The ABC of a Junior ISA

The Junior Individual Savings Account (ISA) was introduced in 2011, 12 years after the launch of the original ISA in 1999, which recently celebrated its 18th birthday

In a nutshell, the Junior ISA is a long-term, tax-free savings account for children. It effectively replaced the Child Trust Fund and aims to enable parents to save a tax-efficient nest egg for their children.

There are two types of Junior ISA and your child can have one or both types:

  • A cash Junior ISA, where you won’t pay tax on interest on the cash you save.
  • A stocks and shares Junior ISA, where your cash is invested and you won’t pay tax on any capital growth or dividends you receive.

Managing the money
Only parents, or guardians with parental responsibility, can open a Junior ISA for under 16s, but the money belongs to the child. Until the child turns 16, the parent can manage the account if they want to make changes. For example, they could change the account from a cash to a stocks and shares Junior ISA or change the account provider.

The child takes over control of the account when they turn 16 and they can access their money from age 18 (when the ISA automatically loses its ‘Junior’ status).

Children aged 16 or older can open their own Junior ISA, as well as an adult cash ISA (with maximum contribution limits of £4,128 and £20,000 respectively, for the 2017-18 tax year).

Paying into a Junior ISA
Anyone can pay into a Junior ISA, but the total amount paid in can’t exceed £4,128 in the 2017/18 tax year and £4,260 for 2018/19. If you go over this limit, the excess is held in a savings account in trust for the child and cannot be returned.

During the 2017/18 tax if you have paid £2,000 into a child’s Cash Junior ISA you can only pay £2,128 into their stocks and shares Junior ISA. You can make contributions into a Junior ISA until the child’s 18th birthday.

Contains public sector information licensed under the Open Government Licence v3.0.

The tax efficiency of ISAs is based on current rules.
The current tax situation may not be maintained. The benefit of the tax treatment depends on the individual circumstances. The value of your stocks and shares ISA and any income from it may fall as well as rise. You may not get back the amount you originally invested.

If you’d like more information on Junior ISAs, please get in touch.

Monthly market update, Happy new year!

The bells rang and we moved into 2018 with the FTSE 100 closing at an all-time high. This is the second year in a row that the FTSE 100 has ended the year at its highest level.

The final session of the year saw the FTSE 100 close at 7,687.77, which was 4.9% higher than the November closing figure of 7,326.67.  This meant the index enjoyed growth of 7.6% in 2017, following its close in 2016 at 7,142.83.

Despite falling slightly in the final session, in the US, the Dow Jones Industrial Average continued its general upward momentum, closing the year at 24,719.22.  This was 1.8% above November’s closing level of 24,272.35 and was the ninth straight monthly gain, leaving March as its only losing month in 2017.

Over the full year, the Dow Jones Industrial Average enjoyed growth of an amazing 25.1% over its closing figure in 2016 of 19,762.60.

In terms of £ Sterling, it ended the year at 1.35 US Dollars.  While this was unchanged from the end of November, it was 9.5% higher than the closing figure in 2016 of 1.23 US Dollars.

Against the Euro, £ Sterling ended the year at 1.13 Euros, which was fractionally lower than the November closing figure of 1.14 Euros.  During 2017, the pound fell 4.1% against the Euro, having started 2017 at 1.17 Euros.

Inflation, as measured by the Consumer Prices Index including owner occupiers’ housing costs (CPIH), remained unchanged at 2.8% (this is based on November’s data which is reported in December).  The 12-month for the Consume Price Index (CPI) rate which excludes owner occupied housing costs and council tax, was 3.1% in November 2017, up from 3.0% in October 2017.  This is the highest it has been since March 2012.

The increase in interest rates during November helped long-suffering deposit savers slightly.  However, they continue to lose money in real terms when you consider the rate of savings interest compared to the rate of inflation.

The Omnis Managed funds, Openwork Graphene Model Portfolios and new Omnis Managed Portfolio Service provide you with a diversified asset allocation in line with your Attitude to Risk, investing in Developed Market Equities, such as UK, US, Europe and Asia Pacific as well as Emerging Market equities.  Cautious and Balanced investors will also have significant holdings in UK and Global Bonds, as well as Alternative Strategies.

We believe this multi-asset approach aims to give you the best opportunity for the highest level of return for your stated level of risk.

 

The bells rang and we moved into 2018 with the FTSE 100 closing at an all-time high. This is the second year in a row that the FTSE 100 has ended the year at its highest level.

The final session of the year saw the FTSE 100 close at 7,687.77, which was 4.9% higher than the November closing figure of 7,326.67.  This meant the index enjoyed growth of 7.6% in 2017, following its close in 2016 at 7,142.83.

