Putting financial planning before products
Chartered Financial Planner Leckridge has strengthened AC Wealth’s presence in the Scottish capital, bringing with him more than 20 years’ experience in financial services.
Explaining his approach to wealth management advice, Leckridge says: “It should always be a case of financial planning before products. It’s vital to consider a client’s long-term plans before making any product recommendations.
“I use the analogy of building a house. You wouldn't start by choosing the kitchen or bathroom and then working everything else around that. But for some strange reason when it comes to finances some will pick products first, whether that’s an ISA, pension or investment fund, rather than initially looking at the individual’s current circumstances and future goals and objectives.”
Leckridge believes in setting the scene with a client by asking such questions as when they would like to retire, what lifestyle they want by then and would they like to support their children or grandchildren with things like getting on the property ladder.
“Answers to these questions will vary from different clients,” adds Leckridge. “It’s about understanding longer-term issues first and then coming up with products or investments that will implement the plan - and updating this plan if things change further down the line. This isn’t a new or groundbreaking approach, but it’s best practice that isn’t always followed.”
And with the end of the current tax year approaching, now is a good time for clients to sit down with their adviser to discuss their plans, says Leckridge. Changes to Scottish income tax is clearly a hot topic, but he believes that it’s important to look at the details behind the headlines.
Focusing on some calculations to show the impact on people living and working in Scotland of tax changes north of the border, individuals earning £100,000 will see their income tax bill go up by just under £750 in tax year 2024/25 compared with the previous year. For someone earning £150,000, the increase will total more than £1,860. But, on the flipside, a person earning £35,000 will see their annual income tax bill drop by just slightly over £10.
Leckridge says: “For median earners the savings aren’t huge, but higher earners will see quite an increase in the tax they pay. It’s therefore important to look at opportunities around various forms of savings and tax relief, with pensions being the obvious place to start.”
He explains that wide-ranging changes to pensions from the Westminster Government in March last year have already taken effect, or are in the process of being introduced, such as personal allowances increasing from £40,000 to £60,000 a year, alterations to tapered annual allowance thresholds and the scrapping of the lifetime allowance.
“Scottish taxpayers should be taking advantage of some of these initiatives if they aren’t already,” says Leckridge.
Something that isn’t being changed is the limit of £20,000 that can be saved into an ISA each year, despite pressure on the government for this to be raised.
Leckridge says: “It’s important to be aware of the fact that ISA allowances, unlike pension allowances, can’t be carried forward. If you don’t make use of it in one year, that’s it lost. But some changes to ISAs included in the UK Autumn Statement last year have gone under the radar. For example, people will soon be able to contribute to more than one of the same type of ISA, such as stocks and shares, in a single tax year and there will be no limit on how many ISAs you can have. We need to rely on product providers updating their systems to accommodate these changes, so people might need to shop around to take full advantage of their ISA allowances.”
Individuals should also be mindful of changes to Capital Gains Tax (CGT) as the 5th April approaches. The exemption level was more than halved from £12,300 to £6,000 last year and in 2024/25 it goes down again to £3,000.
“If anyone has investments which have unrealised capital gains, they might want to think about making use of their annual CGT exemption before the end of the tax year. And they shouldn’t overlook the potential benefit of crystallising capital losses that may have come about during the recent periods of market volatility too. And be mindful of the fact that CGT is still currently one of the lowest rates of tax around at 10% on non-property related gains for basic rate taxpayers and 20% for higher and additional rate taxpayers,” he concludes.
Find out more at https://bit.ly/3OhAhlD