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How far is too far for diversity

How far is too far for diversity

As funds continue to tune and develop their offerings to make them more appealing, investors face a seemingly unending series of choices. Funds increasingly have more complex ethical considerations. Rightly so. But how far should they go?

There are already funds that consider the gender bias of their investments, some so far as to claim they are actively influencing gender diversity.

Back as far as 2009 the expression “gender lens investment” was used to describe investment that actively considered benefits to women. Some high profile funds include the Legal and General Investment Management’s Girl fund, the Valuers Feminines fund, managed by Caroline Grinda-Kalbacher; and the UBS ETF Global Gender Equality fund.

A 2015 report by McKinsey & Company supported the principle that funds should have a bias towards companies with diverse management, as a gender balance boosts performance.

Now investors and advisers, including at retail level, can use the extended gender lens concept to boost their returns.

A recent report revealed that the gender diversity of the management team actually makes a difference. In an environment where every tenth of a percentage point counts, this sort of information could add significantly to income returns.

In the third edition of the Alpha Female study, it is concluded that a fund management tram that is of mixed gender – as opposed to single gender teams or solo managers – will produce better returns, and do so while reducing overall risk compared to a male-only administration.

And the outperformance is not just at fund level, but at single asset class level too, with returns on equities, bonds and mixed asset portfolios run by mixed gender teams producing better total returns over three years.

They found that women-only managers or teams tended to have less risk, and the mixed tams balanced it out.

In a male denominated industry mixed teams can only encourage more women to become fund managers. It makes business sense too build a team with a mixture of skills and expertise, with gender diversity a huge windfall benefit.

Wasn’t it obvious

What is perhaps more concerning is that this information has been presented as surprising, or a revelation. It must seem fairly obvious at headline level that a team with a balance in gender would make for a more balanced approach to investment.

Add that balance to a brand range of experience and ideas and it is more likely to produce a winning portfolio.

City based IFAs Holden & Partners’ say that their investment committee would not buy a fund purely on the fact it had a mixed or women-only investment team, but instead look for a management team with a relatively flat structure and diversity of opinions, providing more confidence in that team to manage a certain product.

But if there are more women on the team it shows willingness to be more diverse.

Some advisers don’t regard fund manager diversity in their investment criteria, but would consider that a combination of different views and opinions is always going to give you a more balance, rounded approach.

There is evidence also that more management groups are aware and responding to the fact that mixed teams produce better results, with a 14 per cent increase in funds managed by a mixed team since 2016.

Second only to total return performance is risk exposure. The Alpha Female report also found that mixed teams have higher risk levels than female-only teams, but lower risk levels than male-only teams. Again unsurprisingly it was concluded that women in a mixed team appear to act as a restraining influence on men.

Opinions vary as why this is, but one suggests that men have had a longer history within financial services, and are biased towards short-termism and excessive risk. Women don’t have as long a history of thinking that way.


Performance demonstrates the benefits of diversity. Finding the right funds has become increasingly difficult with the increased complexity of selective criteria.

These additional ways to select – or deselect – the most suitable fund provide huge choice and more headache-bringing decisions. But it would appear on the evidence that finding funds that invest in companies with diversity within their culture, and fund managers that reflect those same values may be the next investing advantage.

September 2018

When bandwagons turn into bubbles

When bandwagons turn into bubbles

Quite often when an investment idea takes hold prices surge, then settle, and unmanly occasions fall before bottoming out and building again slowly.

We’ve seen it recently with equities, bonds, metals, minerals, oil and and collectables.

One of the best performing collectable sectors over recent years has been classic cars and automobile. Values surged as gold fell until 2015, and then started to fall back as the gold price improved. Coincidence? maybe.

Opinions differ according to the source, with Coutts suggesting in their Passion Index that prices have fallen, and Knight Frank’s Wealth Report indicating that the tide has turned.