Despite falling slightly in the final session, in the US, the Dow Jones Industrial Average continued its general upward momentum, closing the year at 24,719.22.  This was 1.8% above November’s closing level of 24,272.35 and was the ninth straight monthly gain, leaving March as its only losing month in 2017.

Over the full year, the Dow Jones Industrial Average enjoyed growth of an amazing 25.1% over its closing figure in 2016 of 19,762.60.

In terms of £ Sterling, it ended the year at 1.35 US Dollars.  While this was unchanged from the end of November, it was 9.5% higher than the closing figure in 2016 of 1.23 US Dollars.

Against the Euro, £ Sterling ended the year at 1.13 Euros, which was fractionally lower than the November closing figure of 1.14 Euros.  During 2017, the pound fell 4.1% against the Euro, having started 2017 at 1.17 Euros.

Inflation, as measured by the Consumer Prices Index including owner occupiers’ housing costs (CPIH), remained unchanged at 2.8% (this is based on November’s data which is reported in December).  The 12-month for the Consume Price Index (CPI) rate which excludes owner occupied housing costs and council tax, was 3.1% in November 2017, up from 3.0% in October 2017.  This is the highest it has been since March 2012.

The increase in interest rates during November helped long-suffering deposit savers slightly.  However, they continue to lose money in real terms when you consider the rate of savings interest compared to the rate of inflation.

The Omnis Managed funds, Openwork Graphene Model Portfolios and new Omnis Managed Portfolio Service provide you with a diversified asset allocation in line with your Attitude to Risk, investing in Developed Market Equities, such as UK, US, Europe and Asia Pacific as well as Emerging Market equities.  Cautious and Balanced investors will also have significant holdings in UK and Global Bonds, as well as Alternative Strategies.

We believe this multi-asset approach aims to give you the best opportunity for the highest level of return for your stated level of risk.

A Tax Update for Landlords

As a result of a challenging economic environment, the Chancellor has tightened the screws on a number of sectors and trading types. One sector that has been bombarded by changes is landlords and property owners.

In this article, we endeavour to summarise recent tax-related changes that affect people letting out or selling residential, second properties.

Mileage for private landlords

In the recent Autumn Budget 2017, the Chancellor announced that landlords would have a choice when calculating their motor running expenses. From 6th April 2017, landlords can now opt to use mileage rates to calculate their allowable deductions for motoring expenses, or stick with deducting actual running costs and claiming capital allowances.

Mileage is not available to landlords who are companies or in mixed partnerships (a partnership with both individual and non-individual members).

Selling properties owned by a company

When an asset is sold for a profit, part of the increase in its value is due to inflation. When calculating a capital gain for a company, you effectively convert the proceeds to what they would’ve been worth when the item was originally purchased. This is called indexation.

Indexation allowance for companies has continued to apply since 1982, but it will now be frozen from January 2018.

Lending

Buy-to-let lending legislation has also changed. In October, new rules introduced by the Prudential Regulation Authority made it more complicated to obtain lending to finance the purchase of an investment property, because lenders were forced to look at the feasibility of the entire portfolio; not just the property in question.

Letting fees

As part of the Autumn Statement in 2016, the government announced plans to ban letting agent fees for tenants in England. Currently, tenants are usually billed for tenancy agreements, referencing and credit checks.

A draft bill has recently been laid before Parliament so if the government proceeds with the ban, it is likely to come into effect in 2018.

£1,000 property allowance

You can get up to £1,000 a year in tax-free allowances for property income from 6th April 2017. If you own a property jointly with others, you’re each eligible for the £1,000 allowance against your share of the gross rental income.

If you’re already registered for Self Assessment, you can claim the allowances by deducting them from your gross property on your tax return. You can’t deduct any other expenses or allowances if you claim the property allowance. You can change which approach to take from year-to-year.

If you aren’t in the tax return system, you don’t need to register provided your property income is below £1,000, but you would need to keep records of your income. You can of course opt to complete a tax return if you have a loss to declare, which would make it easier to claim the loss in the future.

Capital Gains Tax

Capital gains tax arises when you make a “gain” when you sell or dispose of an asset. Normally, capital gains tax is charged at 10% or 20% depending on your tax rate, and capital gains tax transactions are reported on a tax return so you have 10 months from the end of the tax year to file the return online and pay any tax arising.

From April 2017, new rates of capital gains tax were introduced that only apply to residential property that isn’t your home. If your gains are within the basic rate band, 18% is now charged on residential property and 28% on any amounts above the basic rate band.

The government has also announced their intention to shorten the window for paying the capital gains tax on such transactions. But in the Autumn Budget 2017, it was announced that the introduction of the 30-day payment window for capital gains tax to be paid on residential property would be deferred until April 2020.

Restrictions to tax relief on mortgage interest

From April 2017, the offset of mortgage interest available to higher rate taxpayer landlords will be gradually reduced to the basic rate.

