Lowes Magazine 117

TAX

50 YEAR ANNIVERSARY SUPPLEMENT

The taxing question

Our 50th Anniversary

Lowes Consultant Adam McLachlan says: Whether or not there are tax increases in 2021 it is important we take advantage of the reliefs and

THIS YEAR, LOWES FINANCIAL MANAGEMENT celebrates its 50th year providing clients with personal and professional Independent Financial Advice. Ian Lowes, Managing Director, Lowes Financial Management, writes: This is a momentous year for Lowes and I am immensely proud to be presiding over the company that my father established fifty years ago. Whilst I was too young to remember the first office in Pilgrim Street, Newcastle, I distinctly remember the early years at Market Street, which was the head office for a decade. The 1984 move to Holmwood House, which was the company’s home for over 30 years was a big part of my life, as of course was the move to our new home, Fernwood House, in 2016. We are now a group of companies under the Lowes umbrella, represented by over 90 individuals, all serving our clients in line with our strapline: ‘Where personal finances are cared for personally’. I am extremely proud that Lowes is amongst the most highly regarded Independent Financial Advice firms in the profession. Not many firms get to celebrate their 50th anniversary, neither do all firms succeed when the reins are passed from father to son. When Ken stepped down and I took over as Managing Director in 2002 there was naturally considerable pressure on the ‘boss’s son’ to do well; or to put it another way, failure was not an option! The business has been a big part of my life, for all my life and I was determined from an early age to join the firm. Ken, however, wasn’t going to make it easy and encouraged me to instead, follow an alternative path. But after a few years on the outside, I was grateful for the opportunity to join the business. Seven years later however, I left to pursue my own business interests and subsequently, a degree in Business Management and Administration. Returning to the firm in 2000 I certainly had no expectation of running it for many years. I concentrated on broadening my knowledge and obtaining advanced, professional qualifications to the extent that I obviously impressed Ken enough for him to entrust the business into which he had poured so much over 31 years, into my hands. I was ambitious for the firm and my plan was to grow the number of Consultants and quite dramatically. We interviewed 160 potential candidates in the first year, of which we felt just three matched our rigorous criteria. We appointed just one, Rob Newton, who continues to be a great Lowes Consultant to this day. That was an important process because it showed me, in no uncertain terms, what previous incumbents of my position had

also established; that finding the right calibre of individual to deliver the quality of service we expect for our clients was far from easy. As a result, rather than any rapid expansion, we have selectively grown the business and number of Consultants, incrementally, year by year and seen some retire along the way. In 2005 we re-introduced one of Ken’s most successful initiatives, the seminars. I have now presented to thousands of people across the UK and have been delighted with the satisfaction, with all but a handful stating their attendance was time well spent. More than a few have gone so far as to state attending the seminar was one of the best things they ever did. I vividly remember my nervousness before delivering the first seminar but now with hundreds under my belt I look forward to them and it has been frustrating not to be able to run any sessions during the pandemic. An area of personal interest and one for which Lowes is now a recognised authority in the profession, is structured products. Over the years we have developed a well-honed expertise in these investments. In the early days I would analyse and post details of every product on our website. Now with typically 40 products being launched each month we have a dedicated team which conducts the analysis and manages the Lowes ‘Preferred’ list and our structured product websites. We have been through two major market incidents in my tenure at the helm of Lowes, the Financial Crisis of 2008/9 and the Coronavirus pandemic. In 2008 we all came together to tackle the issues. This time around it has been a little more challenging, as we are all isolated from one another. But our determination to do our best for clients is the same, nevertheless. Having looked forward to our 50 th anniversary, sadly it seems highly unlikely we will be able to celebrate in the way we would have wanted this year, not least our planned garden party at which we hoped we would see some of our longest standing clients. It has been extremely frustrating for us, as a people business, not to see our clients face-to-face and we thank all our clients for their understanding and patience in what have been difficult times. So where to in the future? We are looking to grow the business, as we have done over the past 19 years, but we’ll not be making dramatic changes. You can be sure that we will maintain our family culture and the quality of advice and service for which Lowes is renowned.

exemptions which are available today, before the end of the current tax year. Pensions deliver an uplift from tax relief on contributions, making them a particularly tax efficient savings and investment vehicle. The maximum that can be paid into a pension at present, the annual allowance, is £40,000 (plus potential unused allowances from the last three years depending on your pensionable earnings). The cumulative effect of that tax relief can help boost the size of a pension over the years, helping to build wealth for our retirement. So it can be advantageous to pay more into your pension if you can afford to do so, particularly for higher rate tax-payers who benefit from 40% tax relief. Income tax is payable on money taken from a pension as income and there is a limit on how much can be held in a pension over a lifetime, currently £1,073,100. The Capital Gains Tax exemption allows individuals to benefit from up to £12,300 of gains made on investments and savings. This can be a useful tool in retirement, as it allows returns on capital to be drawn down to boost retirement spending, to keep within a lower income bracket, for example. We can pay £20,000 per annum into an Individual Savings Account (ISA) and not have to pay income or capital gains tax on the returns from it when money is taken out. What must be noted here is that ISAs fall within your estate for Inheritance Tax (IHT) purposes – so are not exempt from that tax. On that note, there are numerous ways we can make sure HMRC only receives what it is due through IHT planning. These include amounts we can gift tax free annually, and where larger sums are involved use of more complex tax-efficient vehicles such as Business Property Relief – and of course trusts. Used effectively within a well-constructed financial plan, annual tax allowances and exemptions can make a significant difference to your finances. If you have any questions about how best to use your annual allowances and exemptions talk to your Lowes Consultant or call 0191 281 8811 and we will arrange for someone to talk to you.

LOCKDOWN AND ITS POTENTIAL IMPACT ON THE economy has seen the Government increase the UK’s debt. The Office for Budget Responsibility (OBR) estimates total government borrowing will be around £394bn in the financial year to 5 April 2021, compared to the expected £55bn prior to the pandemic. The inevitable question being banded around the media at the moment is whether the Chancellor of the Exchequer will increase taxes or reduce tax reliefs and allowances in order to raise revenue for the Treasury to start paying down the debt which has been incurred through the Coronavirus crisis. There has been plenty of speculation and warnings of ‘significant’ tax hikes across the board. We think this blanket approach is highly unlikely but the Chancellor could make strategic changes while balancing the need to keep the economy afloat and to keep people spending. One area that is being highlighted for potential change is Capital Gains Tax (CGT). The Office for Tax Simplification has recommended that CGT rates be brought in line with income tax and the annual exemption amount reduced from the current £12,300 to around £5,000. The Chancellor cancelled the November Budget in view of the uncertainties around the economy as the pandemic continued. His March Budget Statement, coming closer to an end to the crisis, we hope, now vaccines are in play, will be where we are more likely to see how the debt will be paid back and who will be paying. Some analysts believe governments in general will not hike personal taxes as this will put an additional burden on consumers and businesses, which could stall attempts to re-galvanise economies. Key here, is that tax planning has to be conducted on what we know, rather than on media hype. Rest assured, we will be keeping our finger on the pulse and issuing carefully considered advice on any implications on wealth building and inheritance based on the facts, rather than speculation.

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