The chart below from US insurer and researcher Hagerty seems to support the consensus, showing a fall of over 16 per cent from the highs to recent low. That is consistent with the drops in 2008 during the financial crisis. But the chart des show what appears to be a bottom and a return to growth.

So was this a “bubble”, and has it burst?

Comparing other collectable prices with classic cars reveals that cars have been the hands down winner for returns over 10 years. Nothing else comes close.

Wine has followed a similar pattern of rise and fall a year or so ahead of cars. Other assets display similar characteristics, as though money were moving from one asset to the next sequentially. It may be that large sums are moved to the next rising star as the previous one wanes, but it’s hard to prove or demonstrate. And opinions as to what “the next big thing” actually is will differ, though the industry will have a feel and no doubt its clientele.

One of the possibly imperceptible factors in trend change is the attitude of buyers and sellers. Buyers become less enthusiastic, and sellers become just a little more eager to sell. This builds and escalates until prices appear reasonable once more. So investors will have held out for their prize, and some will have moved on to the next available asset class.

For well over a year the number of classic car owners that thought prices were rising has declined. But Hagerty’s June 2018 report suggests that has changed, and shows the biggest increase in positive opinion and optimism for over two years.

For most people it is just not practical to move funds from one asset class to another. These assets are mainly illiquid and costs to trade are high. So better to know perhaps that your chosen passion asset is likely to perform, or has a recent history of growth, that you can invest believing that its value should not recede while you take your enjoyment dividend from seeing and using it in the case of cars, watches or art, or from just owning it perhaps with coins or wine.

This scenario therefore appears much more cyclical in nature, more a corrective reaction to highs than the dramatic panic selling and price drops associated with a bubble.

That is not to say it can’t happen though.

Data from Coutts in their annual Passion Assets Index – Figure 3 – supports the view that wine and coins were better performers in the short term, but you’d still have been better off with a classic car over the longer term if you had the facilities to store and maintain it.

The volatile movement is at first suggestive of large buying and selling, but equally may be affected by small numbers and timing of events, there not being a fixed amount or number of assets available to sell, or opportunities to do so. One large sale being deferred may induce an up and down trend as seen with musical instruments for example.

Delving further into Hagerty’s data they reveal that prices for UK cars including Sunbeam Tigers, Jaguar E-Types and Triumph TR6’s have been key to halting and reversing the slide in index values.

But owning a classic does not have to be megabucks, and doesn’t even have to be a prestige mark.

Finding something that is rare, that has its own appeal to you, or a generation, could be enough.

One interesting place for data is the website HowManyLeft.co.uk, which allows you to search through cars alphabetically, find individual specifications, for example Ford Capri II Ghia, and discover that the one in the neighbours garage is one of only 12 registered, and that 19 have been SORN.

The historic data shows registrations have increased over time, suggesting that some serious renovation has been taking place. It shows how numbers licensed have declined and SORNs increased, and the fluctuation between them.

Key to any of these cars is that they don’t make them any more, so there will never be more than about 30 of the aforementioned Capri.

If you’re looking for a classic car this is a fantastic place to verify quite how rare your potential investment might be.


The headline index values are influenced by big spenders, and don’t reflect the reality of most classics. There was undoubtedly a rush to on the waggon when it was identified as an appreciating asset class, button really a bubble.

Prices can only really go up for average vintage and veteran cars. The super rare and desirable cars that we have dreamt of are more likely to experience serious price fluctuation depending on what is flavour of the month for super spenders.

July 2018


Volatility makes 2018 the wildest ride for over ten years

Volatility makes 2018 the wildest ride for over ten years

After a sleepy 2017 where a pound invested added 15 per cent more or less regardless, 2018 has come as shock. We have just left behind the longest period without a five per cent pullback ever. Over 90 years. The return of the whipsaw has seen stop-loss and gain-lock activations result in much lower prices than expected, only for the price to be back up again – in many cases – within the same trading session.

But it would be nice to know why, and what can be done about it.

After a more than a year of uninterupted index rises any level of drop was a shock.