Under the four-year withdrawal of the relief, in 2017/18 landlords will only be able to apply the existing relief rules to 75% of their finance costs with the remaining 25% using the basic rate reduction. The following three years will see the proportion change by 25% each year before the basic rate cap applies in full from 2020/21.

Landlords who have small borrowings or are basic rate taxpayers, will be unaffected by the change. However, those who took advantage when access to finance was more relaxed, could be hit by the fall in their tax-deductible expenses- and therefore a rise in their tax liability.

This restriction applies to individuals owning properties – not companies. Corporation tax is currently 19% and set to fall to just 17% by 2020 under current government plans. Operating as a limited company may look attractive. However, the tax-advantages of being paid dividends have been slashed and there may be stamp duty and capital gains tax, so it is important to seek advice if you’re considering putting property into a limited company.

Stamp Duty surcharge on additional properties

As of April 2016, anyone buying a second property has been hit with a 3% surcharge.This means for someone buying a property worth £175,000 they’ll pay £6,250 rather than £1,000.

The surcharge is probably one of the most severe changes for individuals who own more than one property.

Removal of the Wear & Tear Allowance

From April 2016, the annual Wear and Tear Allowance was removed. This Allowance served to reduce property income and was available against lettings of furnished, residential properties. It was intended to account for the deterioration of the fixtures and fittings.

Instead of the Wear and Tear Allowance, landlords are now able to deduct the actual costs they incur on replacing furnishings in the property, but no tax relief will be available on the initial cost of furnishing a property. This relief is available to unfurnished and part-furnished properties, as well as fully-furnished.

Increase in Rent-a-room Relief

After 18 years of being at £4,250, ‘Rent-a-room’ relief increased to £7,500 from April 2016.

Rent-a-room relief allows you to let out furnished accommodation in your home, tax-free, subject to the threshold. The threshold is halved if you share the income with your partner or someone else.

The relief is open to anyone renting out room (i.e. a room or even an entire floor) in their home, whether they own the property or not. It is therefore available to people running bed and breakfasts and guest houses.

In the Autumn Budget 2017, the government announced it would publish a call for evidence to establish how rent-a-room relief is used and ensure it is better targeted at longer-term lettings.

Market Bulletin

2017 was the year of the campaign trail, with several key elections held in counties with great influence on global economics and stock markets. Here, we recap on the political posturing that defined the past 12 months, and what it meant of the global stock markets.

On 20 January, Donald Trump was inaugurated as the 45th president of the United States. Global stock markets had rallied since the election result, with many in corporate America hoping to benefit from promised tax reforms. Not everyone was happy – on inauguration day, 420 marches were reported in the US making it the largest single-day protest in American history.

In Europe, the Dutch were hailed as having “defeated populism” in the 15 March election by denying the Geert Wilders-led Party of Freedom’s bid for power.

On 7 May Emmanuel Macron of En Marche! was declared president of France having won the second-round vote against the Marine Le Pen-led National Front by a decisive margin. World stock markets are at their highest point for the year so far.

Across the Channel, the UK general election on 8 June restored Theresa May as prime minister, but only after the Democratic Unionist Part of Northern Ireland agrees to support a Conservative minority government. As the result came in, the prospect of a hung parliament led to an immediate fall in the value of the pound.

After a relatively quiet end to the summer, aside from ongoing Brexit discussions, the eurozone’s biggest player Germany held its federal election on 24 September. The result saw the Christian Democratic Union win only 33% of the vote – its lowest share of the vote since 1949 – but enough to see Angela Merkel remain as chancellor. Markets then rallied for the last week of September and continued to climb in October.

Into autumn and it was the turn of the Japanese to go to the polls on 22 October. Given the dramatic fall in popularity that many world leaders had found themselves in over the year, it was a relief for prime minister Shinzo Abe to secure a big election win. The father of ‘Abenomics’ and the ‘three arrows’ policy of monetary easing, fiscal stimulus and structural reform, Abe’s victory was welcomed by a rise in markets.

Elsewhere in Asia, perhaps the most significant global change was happening in China where the hugely powerful Communist party held its five-yearly congress. President Xi Jinping cemented his legacy with his own political philosophy being written into the country’s constitution.

Emerging markets will dominate the electoral calendar in 2018, with votes due in the likes of Russia, Mexico, Brazil and Pakistan.

Need advice about your investment options? Please us on 01202 520550.

Omnis Investments launches Strategic Bond and UK Equity Income funds

Omnis Investments, the fund range available exclusively to our advisers, is to launch two new funds on 5 December 2017 to be offered initially though the Omnis Managed Portfolio Service, a risk-graded discretionary management service for Openwork clients.

