies and even new cutters for Border Force…can there be anything left for tomorrow?
The answer is yes. For a start, 27 October is not just Budget Day, but also the date when the Office for Budget Responsibility (OBR) publishes its latest Economic and Fiscal Outlook and the Chancellor publishes a three-year Spending Review, which will take us beyond the next election.
Much of the pre-Budget releases are likely to include the parts of those documents which the government want to be heard and remembered. Those ‘leaks’ also have the benefit of a degree of spin – for example the emphasis on total spend rather than annual spend: £5 billion sounds much better than £1 billion a year for half a decade, half of which has been previously announced.
The good news is that the latest public sector finance data, published on Thursday, showed that in the first half of 2021/22 the Treasury had borrowed £43.4 billion less than the OBR had projected at the time of the March Budget, giving Mr Sunak some spending wiggle room.
The bad news is that the reduced borrowing still amounted to over £108 billion. Nevertheless, it looks unlikely that any major tax increases will be revealed this week. Mr Sunak has already introduced £42 billion of tax rises this year (corporation tax, NICs, dividend tax) which have yet to bite.
Where the Chancellor may take some tweaking tax action is around the topics sitting in his in-tray. For example:
The Office for Tax Simplification (OTS) reports on inheritance tax have to date yielded no response beyond a promise – so far unrealised – to simplify application paperwork from the start of 2022.
The second of the OTS reports on capital gains tax, originally commissioned by Mr Sunak, arrived after the March Budget and might now be addressed. Rumours continue to suggest that CGT rates will be more aligned to those for income tax.
Pension tax relief is a Budget perennial and the Treasury has still not addressed the issues around net pay arrangements and low earners on which it consulted in 2020.
As ever, the Budget’s most interesting content will be in the detail, not necessarily the headlines surrounding it.
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You may get concerned when markets fall (bear market) because you are losing value. However, if we look at markets over the medium to long term and take into account market rallies (bull market), the bulls always beat the bears. This video provides an easy explanation from Rohit Vaswani, Client Portfolio Manager, of Bull and Bear Markets. This shows that periods of growth 'Bull markets', are longer and more valuable than periods of downfall 'Bear markets'.
This video explains how protection insurance gives financial security and peace of mind should the unexpected happen.
Watch Rohit Vaswani's market on the Omnis Website (Transcrypt below) So we've woken up to the news about tariffs. President Trump announced that a baseline 10% tariff would be introduced on all imports from the 5th of April, and that a series of higher reciprocal rates on specific countries will take effect on the 9th. This includes 34% tariffs on all imports from China, 20% on imports from the EU, 24% from Japan and 10% here in the UK. In essence, for the US, the effective tariff rate on imports will jump to 24% if President Trump follows through with the plan. And this is assuming that 25% tariffs are included on all imports from Canada and Mexico, which were not mentioned yesterday. Now, this increase in tariff rates is likely to increase inflation in the US. It could be quite impactful, but in reality, we could expect consumers to substitute towards products that were produced domestically or to products that were produced by or imported from lower tariffs countries. Retailers could also absorb absorb some of the cost as the profit margins are currently higher than they were a decade ago. We think these mitigating factors help to reduce the impact of tariff increases in inflation, but these tariffs are inflationary nonetheless. Nonetheless, personal consumption expenditure could also come down, especially with a drop in consumer confidence and the decline in stock prices that we are seeing. At the same time, the US economy will be impacted if businesses respond by reducing investment and if other countries retaliate forcefully, which would weigh on US exports. Both of these scenarios are look quite likely right now. Thinking about the other side of the cone, it is feasible that the revenues raised by the tariffs might then fund tax cuts in the US, and it is also reasonable to expect that the US central bank may cut interest rates further than previously expected, which would limit the damage done to the US economy. That said, this deadline of the 9th of April for kind reciprocal tariffs leaves the door open to backtracking and further delay. So this is very much a watching brief. Now let's be honest, the tariff announcements yesterday were much bigger than most investors expected and markets have reacted negative. It's currently just before 7 o'clock in the morning in the UK and Asian markets have moved sharply down and all signs point to European, UK and U.S. markets falling today too. In these kind of environments, investors move to what we call safe haven assets and we have seen bonds should typically seen as a safe haven asset hold up well since the announcement. What does this mean for you as investors? Well firstly, remember the diversification. You will have a portfolio that has both equities and bonds in in it and whilst you can expect your portfolios to drop in value in the very short term, the bonds in your portfolios will cushion some of the blow. Secondly, remember that reacting to market events is never a good idea. It usually means you experience the losses, the losses, but do not benefit from any recovery we may see. If we think back to five years ago, 2020 during COVID, some of the best days in the year happened right after some of the worst days. And just by missing those 10 best days in the markets, you could impact your long term returns. That leads me to the need for composure in these environments. Maintaining composure is super important. If your circumstances haven't changed, you should not react to this week's news and your financial advisor can help you understand what these market moves mean for your specific portfolio and your long term investment objectives. And lastly, patience. Markets will always go through turbulent times in the short term, but in the long term markets always recover. So think about and focus on your long term goals and not on the short term market impact over the next.