This analysis uses US markets, but the effects apply equally to UK equities. There is an old adage that when Wall Street catches a cold, the rest of the world sneezes. But many respected commentators have suggested that Wall Street has the flu, with consequention repercussions for global markets.

But even so, put in perspective it may not be a frightening as it looks.

Markets have been vulnerable to whipsaw action since people could trade first from their home  computers, and increasing since the smartphone – and more importantly 3G and 4G data connections – became widely available. So over and above planned stop levels, the panic induced selling by worried and inexperienced investors amplifies the problem.

Consider also the way news is reported still. “Dow Jones drops 600 points”, “Biggest ever one-day drop”. These headlines may have been OK twenty years ago, but now they are sensationalist and unqualified. Because the indices are so much higher that large point movements may well be within the percentage ranges expected and understood. Only on the financial news channels do you get any sort of further explanation.

But such falls, or pullbacks or ultimately correction presents great opportunity to buy good stocks at discounted prices.

And there have been some excellent examples recently of why the market was right and sellers were wrong. Boeing, Amazon, Microsoft and Neflix have all surpassed expected earnings. Sector wide, banking and restuarants have added impetus. technology has taken a beating in the correction, but the poistive earnings on sometimes absurdly low P/E ratios provides golden buying chances.

Correction was overdue and needed

There is no doubt that the major indices were over-expended, and that a correction was due. But when this happens the retreating tide takes all stocks with it; it’s largely not selective in its markdowns.

But look at the index charts for the S&P 500 and Dow Jones Industrial Average over three years. Both show how January 2018 had an extended trajectory, and that a pullback was inevitable. More importantly, where the correction has settled. The 200 day moving average became the base line, with prices not falling much below where they were in December 2017, less than five months previous.

What might be behind the change in direction? Earnings continue to support valuations, especially at corrected levels. Confidence in the global economy remains high, significantly in key markets of Europe, China nd North America. Chances of global conflict and the Twitter brinkmanship have vastly reduced, and look likely to retreat further. Inflation remains under control. But the threat of interest rate rises lurks.

It’s a big “IF”

It is the possible rate rises that may be wielding the biggest influence, with gilts and bonds getting more attractive IF rates rise, equities present too much risk for the return compared to the fixed interest alternatives.

The technical picture is the most interesting part. rarely do you get such clarity in a chart. In the two major US index charts the 200 DMA line is so clear it negates the need to add a trend line. The daily index values have fallen to the 200 DMA and stopped, on a few occasions. The more times it happens the more strength of the bottom is implied, and combined with the 200 DMA line the likelyhood is that this is the launch pad for the trend to continue.


There is no guarantee that something may shock markets and they will go down further still. There are still the prickly subjects of trade wars and Syria that could yet throw in a proverbial spanner. But the emerging picture is of consolidation at what is already a level most investors would have settled for two or three years ago, or even just on eyaer ago. In 2015 markets did the same thing, but the conditions that could effect the outcome were not nearly as positive as they are today.

Many commentators hold opinion that this is a correction only. Fundamentals remain very strong. This is a case of volatility leading the market, not the market leading volatility.

May 2018

Spring statement lifts outlook just

Spring statement lifts outlook – just

The Chancellor announced his Spring Statement on the 13th March, a return to the format last seen from Norman Lamont in the early 1990s.

With the annual single fiscal announcement made in the autumn ahead of the year end, the Spring Statement has become an opportunity to update the numbers from the OBR, and report progress since the Budget speech in Novmber 2017.

It is also the opportunity to give a half-time boost to UK companies. But if the FTSE 100 rises after the event, dividend yields will fall, hitting the pockets of income investors.

The Chancellors speech was upbeat, but certainly was not the herald of Spring wanted by business.

UK economy brighter than expected

The ONS says that the UK now has a surplus in its current budget – the day to day funding rather than longer-term investment – of nearly £4bn. The long term debt still remains high – over £1.8 trillion, equating to £65,000 per UK household; still far too high to withstand another fiscal shock.