The Omnis Strategic Bond Fund is to be run by Fidelity International’s Ian Spreadbury, Claudio Ferrarese and Tim Foster. It greatly enhances the service’s ability to diversify across fixed income, investing across developed and emerging market government bonds, inflation-linked bonds, investment grade and high-yield corporate bonds.

Ian Spreadbury is one of the most respected and recognisable names in the fixed income space with over 30 years of investment experience. He and co-managers Ferrarese and Foster will focus on what they see as three core pillars of bond investing – aiming to deliver an attractive risk adjusted return, while striking an appropriate balance between income, low volatility and equity diversification.

The Omnis UK Equity Income Fund is to be run by Royal London Asset Management’s Martin Cholwill. The fund gives the service much greater choice and flexibility in allocating across UK equity holdings, sitting alongside the Omnis UK Equity and Omnis Income & Growth funds.

Martin Cholwill has vast experience in managing money since 1983, and is widely recognised as one of the best fund managers in his field. The fund will adhere to Martin’s robust, stable investment process, that has proven effective through several market cycles. His high-conviction style focuses on fundamentals, favouring companies with strong business models and sound finances.

Toni Meadows, Chief Investment Officer at Omnis Investments, said: “These managers are from the very top-tier of UK investors, and we are thrilled to have secured their talents for Openwork advisers and their clients.

The new funds offer diversification benefits, as well as the ability to deliver meaningful yields to the portfolios, and are a great addition to our armoury.”

He added: “Six months in and the Omnis Managed Portfolio Service is already gaining traction, and adding additional funds to the toolbox makes us more confident that we can deliver greater, cost-efficient diversification and even better risk-adjusted returns”.

John Clougherty, head of wholesale at Fidelity International, said: “Fidelity International is delighted to have been selected by Omnis to provide fixed income expertise for the Omnis investment proposition. We very much look forward to working with Omnis and the Openwork advisers.”

Phil Reid, head of wholesale at Royal London Asset Management, said: “RLAM is delighted to partner with Omnis and work with the growing number of Openwork advisers. I’m particularly pleased Omnis has selected our UK Equity Income strategy; we see this as a strong endorsement of our investment process.”

Budget, November 2017

The media will be full of facts and deep analysis on the Budget that Philip Hammond has delivered,
including the headline grabbing rabbit that escaped the chancellor’s hat to abolish stamp duty for most
first-time buyers in England and Wales. Out of the 88 pages which constituted the chancellor’s second
Budget, table 2.1 on pages 28-30 (see below) is once again the most revealing.

It shows plainly the impact on the public finances of each measure being announced: a (-) is a ‘giveaway’
or fiscal boost from Treasury to the economy, (+) takes money out of the economy and into the public
finances. We call it “THE table” because it is the quickest way to gauge the reality of what has just been
announced.

It identifies 69 specific policy decisions with either a positive or negative effect on the public finances.
Taken together they represent a near £25 billion giveaway over the six years from 2017/18. This is pretty
substantial when compared to the equivalent number in the Spring Budget, which indicated a mild
tightening of £2bn over five years. The Autumn Statement last year was the greatest giveaway in recent
years at £33 billion. So, taken together, the chancellor will have put £56 billion from the public purse into
the UK economy in just over a year.

The table shows the detail in 414 entries across housing, the NHS, families and work, economic
development, tax compliance, tax rates, air quality and other measures.
Budgets are one of the most important set-piece events in the national calendar. Markets move, careers
are made and lost, the economy can be aided or hindered. And sitting behind the Budget is the
independent forecast of the Office for Budget Responsibility (OBR).
The OBR published its November outlook for the economy and public finances as the chancellor sat
down today. The economy and public finances are naturally very difficult to forecast but the point of trying
to nail this particular jelly to a wall is to determine the projections for the health of the economy, the
subsequent flow of tax revenues to the exchequer, and demands upon the same for spending. The
performance of the engine of the economy is far more important than any one headline tax or spend
measure.

At the core of those forecasts was the fact that this is the first time in modern history that the official UK
GDP growth forecasts are below 2% every single year through to 2022. A sobering thought for us all as
we look towards the festive season.

