"HatTip" - U.S Election: Nothing To See Here

What Happens Today & Tomorrow Means Nothing

Written by Nick Lincoln, IFA

The US election looks to many (including me) like a choice between the Devil and the deep blue sea.

My extensive research concludes that either Trump or Clinton will win: beyond that, everything is uncertain. Whichever way the election goes, world stock markets could well have kittens, to use a technical phrase.

Such times can be deeply unsettling - nobody enjoys seeing the value of their investments fall, however temporarily. But most of my clients' portfolios span decades. For many families, their financial plans are powered by investments that will likely extend over 30 years or more.

Long Journeys Are Made Up of Lots of Little Steps

Click above to open presentation in new window

In a 30 year period, there are 10,950 individual days. Think about that for a second. In that context, how important (or not) are the next two or so days?

In time, the US election will be just another "event", just another (potential) blip. Until the next one comes along, as it invariably will.

The short presentation to the right (or click here) may help put the above ramblings into context. Time is a great healer, especially with your investments.

In terms of your financial well-being, what happens today and tomorrow is - honestly - pretty irrelevant. What happens over the decades is what matters.

If your financial plan spans decades then time is on your side. Let time work its magic. 

"HatTip" - You And I Are Different

People that know me will have read the title of this "HatTip" and exhaled a sigh of relief: who on Earth would want to be like me?!

Thankfully of course we are all different, in our own lovely, different ways. Each of us has different wants, needs, aspirations, values (morals, even), ages, states of health. Financially, we have differing incomes, debts, inheritances, spending patterns and so on.

"HatTip" - 2015 Autumn Statement

And exhale! Miracles do happen: Gorgeous George managed to get through an Autumn Statement without completely rearranging the personal financial services landscape.

Perhaps he read the last paragraph in this....

Of course, the devil is often in the detail, so don't pop those champagne corks quite yet. Especially if you are a buy-to-let landlord; the Chancellor seems to have you in his sights....

However, for the moment, let us be grateful. No doubt he will find things to dicker about with during next year's budget!

"HatTip" - Open Letter to George at Number 11

"Dear George

I am a basic rate taxpayer. When, on 8th July 2015, you sat down after your Budget, I was nearly £2,000 a year worse off because of changes to the tax regime.

Yet the media lauded your Budget as a tax-cutting success. How did this discrepancy arise? It arose because I am the owner of a small business and I remunerate myself via salary and dividends.

8th July 2015 marked the day when the Conservative party finally ditched any pretence to being the party of small business; the era of “crony capitalism” (corporatism) is now accepted and openly touted by the establishment. Small business is so “yesterday”.

So yes, I have a vested interest in whingeing. I admit it. But let me put to paper my thoughts on why this new taxation of dividends is so damaging.

First, let us dismiss the pernicious myth that somehow paying oneself via dividends means you are avoiding tax. This is nonsense; every penny of dividend income I receive has come out of business profits already taxed once via Corporation Tax.

The compact between the State and the business owner was that the State would take its share via this tax and whatever was left over was yours. There would be no further tax to pay (unless you had the temerity to take dividends that put your income into the 40% tax band - hey big spender!)

The State recognised that, as a small business owner, you were running incredible risks. The State understood that there was no benevolent employer looking after you; that there was no company pension scheme waiting for you to join; there was no employer sick pay or life cover or employment “rights”. It was just you, the marketplace and your offering.

The State saw that, if small businesses flourished, they would grow and employ people. These employees in turn would pay Income Tax, National Insurance etc.

The quid pro quo was that the State would not tax business owners as heavily as PAYE employees, a

A dividend certificate, as spotted yesterday

vast number of whom enjoy all of the above benefits.

That compact has now been blown away; the State will continue to tax you first on every penny of your profits (for, unlike Income Tax,  there are no allowances with Corporation Tax) and now tax you again when you extract what remains, bar a truly pathetic £5,000 “dividend allowance”.

Of course, this is where dividends meet the thin end of the wedge. Once a tax is introduced it never seems to go away. A 7.5% tax on dividends could just as easily be 17.5% or 27.5% whenever a future Chancellor needs more of our money. The door has been opened.

This is the country of the “butcher, baker and candlestick maker.” It is built on commerce, on entrepreneurship, on the collective risk-taking of hundreds of thousands of people who have had the courage and conviction to go it alone. These same people may now be thinking “why bother?”

Not every small business will become a big business, either through choice or because of business failure. But every  - every - big business was once a small one: the ramifications of this ideological sea change from a purported Tory chancellor could be catastrophic.

As ever, the outcomes will not be felt until you and your generation of politicians have long departed, to retire on your (taxpayer funded) final salary pensions. You know, those pension schemes that small business owners have not a hope in hell’s chance of ever enjoying!

Anyway, hope you are well and that the family is OK. Speak soon.

Yours sincerely

Nick

"HatTip" - Promises, Promises

In case you missed it, there was an election recently.
And in the 12 months leading up to it, a lot of promises were made. Will they be kept?

The Labour Party seemed to spend the dreadful Mansion Tax about 15 times over. The LibDems... well, I was not listening to their promises. Come on, hands up - neither were you.

As for the Conservatives, one has the feeling they were making promises on the assumption they