Put in perspective, it is now over 85 per cent of GDP. In 2005 it was 38 per cent, rising to over 60 per cent in 2010. The OBR predicts it will be back to 78 per cent by 2021/22.

The forecast for borrowing throughout 2018 was revised downwards, but not as low as trends had suggested. £45.2bn rather £49.9bn is an improvement, but not the £38.5bn expected by renowned thinktank the Resolution Foundation.

The UK is also near bottom of the G8 league for fiscal growth, though it was not as bad as predicted. Further upgrades to the outlook from the OBR may help, but don’t relieve the pressure on public services caught between the grip of austerity and a long and deep winter.

A stronger economy and higher tax receipts than were expected may provide – if they continue, says Mr Hammond – some additional help for struggling services later this year. The fear is some may not manage that long.

Austerity is ending, not ended.

Housebuilding received more attention, with the plan for £44bn of investment to provide 300,000 homes per year over five years centre of attention. The share prices of housebuilders – already good sources of dividends – did not react though. Perhaps it has been the same story for too long, of much talk and little real action.

Overall these numbers are all the right side of forecast, but not enough ahead to be meaningful with the uncertainty of Brexit.

The speech failed to excite the market, and for now at least income seekers should be able to find a return, despite the slowing of dividend growth.

Growth in dividend payments is still expected to be almost five per cent in 2018, but currency exchange may make it lower.

The UK was bottom of the global  league for dividend growth in 2017, significantly influenced by the weakness of sterling. Strengthening business conditions and share prices will mean that yields will fall for new investors looking at adopting a dividend income strategy.

In 2017 total global dividends surged in 7.7 per cent to an all time high on the back of strong growth and confidence in the economic outlook. 2018 is set to be higher still.

Dividend gems can still be found

The best returns came from Asia Pacific and Emerging markets, with Japan a distant third. These are the places dividend investors will need to start looking for a growing income stream.

The Janus Henderson Global Dividend Index report lists the top dividend regions and companies. Its contents offer some hope to those prepared to create their own portfolios, and it is still possible to find some joy in the FTSE indices. The mining sector is fast improving, offering selections such as Glencore, restoring its dividend last quarter, and Rio Tinto significantly increasing its return.

Another area may be life assurance, on the back of ageing population and the “advice gap” that will need to be filled. Legal & General has increased its payout by 15 per cent per annum over the last three years.

Looking at other areas where improvement has been forced upon industry, US banking may offer opportunity. Around the world banks have been made to remove risk from themselves, leaving many as bargains.

Around the world – see table above – unsurprisingly the same companies consistently fill the ranks of the top 20 dividend payers.


The Chancellor failed to deliver the motivation the City was looking for, and has maybe tried to save too much back “just in case” for Brexit, rather than break his new statement policy.

Brexit, and the uncertainty following has left sterling weak, and UK dividends still below par. But the Spring Statement didn’t set the market on a run, and so UK stocks paying reasonable dividends can still be found. And looking further afield should keep a steady income over what will be a turbulent year.

March 2018

Short sellers might hold clues to bad news

Short sellers might hold clues to bad news

After the death of Carillion, news abounds that its fate was foretold, and was one of the most shorted companies in the UK.

Further investigation shows that this is not just based on recent news, but a consistent trend; they had been the most shorted since before December 2015.

The 10th July 2017 warning that full year revenue guidance was slashed, the debt estimate raised and dividend suspended, resulted in a 70 per cent drop in the share value. But the short sellers for the most kept their positions open in expectation of even further falls. New short positions were being opened right into January 2018.

Some very astute investors have been caught out by the apparent rapid demise of Carillion, but there was evidently a considerable established opinion that all was not well, and that a significant price reduction was due to happen. But the information investors need is available free on the internet.

Data provides bigger picture

Having this sort of information might help investors find out if there is short selling on shares they own, or are considering adding to their portfolio. And though it does require a degree of spreadsheet knowledge, it’s actually much easier than you might imagine.