 

Table 2.1: Autumn Budget 2017 policy decisions (£ million)1
Head 2017-18 2018-19 2019-20 2020-21 2021-22 2022-232
Housing and Homeownership
1 Land Assembly Fund3 Spend 0 0 -220 -355 -355 -355
2 Housing Infrastructure Fund: extend3 Spend 0 0 -215 -710 -1,070 -1,185
3 Small sites: infrastructure and remediation Spend 0 -275 -355 -120 0 0
4 Local Authority housebuilding: additional investment Spend 0 0 -355 -265 -260 0
5 Stamp Duty Land Tax: abolish for First Time Buyers up to £300,000 Tax -125 -560 -585 -610 -640 -670
6 Right to Buy for Housing Association tenants: pilot Spend 0 0 -85 0 0 0
7 Council Tax: increase maximum empty home premium to 100% Tax 0 0 0 0 +5 +5
National Health Service
8 NHS: additional resource Spend -400 -1,900 -1,070 0 0 0
9 NHS: additional capital Spend -600 -420 -840 -1,020 -960 -360
Supporting families and working people
10 Fuel Duty: freeze for 2018-19 Tax 0 -830 -825 -845 -865 -885
11 Alcohol Duties: freeze in 2018 Tax -35 -225 -230 -230 -235 -240
12 Air Passenger Duty: freeze for long-haul economy flights and raise business class multiplier Tax 0 0 +25 +25 +25 +30
13 Targeted Affordability Fund: increase Spend 0 -40 -85 -95 -100 -110
14 Universal Credit: remove 7 day wait and extend advances to 100% Spend -20 -170 -205 -195 -160 -145
15 Universal Credit: run on payment for housing benefit recipients Spend 0 -130 -125 -135 -110 -40
16 Universal Credit: in-work progression trials Spend * * * -5 -5 0
17 Private rented sector access schemes: support for households at risk of homelessness Spend 0 -10 -10
18 Disabled Facilities Grant: additional resource Spend -50 0 0 0 0 0
19 Relationship Support: continue programme Spend 0 -5 -10
An economy fit for the future
20 Domestic spending: preparing for EU Exit Spend 0 -1,500 -1,500 0 0 0
21 National Productivity Investment Fund3 Spend 0 0 0 0 0 -7,000
22 Research and Development: NPIF investment3 Spend 0 0 0 0 -2,300
23 Research and Development: increase R&D expenditure credit to 12% Spend -5 -60 -170 -175 -170 -175
24 Oil and Gas: transferrable tax history Tax 0 +5 +20 +10 +10 +25
25 Patient Capital Review: reforms to tax reliefs to support productive investment Tax 0 0 +45 +35 -15 -20
26 Innovation: Ultra Low Emission Vehicles: plug in car grant Spend 0 -50 -50 0 0 0
27 Innovation: tech, AI, and geo-spatial data Spend 0 -70 -75
28 Transport: accelerate capital investment for intra-city transport (Transforming Cities Fund) Spend 0 -10 -240 -285 +525
29 Transport: additional investment in local roads Spend -55 0 0 0 0 0
30 Public Works Loan Board: new local infrastructure rate Spend 0 * -5 -5 -5 -5
31 Skills: National Retraining Scheme initial investment Spend 0 -20 -45
32 Skills: investment in computer science teachers and maths Spend 0 -30 -50
33 Skills: teacher premium pilot Spend 0 -10 -15 -15 -5 0
34 Business Rates: bring forward CPI uprating to 2018-19 Tax 0 -240 -530 -525 -520 -520
35 Business Rates: extend pubs discount to 2018-19 Tax 0 -30 0 0 0 0
36 Competition and Markets Authority: additional enforcement Spend 0 -5 -5 +5 +15 +10
37 Aggregates Levy: freeze in 2018-19 Tax 0 -15 -10 -10 -10 -10
38 HGV VED and Road User Levy: freeze in 2018-19 Tax 0 -15 -10 -15 -15 -15
Avoidance, Evasion, Fraud and Error
39 Avoidance and Evasion: additional compliance resource Tax -10 +10 +170 +585 +580 +740
40 Corporation Tax: tackle related party step up schemes Tax +15 +45 +45 +45 +45 +45
41 Corporation Tax: depreciatory transactions Tax +5 +10 +10 +10 +10 +10
42 Royalty payments made to low tax jurisdictions: withholding tax Tax 0 0 +285 +225 +160 +130
43 Online VAT fraud: extend powers to combat Tax 0 +10 +20 +40 +50 +45
44 Offshore Time Limits: extend to prevent non-compliance Tax 0 * * * +5 +10
45 Carried Interest: prevent avoidance of Capital Gains Tax Tax 0 +20 +170 +165 +150 +145
46 Insolvency use to escape tax debt Tax 0 -5 +70 +135 +150 +150
47 Dynamic coding-out of debt Tax 0 0 +55 +30 +20 +20
48 Construction supply chain VAT fraud: introduce reverse charge Tax 0 0 +90 +135 +105 +75
49 Waste crime Tax 0 +30 +45 +45 +50 +45
50 Fraud, Error, and Debt: greater use of real-time information Spend 0 +85 +75 +65 +40 +40
A fair and sustainable tax system
51 Corporation Tax: freeze indexation allowance from January 2018 Tax +30 +165 +265 +345 +440 +525
52 Capital Gains Tax: extend to all non-resident gains from April 2019 Tax +5 +15 +35 +115 +140 +160
53 Non-resident property income: move from Income Tax to Corporation Tax Tax 0 0 0 +690 -310 -25
54 Capital Gains Tax payment window reduction: delay to April 2020 Tax 0 0 -1,200 +950 +235 +10
55 VAT registration threshold: maintain at £85,000 for two years Tax 0 +15 +55 +105 +145 +170
56 Tobacco Duty: continue escalator and index Minimum Excise Duty Tax +45 +35 +40 +45 +40 +35
Other public spending
57 Adjustments to DEL spending Spend +1,000 0 -1,135 0 0 0
58 Official Development Assistance: meet 0.7% GNI target Spend 0 +375 0 0 0 0
59 Scotland police and fire: VAT refunds Tax 0 -40 -40 -40 -45 -45
Air Quality
60 Air Quality: increase Company Car Tax diesel supplement by 1ppt from April 2018 Tax 0 +70 +35 -30 +130 +90
61 Air Quality: First Year Rate increased by one VED band for new diesel cars from April 2018 Tax 0 +125 +50 +10 * *
62 Air Quality: funding for Air Quality Plan and Clean Air Fund Spend -20 -180 -215 -80
Previously announced policy decisions
63 Tuition Fees: raise threshold to £25,000 in April 2018 Tax 0 -50 -100 -175 -235 -295
64 Tuition Fees: freeze fees in September 2018 Tax 0 -5 -15 -25 -35 -45
65 Oil and Gas: funding for UK continental shelf exploration projects Spend 0 -5 0 0 0 0
66 NICs: maintain Class 4 NICs at 9% and delay NICs Bill by one year Tax -10 -125 -645 -685 -565 -525
67 Making Tax Digital: only apply above VAT threshold and for VAT Tax * * -65 -245 -515 -585
68 City Deals: Swansea and Edinburgh Spend 0 -30 -30 -30
69 Social rented sector: maintain current rent policy without Local Housing Allowance cap Spend 0 0 -155 -205 -255 -320
Total policy decisions3 -230 -6,045 -9,915 -3,315 -2,960 -2,520
Total spending policy decisions -150 -4,460 -7,190 -3,625 -1,450 -1,105
Total tax policy decisions -80 -1,585 -2,725 +310 -1,510 -1,415
* Negligible
1 Costings reflect the OBR’s latest economic and fiscal determinants.
2 At Spending Review 2015, the government set departmental spending plans for resource DEL (RDEL) for the years up to and including 2019-20, and capital DEL (CDEL) for the years up to and including 2020-21. Where specific commitments have been made beyond those periods, these have been set out on the scorecard. Where a specific commitment has not been made, adjustments have been made to the overall spending assumption beyond the period.
3 These figures do not feed into the Total policy decisions line. In 2021-22 and 2022-23, funding for these measures has been allocated from the aggregate total for capital spending. This includes the National Productivity Investment Fund. The NPIF will extend into 2022-23 at £7bn in that year.