In recent years, a select group of companies have risen to unprecedented dominance in the U.S. equity market. Dubbed the 'Magnificent Seven,' these tech giants have significantly shaped the returns and direction of the market. However, their dominance raises important questions about portfolio diversification and investment strategy.
The Omnis Investment Club podcast is now out - week in the life of financial markets #omnisinvestmentclub #omnisinvestments
If you’re a first-time buyer , there are two words that you might not be familiar with – stamp duty. When you are thinking about buying your first home you'll have been saving for a deposit and thinking about how you will pay to kit out your home but there are other costs to account for when buying a property. It’s important to note that changes are coming to stamp duty very soon for those buying in England and Northern Ireland, changing the amount of relief available to first-time buyers. So, whether you’re deep in your search or still waiting for the right moment to move, here is all the important information you need to know ahead of the changes. Download our blog on why stamp duty relief is changing and what first-time buyers need to know. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE. Approved by The Openwork Partnership on 27/11/2024. *Please note, this only applies to stamp duty in England and Northern Ireland.
The Omnis Investment Club podcast is now out - week in the life of financial markets #omnisinvestmentclub #omnisinvestments
Lisa is a university lecturer and a keen kayaker in her early 50s. She’s also a single mum to two teenage daughters – Lila and Eliza. Lila is in the final year of her A-levels and Eliza is in the first year of her GCSEs. Both daughters are very academic – Lila wants to be a doctor and Eliza a vet. With the cost-of-living crisis showing no signs of lessening its grip, despite earning over £50,000 a year, Lisa is finding she has less and less disposable income at the end of the month. With the cost of her daughters’ continuing education and her own retirement on her mind, she is finding money is becoming a constant source of worry. After giving up work, she was planning to throw her kayak in the back of her campervan and explore Europe. But she’s becoming increasingly concerned that those retirement plans will have to be seriously curtailed. Why it’s more expensive being a single parent Lisa is one of 2.9 million single parents in the UK, with a quarter of all families in this position. And research shows it’s more expensive raising a child alone. Figures from the Child Poverty Action Group, the cost of a child report, reveals that in 2023, the full cost (including housing and childcare) of raising a child in the UK was £166,000 for a couple and an eye-watering £220,000 for a single parent. Single parents pay more because fixed costs like transport are shared between fewer people, so a higher proportion of those costs are attributable to the child. As a result, single parents like Lisa are being disproportionately affected by the cost-of-living crisis. A report from the charity Gingerbread found the financial situation of two in three single parents in the UK is worse than it was a year ago, with one in five using credit to pay for household essentials and a similar number turning to food banks. The same report revealed one in three single parents have seen the amount of debt they have increased over the past year, with almost half of those finding themselves more than £1,000 deeper in debt. In total, 76% of all single parents are in debt and half of those owe more than £2,000. So what financial support is there for single parents? If you’re a single parent, it’s worth using a benefits calculator to check you’re claiming all the financial support you’re entitled to. There’s a calculator on the Gingerbread website or you can use the government one. Depending on your situation, the benefits and financial support you may be able to claim include: Child benefit Council tax reduction Universal credit Widowed parent's allowance 15-30 hours of free childcare Tax-free childcare Healthy start vouchers NHS low-income scheme Free school meals Why single parents should get financial advice If you’re a single parent, it makes sense to get financial advice regardless of your age or income. Whether you’re approaching retirement like Lisa or you’re at the start of your career, speaking to a professional can be vital in ensuring you make the most of every penny and avoid costly mistakes. Expert advice is useful for everyone but arguably more so if you’re a single parent with children who are financially dependent on you. A financial adviser has the experience and market knowledge to assess your situation accurately and provide recommendations for suitable products and services. So, if you’re a single parent and you’d like advice on any money-related matters, we’d be delighted to help. Approved by The Openwork Partnership on 03/06/2024