Under the Short Selling Regulation from November 2012, institutions must advise the regulator of their net short position within a day of opening it. This rule was introduced in the wake of the 2008 crisis, when short sellers were blamed for contributing to, if not actually creating the event. Subsequent reports have ruled otherwise.

These positions are logged and made available on a spreadsheet that details separately any current shorts, and all historical positions.

With a little sorting you can quickly establish which companies the hedge fund industry is expecting to falter.

There is a caveat though; this is just a record of the speculation these institutional investors are undertaking, it doesn’t provide the reasons for the shorting.

But when you see some companies on the list more than others, with multiple sellers of the same shares, you have to conclude that there must be some smoke, if not fire.

The data set is available in Excel from the FCA website – just search the web for “FCA net short positions”.

And the data provides other information too. As well as which companies are collectively thought more likely to falter, it also shows the number of institutions shorting each company, and the dates when they opened the short positions.

Those with most short positions include BlackRock, and others listed as “alternative” investment managers, notably London based hedge fund managers Marshall Wace LLC.

And by looking at those sellers whose predictions have been proved right, you can quickly see which other companies are on their radar.

The list of the most short sold companies from the 19th January 2018 data set is on page one. As you can see, there are many household names in the sights of the sellers.

Debenhams stands out as having shorting increased since a comparison last September. Aggreko is also up, as is J Sainsbury, Marks & Spencer and Pets At Home. Wm Morrisons has seen a significant reduction in short positions.

But Ocado – see below – stands out as having defied the odds. It has over 13 per cent of its shares sold short, with positions opened mostly before the share price shot up in late November 2017, and then again before the price rose to three year highs on 22nd January at 468p.

In fact the share price gained 96 per cent since the majority of the short positions were opened, leaving short sellers well out of pocket, at least for now.


This tells us is that the conclusions are not always obvious, but perhaps before making a purchase of shares in a company a look at the short positions list is a good fail safe. On finding your target present there further investigation is required, rather than an outright dismissal of its potential.

January 2018


Update Service 2017 Autumn Budget Special

Update Service 2017 Autumn Budget Special

This SPI Update Service Budget Special summarises the impact of the main measures of the 22nd November 2017 Budget on you as an investor and taxpayer, rather than as a drinking, smoking car-driver. It includes the changes previously announced which take effect in 2018-19 affecting Lessons in the SPI course which you may already have received.

The Lessons most affected are:

  • Yes, You Can Beat The Taxman
  • Advanced Tax Planning for the Investor
  • Tax-Efficient Investing
  • Investing in UK Property
  • Planning for a Prosperous Retirement

Even before the disappointing summer election, the Chancellor had made clear that the main Budget from now on would be in the autumn. Normally the first budget after an election tries to get out of the way all the nasties early on in the life of the parliament. If the conservatives had increased their majority in the election as they had hoped, this budget might have seen a much bolder attempt to improve the lot of the young at the expense of the old. But this budget consisted of giveaways in financial terms, but not the sort which directly affect most people’s pockets.

It actually felt much more like a glorified old-style Autumn Economic Statement as originally conceived – setting out the spending plans whose financing would be revealed in the traditional Spring budget.

This year everyone who can afford it will continue to benefit from:

  • generous tax breaks on SEIS and VCT investments
  • a doubling of the EIS investment limit to £2 million for “knowledge intensive companies”
  • the 20% rate of tax on capital gains, one of the lowest since it was introduced in 1965
  • a £400 rise in the tax free capital gains tax allowance, worth £80.

But you may be hit by:

  • the renewed freeze on the amount of your assets which escapes inheritance tax, except to the extent they are in a SIPP
  • the progressive loss of the tax free personal allowance above the £100,000 threshold. This is unchanged from 2017-18.

Income Tax

Table 1 below shows the income tax bands and rates for 2018-19 compared with 2017-18.