 

MARKET UPDATE: BREXIT BRITAIN BEGINS WITH CHANCELLOR’S BUDGET

20th November 2017

LAST WEEK – KEY TAKEAWAYS

Food prices on the rise though UK headline inflation unchanged
UK inflation remained unchanged at a five-year high of 3% during October, wrong-footing analysts who had predicted a further rise. However, food prices rose 4% year-on-year, their fastest rate in four years as the fall in the pound pushed up the cost of living. UK wage growth was 2.2% between July and September, compared with a year earlier, while the UK unemployment rate was stable for the third month in a row at 4.3%. A new report from the Centre for Economic Performance has found that the average household is now paying £404 a year extra due to rising prices.

One step closer to US tax reform…
House Republicans have voted to pass plans for what could be the most significant overhaul of the US tax code in over 30 years, prompting treasury secretary Steven Mnuchin to say he expects the tax reform bill to be sent to president Donald Trump this side of Christmas. The Senate now must vote on its version of the tax plan, with suggestions over the weekend that the White House may be willing to remove a contentious provision to repeal the Affordable Care Act if it proves a hinderance to getting the tax bill through.

… as inflation climbs closer to 2% target
Core consumer prices in the US climbed 1.8% year-on-year to in October, up from 1.7% in September, and a step closer to the Federal Reserve’s 2% target. According to Bloomberg (20 November), there is currently a 92.3% probability of policymakers raising interest rates further at their next meeting on 13 December.

German coalition talks collapse…
Two months on from the election, and talks aimed at forming a coalition government in Germany have seeming collapsed. The Free Democratic Party (FDP), which received 10.6% of the vote in September, has pulled out of talks with chancellor Angela Merkel’s Christian Democratic Union (CDU/CSU) party. In what represents her biggest challenge in 12 years in power, Merkel may well have to face a second election, or form a minority government with the Greens.

