As we were finalising the Spring edition of our newsletter, the world watched aghast as Russia invaded Ukraine. Having spent two years consumed with the worldwide transmission of Covid-19 and the resultant disruption to our lives, what should have been momentous developments – the gradual lifting of restrictions around the UK – has taken a back seat. The Russian attack on Ukraine at the end of February now dominates the news agenda. While the suffering of the Ukrainian population, and millions of refugees fleeing their homes in fear for their lives, are of paramount concern, the ramping up of sanctions imposed on Russia by the West are likely to have a wider effect beyond the region.
Even before this latest crisis, and despite the hopes for many of almost getting back to ‘business as usual’, the economic fallout from the pandemic is hitting home this year. Rising inflation coincides with the increase to National Insurance contributions and dividend tax slated to come in from 6 April, all of which contribute to concerns on the rising cost of living. We cover these issues in our first newsletter for 2022. Our feature considers how gifting from income can help you structure your estate planning the light of frozen inheritance tax thresholds and the Chancellor’s decision to keep the tax broadly unchanged.
Other stories for this edition include:
As we watch the mounting carnage in Ukraine and seek ways to help the humanitarian relief effort, it may seem difficult to focus on these issues closer to home. We are happy to discuss anything arising from the topics addressed in our newsletter. Our next edition will be with you in the summer.
Two years on, a new crisis unfolds
Two years on from the start of the pandemic, businesses and families were looking forward to the lifting of Covid-19 restrictions as the numbers affected by the omicron variant appeared to fall significantly. Those numbers are now rising again. But the attack from Russia on Ukraine has turned attention to a new unfolding disaster. The short term plight of Ukrainians stuck in their besieged country and those fleeing to surrounding countries, plus the longer term ramifications of President Putin’s actions, have overtaken other considerations.
While meeting the needs of the humanitarian crisis are paramount, the conflict comes at a time of already rising costs and challenges in the aftermath of the pandemic. While it can seem churlish think about, the war is likely to have an impact on finances here in the UK. There is already widespread concern around fuel prices and, amid calls to stop using Russian oil and gas supplies, they are likely to get higher. Inflation is rising with the accompanying effect of eroding the value of the pound in our pockets. If you are about to retire, think carefully about when you should start withdrawing from your pension. Rising inflation means you will need a greater pension pot to achieve the living standard you expect. If you are invested in fixed interest funds, look again at the terms as future payments will be devalued by increasing inflation.
As the Chancellor prepares for his Spring Statement under pressure from his own backbenchers to take additional measures to help combat these issues, the new tax year brings frozen tax thresholds. These essentially operate as tax rises, further exacerbating the pressure on incomes.
Meanwhile as we move into spring and, as far as we’re able, begin to think about holidays, there is a key change coming in 2023 for anyone with a second home that they may occasionally let out to holidaymakers. The government is tightening up the tax rules and from the 2023/24 tax year will make second property owners prove they have let their property for a minimum of 70 days to qualify for business relief rather than council tax. You have a year to make arrangements that ensure you aren’t caught out.
Our next update will come as we move into summer when we can but hope for better times.
We very much hope you enjoyed our Spring 2022 newsletter. If you would like to know more about any of the topics raised simply get in touch.