Table 2 shows the allowances.

The Chancellor confirmed that the tax free personal allowance rises by another £350, and that the starting point for higher rate tax rises from £45,000 to £46,350.

He reconfirmed the commitment to increase the personal allowance further to £12,500 by the end of this parliament, and to raise the starting point for higher rate tax to £50,000 by 2020.

So as a basic rate taxpayer, in 2018-19 you will benefit from:

  • the further rise in the tax free personal allowance, worth £70 a year

As a higher rate taxpayer:

  • the rise in the personal allowance will leave you £140 a year better off, and
  • the increase in the starting point for higher rate tax is worth another £200
  • this more than offsets the £2.52 a week rise in National Insurance Contributions if you earn more than £46,384 and are aged under 65.

If your total taxable income is between £100,000 and £123,700, you progressively lose all the benefit of the personal allowance.  You lose £1 of allowance for every £2 of taxable income over £100,000, representing an effective marginal rate of tax of 60 per cent – increased to 62 per cent if your income comes from earnings rather than investments, and you are aged under 65 and so still paying NICs.

Once your taxable income exceeds £123,700 you will have lost all the personal allowance, meaning £4,740 in extra tax payable at 40 per cent. The point at which you start to pay the 45 per cent top rate remains unchanged at taxable income of £150,000 – another continuing stealth tax, thanks to inflation.


If you are a basic rate taxpayer, since April 2016 the first £1,000 of the interest on your savings is entirely tax free – a £200 saving.

For higher rate taxpayers the allowance is halved to £500, but this still saves £200 in tax. Top rate 45 per cent taxpayers get no tax-free savings allowance.

And a further £5,000 “savings allowance” means that if your total taxable income is under £17,850 you pain tax at all on your savings income in 2018-19. Non-savings income above £11,850 is taxed at 20 per cent.

Since April 2016 net dividends over £5,000 a year is taxed at 7.5 per cent, and in the Spring budget this was reduced to £2,000 from April 2018.

Higher rate taxpayers still pay a nominal unchanged tax rate of 32.5 per cent on dividend income above £5,000, but the abolition of the dividend tax credit since 2016 means the effective tax rate increased from 25 per cent of net dividends received to 32.5 per cent – a 30 per cent increase in tax paid.

The reduction in the allowance to £2,000 will cost basic rate taxpayers with more than £5,000 dividend income an extra £225 a year.

For anyone with substantial dividend income this further enhances the attractions of shifting your dividends into your ISAs, or those of other family members.

National Insurance Contributions

  • The employee’s contribution rate remains at 12 per cent on the “primary” bank of income.
  • The rate on earnings above this primary band remains at two per cent.
  • The primary threshold at which contributions start to be paid rises to £162 a week,
  • but the upper earnings limit (UEL), where contributions fall from 12 to 2 per cent, is raised from £866 to £892 per week, to align it with the starting point for 40 per cent tax.

This budget continues the recent trend of further undermining previous attempts to harmonise the impact of tax and National Insurance by further widening the starting points for NICs and income tax.

This year employees start paying 12 per cent NICs on earnings of £162 a week, but don’t start paying 20 per cent income tax until they earn over £227 a week.

For 2018-19 we have a tax regime where for all except those over retirement age:

  • the effective starting rate is 12 per cent NICs at £162 a week, £8,424 a year
  • the combined NICs plus basic income tax rate of 20 per cent on earnings between £227.88 a week, £11,850 a year, and £46,384 – £892 a week – is 32 per cent, rather than the headline 20 per cent
  • the rate on earnings between £46,384 and £100,000 is 42 per cent
  • the rate on income between £100,000 and £123,700 is 62 per cent, because the £11,850 personal tax allowance is progressively withdrawn on incomes above £100,000
  • falling again to 42 per cent on taxable earnings up to £150,000
  • finally rising to 47 per cent on taxable earnings over £150,000.


There are no changes to the ISA regime. The amount you may contribute each year to an Individual Savings Account remains at £20,000 for 2018-19.

