Investment Insights - Hot Topics May
Welcome to Balance: Wealth Planning's Hot Topics!
Balance: Wealth Planning's May edition of Hot Topics.
Every month, our financial planners will collate the latest 'Hot Topics' within the industry, which we will share with you. The purpose is to update you regularly as these topics are happening and help cover any frequently asked questions.
So, without further ado, please enjoy this edition of Hot Topics!
Inheritance Tax
On 21 March 2024, HMRC published their monthly receipts for the last four tax years. Included in this they shared the following graph reflecting the inheritance tax received over this period.
(HMRC tax receipts and National Insurance contributions for the UK, Released 21 March 2024)
From April 2023 to February 2024, HMRC received £6.8 billion in Inheritance tax, which is 400 million higher than the same period in the previous year. This is just shy of a 6% increase and analysts are expecting the figure to reach almost £10 billion by the end of the decade.
Back in Autumn 2022, the government confirmed that the Inheritance Tax nil-rate band (NRB) and residence nil-rate band (RNRB) thresholds would be fixed at their current level until at least the end of the 2027/28 tax year; by this point, the NRB will have remained level for just under 20 years! If the £325,000 NRB had increased along with inflation since 2009 when the current rate was introduced, we would be seeing today an NRB of £496,520.56 as of February 2024.
Residential property makes up the largest share of most estates. In January 2009, the average house in the UK cost almost £158,000. In contrast, in January of 2024, this figure was just over £280,000, more than a 75% increase, resulting in more people becoming liable to pay inheritance tax. The below, published by Gov.uk, makes it very clear that without any further increases in the NRB and RNRB, the next 4 years are likely to see a considerable spike in not only those breaking into the threshold of paying IHT, but also an increase in the bill for those whose estates are already above this level as their assets grow. Our experienced financial planners can help you get ahead of this increase and allow more of your wealth to be passed on to loved ones.
(HMRC Inheritance Tax statistics: commentary. Updated 26 July 2023)
On 28 March, a 25-year sentence had been handed out to the once 41st richest person in America, Sam Bankman-Fried. Sam founded FTX, one of the largest cryptocurrency exchanges, and played a huge role in bringing cryptocurrency to the mainstream. FTX was built to appear to the public as a stable and trustworthy company, and one of the ways they did this was by using well-known celebrities to endorse the company and the cryptocurrency market publicly. They advertised cryptocurrency as a fun and easy way to get into investing with huge earning potential and massively downplaying the risks.
FTX was then found to be mishandling client funds and stealing over $8bn of its client’s investments. This led to Sam being convicted on seven counts of fraud, conspiracy, and money laundering. However, Sam has not been the only person in hot water for his role in this. The list of celebrities facing backlash for promoting risky cryptocurrency platforms is enormous, including names like Matt Damon, Kim Kardashian, Floyd Mayweather, and many others. A large number of these celebs have now been facing lawsuits for misleading people about the risk of what they are investing in and promising unrealistic returns.
This is another case study of how important it is to do your due diligence and consult a financial professional before investing. Always exercise caution when listening to endorsements of people being paid to promote something.
Please note: This update is not financial advice and is provided for information only. You should not take any action before speaking to a Financial Planner, who will confirm what suits you.
Please feel free to share it with anyone who may be interested. If you have any questions, please get in touch with your usual contact or investments@balancewealth.uk.