… as its economy grows
The euro was last week buoyed by strong economic data from the eurozone’s largest economy as German GDP grew by 0.8% during the three months to end of September, beating the consensus estimate of 0.6%. The Federal Statistics Office (Destatis) attributed the rise to an increase in business investment, especially machinery and equipment. With an annualised growth rate of 2.8%, this is the fastest the German economy has grown since the first quarter of 2011. Italian GDP also surprised, growing at 0.5% during the three months to end of September, beating the consensus estimate of 0.3%.

LOOKING AHEAD – TALKING POINTS

All eyes on Hammond’s Autumn Budget

Chancellor Philip Hammond will deliver his third Budget statement on Wednesday, which watchers will hope delivers insight into the measures taken to ensure the success of the UK economy as it prepares to exit the EU. Having already made bold targets on bringing down public sector debt – and aiming to balance the books by 2025 – Hammond can expect borrowing to be up to £8bn lower this year. It is reported that the Treasury will pledge to build 300,000 homes per year with £5bn put aside for housing schemes, while the chancellor is also under pressure to ease financial pressures on the NHS and address public sector pay. Small businesses will be on tenterhooks with suggestions that the VAT threshold could be lowered from the current £85,000 limit on annual turnover.

The Omnis Managed Investments ICVC and the Omnis Portfolio Investments ICVC are authorised Investment Companies with Variable Capital. The authorised corporate director of the Omnis
Managed Investments ICVC and the Omnis Portfolio Investments ICVC is Omnis Investments Limited (Registered Address: Washington House, Lydiard Fields, Swindon, SN5 8UB) which is
authorised and regulated by the Financial Conduct Authority, 25 North Colonnade, London E14 5HS. Omnis Investments Limited does not offer investment advice nor make recommendations
regarding investments. Potential investors are particularly advised to read the specific risks and charges applicable to the Funds which are contained in the Prospectus and Key Investor
Information Documents (KIIDs).
Omnis Investments Limited is registered in England and Wales under registration number 06582314 (Registered Office: Washington House, Lydiard Fields, Swindon SN5 8UB).

MARKET UPDATE: MORE PRESSURE ON MAY WHILE STERLING TAKES A SLIDE

13th November 2017

LAST WEEK – KEY TAKEAWAYS

UK given two weeks to clarify Brexit bill
The EU’s chief Brexit negotiator Michel Barnier has given the UK two weeks to clarify what divorce it will pay if progress is to be made in Brexit talks. The so-called ‘divorce bill’ has proven to be a barrier to negotiations, but the EU is demanding clarity on monetary commitments before it will open talks on a transition period on the principles of a future trading deal. Next month, an EU summit will determine whether enough progress has been made on preliminary issues to allow Brexit talks to move on to the next level. More pressure was piled on prime minister Theresa May over the weekend with reports that 40 Conservative MPs had agreed to sign a letter of no confidence in her leadership – this in turn meant the pound took a tumble on Monday morning.

Trump’s Asia tour ramps up pressure on North Korea
Donald Trump used the platform of his visit to Asia to issue more warnings against North Korean leader Kim Jong-un. At a speech at the Asia-Pacific Economic Cooperation summit in Vietnam, the US president asserted that the region must not be “held hostage to a dictator’s twisted fantasies of violent conquest and nuclear blackmail”. The tour across Japan, South Korea, China, Vietnam and Philippines has seen Trump look to garner support for further sanctions on Pyongyang.
Chinese inflation on the rise
China’s consumer price inflation (CPI) accelerated to 1.9% in October year-on-year, which was higher than had been forecasted. According to the National Bureau of Statistics, the producer price index rose 6.9% in the same period, unchanged from the previous month’s increase. It was also revealed that the country’s trade surplus with the US fell to $26.6bn in October, from $28.1bn. As previously discussed (see Market Update 6/11/17), one serious concern for investors is China’s mounting debt.

Investors frustrated with delay on US tax reforms
Stock markets have been preoccupied with a perceived lack of progress on US tax reform. With a Thanksgiving break fast approaching, there are fears that the signing off on a concrete tax reform plan is likely to be delayed, which could in turn weigh on the value of the dollar. There are discrepancies between plans delivered by House of Representative and Senate Republicans, including a delay in the implementation of a corporate tax rate cut.

UK manufacturing sees September surge
UK manufacturing output grew by 0.7% from August to September, more than double the expected 0.3% figure. The growth, according to the Office for National Statistics, was driven by increases in the production of computer, electrical and general machinery and equipment. Total production output, including commodities, climbed by 0.7%, for the sixth consecutive month.