The Lifetime ISA launched last year allows anyone under the age of 40 to receive a £1 credit for every £4 paid in, up to a maximum credit of £1,000 a year until they are age 50.

The fund may be used for house purchase, or can be withdrawn for any purpose after the age of 60, or earlier in cases of serious illness.

Withdrawals for any other purpose than house purchase before the age of 60 lose the government bonus, plus any growth or interest on it and also attracts a 5 per cent penalty.

These plans are separate from normal ISAs, but contributions count towards the 2018-19 total annual £20,000 limit.

With an ordinary ISA you may take as much as you like out any time for any purpose, and providing you repay it within the same tax year, you can continue to shelter the income and capital gains under the ISA wrapper in future.


The Chancellor said nothing about pensions, despite widespread speculation that he may have been considering reducing further some of the tax breaks currently available.

The Budget papers revealed that after three reductions from £1.8m in 2011-12, the Lifetime Allowance goes UP by inflation to £1.03m.

Capital Gains Tax

After last year’s surprise cut in the flat rate to 20%, the rate remains unchanged for 2018-19.

The annual tax-free capital gains tax allowance increases by £400 to £11,700, in line with inflation.

Corporation Tax

As previously announced, the rate of corporation tax remains at 19 per cent.

Inheritance tax

The £325,000 limit remains unchanged and the tax rate remains unchanged at 40 per cent.

In April 2017 a further £100,000 reduction in the taxable value of your main residence became available. This goes up to £125,000 in 2018-19 as part of a planned increase to £175,000 by 2021-22. The value of the main residence nil rate band will be the lower of the net value of the interest in the property or the maximum amount of the band.

Since 2009 widows or widowers may “inherit” their former spouse’s or civil partner’s nil rate band.

VCTs, EISs and SEISs

The Chancellor announced that the investment limit for EISs would be doubled for knowledge-intensive companies.

  • The maximum you may invest in an EIS increases from £1 million to £2 million, with the additional £1 million to be invested in knowledge-intensive companies.
  • The limit for VCT investment remains at £200,000.
  • The limit for SEIS investment remains at £100,000.
  • The up-front income tax relief for investing in both EISs and VCTs remains at 30 per cent.
  • The up-front relief for investing in a SEIS remains at 50 per cent, regardless of your actual rate of tax.The length of time for which you must own a VCT before being able to sell it free of capital gains tax remains at five years; for EISs and SEISs it remains at three years.
  • SEISs and EISs continue to qualify for roll-over capital gains tax relief, and for inheritance tax business property relief.

Taxes on perks

Since April 2002, the personal tax you pay for cars registered after January 1998 has been determined by the price of the car, and its carbon dioxide (CO2) emissions – how “dirty” it is.

For 2018-19 the bands have changed as follows:

  • 13 per cent of the car’s value for cars with less than 50kg/km CO2 emissions.
  • 16 per cent of the car’s value for the next band of clean cars – those emitting between 51g/km to 75g/km.
  • 19 per cent of the car’s value for the next band of clean cars – those emitting between 76g/km to 94g/km.
  • Above that the tax increases by one per cent for each extra 5/km of CO2 emitted, rising to
  • 37 per cent for the most polluting cars emitting 180g/km of CO2 or more.
  • Within all bands an additional supplement applies for cars using diesel. This rises from 3 to 4 per cent from April 2018 for cars (not vans or lorries) which do not meet the latest Driving Emissions Step 2 standards.

Since 2003-04 the fuel scale charges have also being aligned to the car scale charges, designed to tax you on your personal benefit from your use of a company car. Your bill is determined by the same percentage of a fixed fuel scale figure. The “fuel benefit charge” multiplier increases by two per cent more than inflation each year, rising this year to £23,400.

The budget and your investing strategies

The Chancellor appears to have found an extra £25bn over the coming years to inject into the economy without putting any taxes up, and still being able to reduce the national debt as a percentage of GDP despite miserable growth forecasts.

