Put a January investment ‘detox’ at the top of your New Year financial resolutions list

Put a January investment ‘detox’ at the top of your New Year financial resolutions list

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Julia Grimes
Published: 29 Dec 2014 Updated: 03 May 2016

Clean up your portfolio before putting new money into an ISA says Tilney Bestinvest

The New Year is a time when people often set themselves personal goals for the year ahead. For many their list of New Year Resolutions will include getting back into shape after the indulgences of the Christmas festive period but it can also make sense to add a few finance-related ones to the list, including giving your investments a January “detox”.

Jason Hollands, Managing Director of investment and financial planning group Tilney Bestinvest, suggests six possible New Year Resolutions worth considering:

1. File your 2013/14 tax return online by 31 January

“Few people enjoy filling out forms, not least lengthy ones for the taxman, so it is human nature to leave completing an annual tax return until the eleventh hour. The deadline for submitting paper-based returns for the 2013/14 tax year has already passed but returns can be submitted online until 31 January 2015. It is important not to miss this, or you will face a fine, starting at £100 for being just one day late, and thereafter and additional £10 for each day if you are three months late. If you delay by 6-months, you will also face all of these penalties plus the higher figure of either a further £300 or 5% of any tax due.

“It is important to understand that to file a self-assessment tax return online you will need a HMRC account and this can take a week because you will need to receive an ‘activation code’ in the post – so act now if you do not have one.

“Furthermore, completing a tax return involves preparation in terms of gathering together relevant documents such as pay slips and records of any bank interest or dividends received.”

2. Detox your existing portfolio before investing in a new ISA or pension

“One of the biggest mistakes some investors make is getting caught up in the end of tax year frenzy and choosing investments on an ad hoc basis. It is so easy to get distracted by whatever funds are flavour of the month without first considering how these might fit alongside an existing portfolio. It is however vital to understand your overall goals, risk appetite and strategy as a precursor to investing any new money into the markets.

“Existing portfolios also drift over time as different investments held don’t all move in tandem, which can lead to a situation where the risk profile of a portfolio mutates into something very different from what may have originally been intended. And of course, individual investments that may have been worth backing in the past might need to be reassessed from time to time.

“For these reasons, it is vital to review your portfolio and potentially give it the equivalent of a ‘detox’ at least once a year. Given that many people make new investments in February and March in the run-up to the tax year end, it is a good disciple to review what you already hold ahead of this as the process should provide an insight into the asset classes and markets that you should focus on for new investments in order rebalance your overall portfolio.

“One way that investors can analyse their own portfolio free-of-charge is by using Tilney Bestinvest’s Free Investment Report Service & Tool at: www.bestinvest.co.uk/first

3. Consider consolidating your investments for greater control

“One of the things that can frustrate an investor’s ability to effectively manage and review their investments, is when they are scattered around in different accounts. This is especially true of pensions, because people can end up accumulating several as they change jobs during their working lives. These days however, the ISAs and Self-Invested Personal Pensions offered by firms such as Tilney Bestinvest offer an incredible amount of choice within a single account. Consolidating your investments might therefore enable you to have greater control over your investment strategy, without sacrificing choice. However, before consolidating your pensions, do first check with each pension provider that there won’t be any excessive penalties or loss of valuable benefits.”

4. Utilise your pension allowances and mop up any unutilised ones from previous years, as the current reliefs many not be available in the future

“Radical changes are being introduced to pensions which will provide considerably greater flexibility over what you can do with your pension pots when you reach retirement age as well as the ability to pass pension assets on to your heirs without incurring a tax hit, so if you have been deterred by pensions in the past, you should take another look.