LOOKING AHEAD – TALKING POINTS

Crucial UK data due before Autumn Budget
With chancellor Philip Hammond set to outline his Autumn Budget on 22 November, this week sees the release of crucial data on the state of the UK economy. Official statistics are due for inflation and unemployment. While the latter remains under control – the jobless rate stood at a 42-year low of 4.3% between June and August this year – rising inflation could be problematic. Economists polled by Reuters believe the headline data will show that inflation climbed to 3.1% last month, up from 3% in September. Others believe the figure will be higher as the impact of the weaker pound feeds through to higher prices. Either way, inflation above 3% will require the Bank of England governor Mark Carney to write to Hammond to explain why the figure is so far in excess of the Bank’s stated 2% target. The UK economy is expected to lag behind many of its European neighbours this year – last week the European Commission cut its growth forecast for 2017 from 1.8% to 1.5%.

UK Consumer Price Inflation (September 2012 – September 2017)

Rsz _1rsz _united -kingdom -inflation -cpi _1

Source: Office for National Statistics, TradingEconomics.com

 

Time for a move in US inflation?

Fresh inflation data is also due from the US this week. It will be the final reading of the Consumer Price Index (CPI) before next month’s Federal Reserve meeting, where officials are widely expected to initiate an interest rate rise (the market is currently pricing in a 92% probability of a December rate rise). The annual core inflation rate, which excludes food and energy prices, has stood at 1.7% for the past five consecutive months.

US retail sales figures are also due, a key indication of the mood of consumers’ willingness to spend. The last month-on-month figure showed a sharp 1.6% rise in September, buoyed by a surge in receipts at services stations, which reflected higher gasoline prices after hurricane Harvey disrupted production at oil refineries in the Gulf Coast. The big spending, of course, happens between Thanksgiving and Christmas, and global advisory business FTI Consulting last week published its 2017 US Holiday Retail forecast, which projects 4.5% growth in discretionary holiday spending, an increase from 3.3% during the 2016 season.

US Retail Sales (September 2016 – September 2017)

Rsz _united -states -retail -sales

Source: US Census Bureau, TradingEconomics.com

THE OMNIS VIEW

Through a well-diversified approach to asset allocation, the Omnis investment team aims to defend and grow the value of your portfolio through market cycles. Further falls in sterling on Monday, to fresh recent lows against the dollar at $1.3070, flies in the face of some analysts who had predicted the currency had bottomed out. The Openwork Wealth Services Limited investment team have remained underweight the pound in their portfolios since the formation of the Service in April 2017, and recently increased that underweight with a move into Asia Pacific equities.

 

The Omnis Managed Investments ICVC and the Omnis Portfolio Investments ICVC are authorised Investment Companies with Variable Capital. The authorised corporate director of the Omnis
Managed Investments ICVC and the Omnis Portfolio Investments ICVC is Omnis Investments Limited (Registered Address: Washington House, Lydiard Fields, Swindon, SN5 8UB) which is
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regarding investments. Potential investors are particularly advised to read the specific risks and charges applicable to the Funds which are contained in the Prospectus and Key Investor
Information Documents (KIIDs).
Omnis Investments Limited is registered in England and Wales under registration number 06582314 (Registered Office: Washington House, Lydiard Fields, Swindon SN5 8UB).

OMNIS Analysis – What The UK Rate Rise Means For Investors

The move from 0.25% to 0.5% reverses the cut that was put in place immediately following last year’s EU referendum. This could be a signal of shift in policy from the Bank, which may well initiate further rate hikes in the months ahead to combat a rise in inflation.

“The nine MPC members voted seven to two in favour of a rise, but crucially the announcement was accompanied by minutes that painted a cautious picture on future interest rate increases due to the fragile nature of the economy and uncertainty over Brexit,” said Toni Meadows, chief investment officer at Omnis Investments.

“Policy makers also omitted language from previous statements saying that more hikes could be needed than financial markets expect. This implies officials are comfortable with pricing for two more quarter-point increases, roughly one by late next year and another in 2020.”

 

The Omnis Managed Portfolio Service and constituent Omnis funds are monitored daily, as are movements in equity markets, bonds and currencies.

Meadows notes that the Bank’s dovish tone on the future path of interest rates pushed bond yields lower, which is positive for UK gilt prices.

“It also hit the value of sterling and this is positive for our global bond and equity holdings,” he said.

“The UK equity market initially rallied but has subsequently settled back at similar levels to before the announcement.”

Across the Atlantic, today will also see the widely anticipated announcement of a new chair for the US Federal Reserve. The expected selection of Jay Powell instead of John Taylor also paints a dovish picture for the future path of interest rates in the US, and is broadly supportive of equity markets.

 

The value of investments and any income from them can go down as well as up and you may not get back the original amount invested. Past performance is not a guide to future performance and should not be relied upon. Always seek professional advice before acting.