This in itself is no mean feat, but to do it in such a way that almost no consumer will feel any immediate benefit is truly astonishing. Financially austerity has been relaxed, but what this will mean for public sector workers is not at all clear. What is clear is that benefits will go up less than the cost of living. Most voters will not feel that austerity has been relaxed at all.

It is difficult to work out which specific sectors or companies in the private sector will benefit from the largesse. The small print of the budget revealed that £15bn of the Chancellor’s projected spending was to be paid for by sales of shares in RBS, nearly half the current market capitalisation, but the market shrugged off the news.

Big housebuilders initially took fright at the proposals to make sure existing planning consents are in fact utilised, and the government’s expressed intention to encourage smaller builders rather than “big national” firms.

Similarly it is not at all clear where or how the biggest single line item – the £3bn Brexit fund – will be spent. Enhanced border controls and non-membership of the customs union would suggest a bigger role for HMRC, but in fact their budgets are set to fall.

Logic suggests that almost regardless of how the money is spent, it should provide a Keynsian boost to the economy at a time when the growth forecasts are some of the lowest ever predicted in recent history. This is because the Office of Budget Responsibility has given up assuming the UK’s productivity will ever improve; the Chancellor is doubtless hoping on this occasion it is they who are the eeyores, not him.

Almost as important as what was in the budget is what was not.

Fears of tougher regulation of utilities, which had been depressing the sector, proved unfounded, suggesting this sector may now be a bargain basement buy unless there is a real prospect of a Corbyn government any time soon.

Similarly not addressed were

  • the previously threatened changes to self employed National Insurance Contributions to reflect the fact that the basic state pension is now available to the self employed.
  • Social care
  • Any attempt to use taxes to redress the imbalance between the fortunes of the elderly and the young since the financial crisis.
  • Fears the VAT limit for registration might be brought down closer to the European average.

The elephant in the room – and in rooms around the world – remains what effect the reversal of quantitative easing here and in the US will have on market valuations as interest rates rise further.


A cynic might say it was a package of bribes or peace offerings to all Hammond’s political enemies.

The sadder, more likely, explanation is that it was the best a cautious chancellor could do with the rotten hand he had been dealt, to avoid any chance of a humiliating parliamentary defeat, in turn causing the budget to unravel as the Opposition predicted.

To the extent you consider it appropriate, consider the following as the key areas for action:

  • Make use of the full ISA, EIS, SEIS, VCT and capital gains tax allowances – you cannot carry them forward from one tax year to the next.
  • Think very carefully about withdrawing any of the funds which are within your SIPP, both from the point of view of losing the long term capital gains tax and income tax benefits of the fund, but also the future value of your estate.
  • Depending on your age, re-examine whether it makes sense to run down your assets outside your pension fund now that you can bequeath it free of all taxes to anyone you wish.
  • Consider creating matching tax losses on high yielding investments such as preference shares which you might benefit more from holding in an ISA or SIPP, by “bed and SIPP-ing” or “bed and ISA-ing”.
  • Consider adding as much to your pension plans as you can afford. The 40 year age limit for Lifetime ISAs makes logical sense only in terms of eventual plans to phase out upfront pension tax relief.
  • If you are likely to have a taxable income of more than £34,500, and even more so if more than £150,000, consider maximising the extent to which high yielding investments are sheltered in ISAs or SIPPs. Holding such assets in these wrappers is dramatically more attractive the higher your tax rate, and even more so if you have more than £2,000 in dividend income.
  • If your taxable income falls between £100,000 and £123,700, consider strategies such as pensions contributions or charitable donations to reduce the amount in that band, which is effectively taxed at 60 per cent.
  • Determine whether your portfolio contains adequate inflation protection. If the economy matches the Chancellor’s hopes for growth, rising equity dividend yields must be a better bet than the derisory returns on gilts coupled with the near certainty of capital losses when interest rates eventually rise.

November 2017