“However, the UK faces a General Election in May and the outcome looks very uncertain. Labour is committed to reducing the level of pension reliefs available for high earners and therefore there is no guaranteed that the current level of reliefs at your marginal income tax band will be available in the future. Those subject to the highest tax bands should carefully consider whether they should maximise pension contributions while they can still get effective relief of up to 45%. The maximum gross pension contribution this tax year is £40,000 but once that is utilised, you can also mop up any unused reliefs from the three previous tax years through a rule known as pensions “carry forward” when the annual maximum gross contribution allowances were £50,000 per year. For some high earners who have not been utilising pension allowances, that could mean a potential maximum contribution of £190,000 attracting up to £85,000 in tax relief. You need to have had a pension in place in the year from which you are carrying forward to use unused allowances, but you don’t need to have paid in anything recently and your new contribution does not need to be paid into the same pension.”

5. Maximise your New ISA allowance

“ISAs may not have the upfront tax reliefs of pensions, but they do have considerable flexibility as you can withdraw your investments at any time without a potential tax hit on the way out. ISAs have also seen some significant improvements over the last few years, with the allowances hiked to £15,000 per adult, greater flexibility over what can be held within them and the ability for a spouse or civil partner to inherit them without losing the tax benefits. The UK faces the prospect of on-going austerity in the next parliament and a potential reintroduction of the 50% tax band for high earners, so it makes sense to protect your savings and investments as far as you can within ISAs. If you can’t decide whether to invest, or are nervous about current markets then secure your allowance with cash before the end of the tax year and decide later where to invest.”

6. Make use of your capital gains allowances

“If you own investments outside of tax free-wrappers (ISAs and pensions), then you can crystallise returns this tax year of up to £11,000 without incurring capital gains tax. Many investors forget to utilise this potentially valuable allowance. It might make sense utilising this and using the proceeds to fund an ISA or pension contribution, so that over time as much of your investments as possible are sheltered in tax-efficient accounts.”

- ENDS –

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Important Information

The value of investments, and the income derived from them, can go down as well as up and you can get back less than you originally invested. Prevailing tax rates and reliefs are dependent on your individual circumstances and are subject to change.

SIPPs are not suitable for everyone. If you don’t want to invest across different asset classes or don’t think you will make use of the investment choices that SIPPs give you then a SIPP might not be right for you.

Self-directed investors should regularly review their SIPP portfolio, or seek professional advice, to ensure that the underlying investments remain in line with their pension objectives.

Different funds carry varying levels of risk depending on the geographical region and industry sector in which they invest. You should make yourself aware of these specific risks prior to investing. We aim to provide investors with information to help them make their own investment decisions although this should not be construed as advice or an investment recommendation. If you are unsure about the suitability of an investment or if you needadvice on your specific requirements, we strongly suggest that you consider professional financial advice.

About Tilney Bestinvest

Tilney Bestinvest is a leading investment and financial planning firm that builds on a heritage of more than 150 years. We look after more than £9 billion of assets on our clients’ behalf and pride ourselves on offering the very highest levels of professional client service with transparent, competitive pricing across our entire range of solutions.

We offer a range of services for clients whether they would like to have their investments managed by us, require the support of a highly qualified adviser, prefer to make their own investment decisions or want to take more than one approach. We also have a nationwide team of expert financial planners to help clients with all aspects of financial planning, including retirement planning.

We have won numerous awards including UK Wealth Manager of the Year, Low-cost SIPP Provider of the Year and Self-select ISA Provider of the Year 2013, as voted by readers of the Financial Times and Investors Chronicle. We are pleased that our greatest source of new business is personal referrals from existing clients.

Headquartered in Mayfair, London, Tilney Bestinvest employs almost 400 staff across our network of offices, giving us full UK coverage, and we combine our award-winning research and expertise to provide a personalised service to clients whatever their investment needs.

The Tilney Bestinvest Group of Companies comprises the firms Bestinvest (Brokers) Ltd (Reg. No. 2830297), Tilney Investment Management (Reg. No. 02010520), Bestinvest (Consultants) Ltd (Reg. No. 1550116) and HW Financial Services Ltd (Reg. No. 02030706) all of which are authorised and regulated by the Financial Conduct Authority. Registered office: 6 Chesterfield Gardens, Mayfair, W1J 5BQ.

For further information, please visit: www.tilneybestinvest.co.uk


This release was previously published on Tilney Smith & Williamson prior to the launch of Evelyn Partners.