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Morfitt & Turnbull

Issue 4   

Mulligan’s Mate

We’ve heard plenty from him in the first few editions of the newsletter so I thought it was time to officially introduce Adam Longsden, who provides us with the technical pearls of wisdom (see below for the latest useful article).

Adam joined us nearly a year ago and is qualified to the dizzy heights of Chartered status, which really is no mean feat. His dulcet Yorkshire tones often keep the office entertained and although he unearths hidden financial planning gems on a regular basis, his horse racing tips are paradoxically woeful!

We’re also now into the 2012/13 tax year, which means that the new ISA season is up and running! The overall allowance is £11,280 per person for the year so don’t be part of the herd that leaves it ‘til the last minute as the sooner you invest then the sooner you benefit from the tax efficient growth. Get in touch with your usual Adviser and also note that M&T are reducing commissions by a third from 3% down to 2% for ISAs.


Adam Longsden

The Budget – George’s Marvellous Medicine
As I’m sure you know from the extensive coverage it gets, this year’s Budget was announced by Knutsford’s (well, Tatton’s) very own MP, the Chancellor of the Exchequer George Osborne.

The highlights, or lowlights depending on your personal take, were:
George Osborne  
  • The personal allowance increases to £9,205 but this only takes effect from April 2013. Also to change at that time is the 40% earnings limit, to £41,450, which means that more people will pay tax at 40%.
  • The age-related allowance for over 65s will either be removed altogether (for those born on or after 6th April 1948) or frozen (if born before 6th April 1948).
  • The 50% tax rate reduces to 45% for those earning over £150,000, again from April 2013.
  • Child Benefit will be phased out from 7th January 2013 if anyone in the home earns over £50,000. A 1% tax charge is applied for every £100 over the threshold which means that it is wiped out completely once the earnings go beyond £60,000.
  • Capital Gains Tax annual exemption, which is £10,600 for the 2012/13 tax year, will increase every following tax year by the Consumer Prices Index.
  • Stamp duty rate of 7% for property purchases of more than £2million effective immediately.
Any questions, just get in touch ...with us, not George!

Adam’s Technical...
Inheritance Tax planning

Adam (the chap at the top remember) is back with another Inheritance Tax (IHT) planning option...

In the last newsletter I looked at guaranteed Whole of Life plans and I now want to show how to reduce the taxable estate value using an investment route. As a reminder there is no IHT to pay if the deceased’s total estate is below £325,000 (still the same for 2012/13).

The simplest method in theory is to give the wealth away but in practice it is never quite so easy to do this! Once any part of the estate is gifted away, to another person or into trust, then 7 years must pass before it is fully excluded from the estate value. There are also pitfalls in that if you still retain the right to have it back or draw income from the gift then it remains part of the estate.
The solution I’m looking at now is specifically where a person (known as the ‘settlor’) gifts money into trust, utilising an investment bond, for the benefit of others on death. One variation of trust to consider is the Discounted Gift Trust.

With this type of trust the settlor automatically opts to receive fixed income withdrawals from the bond. The withdrawals are deemed to be from a proportion of the bond value, which is calculated by the company providing the bond based on the settlor’s age, gender, health and the level of withdrawal. This value is called the ‘discount’ and (here’s the important bit) it is removed from the estate value immediately and no longer subject to IHT!

The value cannot be finalised with HM Revenue & Customs until death occurs and so is an estimate although it is a bona fide solution that has been used on many occasions. After the trust has been in place for 7 years then the remaining value of the bond is also outside of the IHT trap.

There are many ways to plan for IHT and now we have discussed two - this particular one suits those who are comfortable with gifting a lump sum of money and receiving regular withdrawals from it.

Of course, as this section infers, this is a technical solution and so we will provide the guidance on a suitable trust to use with the investment bond. If you wish to speak to us regarding IHT planning and your options then please speak to your usual Adviser at Morfitt & Turnbull on 01565 624370.

Gareth Says... 
RDR on the RaDaR!

We have mentioned previously the changes to our industry brought about by the FSA which take effect from the start of next year, called the Retail Distribution Review (RDR). This month Gareth gives us an update as to how this is progressing...

"The RDR is the regulator’s way to improve standards across the entire advice industry, encompassing all advisers and making advice more attractive to existing and new consumers. The aim is to ensure they understand what charges they pay and that such charges are communicated and paid in a transparent way.

     To achieve this, the FSA published new rules for advisers to adhere to and introduced new professional requirements to improve confidence in the industry. By the end of this year all advisers will have to hold a statement of professional standing from an accredited body, which requires all advisers being of an appropriate qualified standard, continuing to develop knowledge and subscribing to a code of ethics.
Of course Morfitt & Turnbull have always been clear about the cost of advice and will continue to be so. The way all advisers charge will change and from next year we will not be able to rebate payments we receive from providers to increase initial values of investments. This has been common with investment bonds, however from 2013 the maximum investment will never be more than 100%.

We will provide further updates throughout the year."
    FSA Logo   

Staff Matters - and YOU matter!

As a team we want to understand and connect with those we interact with so we’re going to start asking you some questions in forthcoming e-newsletters. If you have the time we would really appreciate hearing from you so please email us at and one of us will be on hand to acknowledge and take it on board.

So to start off, it’s the obvious question really...

What do you think of our e-newsletters?

Any thoughts on how to improve or any particular areas of interest you would like to see in future are very welcome.


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