Our latest newsletter

1. ClarityProud to offer independent advice
Newsletter Spring 2017
Welcome to our latest newsletter
highlighting some important changes
within the insurance and financial
industry and our latest news.
Welcome
In this issue:
If you’d like to find out more
about any of the topics
covered in this issue, or have any
comments, please get in touch. We
look forward to hearing from you.
01 The danger of retaining profit
within your business
02 Impact of long term care costs
03 Time in the market, not timing
the market
04 Tax year end and tax efficient
planning
05 Is your ISA caught in the
IHT trap?
06 Is Equity Release still a
dirty word?
The danger of
retaining profit within
your business
Everyone knows that a
successful business is one
which grows and generates
profit for its shareholders.
However not everyone realises that if this
profit is retained in cash and not reinvested
in assets, then the valuable tax relief which
makes trading businesses exempt from
inheritance tax, could be lost.
Business Property Relief (BPR) provides
100% relief from Inheritance Tax on
the value of unquoted businesses or
Alternative Investment Market (AIM)
listed trading businesses, in the event
of the death of a shareholder. However
if the company holds a high cash balance,
this high balance may prejudice the
availability of BPR.
Since the Global Financial Crisis and in
the light of economic uncertainty, many
businesses have chosen to maintain
high corporate cash levels. With interest
rates sitting so low and little prospect of
increasing in the near future, the capital is
not only generating poor returns for the
company shareholders but also putting
the business at risk of having assets being
subject to inheritance tax which may
otherwise have been exempt.
If this is a concern to you or your clients,
we can help you find a solution to overcome
the dual issues of reduced BPR eligibility and
poor returns on corporate cash. A solution
which focuses on capital preservation but
provides an inflation-beating return as well as
offering liquidity, allowing owners to access
their funds should they be required, and to
restore the BPR qualification immediately.

2. Time in the
market, not
timing the
market
It is very hard to predict when it’s the best
time to invest into (or exit from) a stock
market. The speed at which markets react
to news means share prices have usually
already priced in the effect of significant
news. When markets move, they can move
rapidly. Investors, in attempting to get their
timing right, can very easily be too late to
catch the market’s reaction.
The graph opposite clearly demonstrates
how an investor in the FTSE All-Share
market could miss out on returns on the
market’s best days over 20 years to the
end of 2016 had they tried to emulate this.
Proud to offer independent advice
02 | Dentons Wealth | Newsletter Spring 2017
There is no doubt that having to
move into a Nursing or Residential
Care Home can be a highly emotional
time. However, coupled with this is
the fact that the costs associated
with moving into a Home (or even
having care provided in your own
home) can have a debilitating effect
on your wealth. Taken together, it can
be quite devastating for individuals
and their families.
> Research conducted by healthcare
analysts, LaingBuisson has found that
the average cost of Nursing Home
Care is now £750 a week (Report dated
2015). This equates to nearly £40,000
per annum.
> In the Partnership Care Report 2016,
it was confirmed that the average stay
in care is four years and one in every
eight ‘self-funders’ stay in a home for at
least eight years.
> In the LGIU Independent Ageing 2013
report, it states that, unfortunately, one
in four people who fund their own care
run out of money.
However, you should be aware that
such actions are fraught with problems,
whether or not there has been a legal
transfer of ownership. Your Local
Authority will almost always ask you
questions about disposal of assets and
will certainly make enquiries.
There are no time limits on how far a Local
Authority can go back when considering
deprivation of assets. Additionally, if
the property was given away before you
needed care, the Local Authority could
ask the recipients of the property to
pay a contribution towards your care.
Clearly, the significance of the costs
associated with long term care can
severely impact on your wish to pass on
wealth to your next or future generation.
You need to ensure you are aware of
the rules which apply in this area as
you wouldn’t want to fall foul of the traps
and pitfalls that could potentially catch
you out and cause you to lose even
more financially.
It is, therefore, only sensible to consider
seeking expert advice in this area while
you can do something to protect your
wealth. Contact our specialist long term
care team to find out how we can help you.
Have you thought about the impact of long
term care costs on your retirement wealth?
Source : FactSet, FTSE, J.P.Morgan Asset Management. For illustrative purposes only. Assumes all income is
reinvested; returns calculated daily over the time period assuming no return on each of the specific number of
best days. Data as at 31 December 2016.
If you would like to
discuss your portfolio
and how to get the best
from the stock markets
please contact one of
our Advisers.
Returns of FTSE All-Share
GBP, a value of £10,000 investment
between 1996 and 2016 with annualised return (%)
How detrimental could all this be to you
and your loved ones?
You may think you would receive help
from your Local Authority. You may get
some general advice, but from a financial
perspective, any support available is
means tested. This means that you may
enjoy little or no assistance at your time
of need. Indeed, if you have more than
£23,250 in England (£23,750 in Wales or
£25,250 in Scotland) you will have to pay
for all your care needs. The means tested
sum will include your savings, income,
and maybe your property. Indeed, it is not
until you only have savings of less that
£14,250, when it’s only your income that
is considered for means testing.
You may also have considered that there
would be some prudent actions you could
implement to reduce this impact on your
wealth. You might have thought about
giving away or selling your home to your
children or other family members to
reduce the value of your estate. Or about
placing certain of your assets in trust
hoping to achieve the same result.
Fully invested Missed 10 best days Missed 30 best days Missed 50 best days
7.40%
4.20%
0.20%
-2.90%
50,000
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0

3. 03
Tax year end and
tax efficient planning
Like birthdays, Christmas and April Fools’
Day, some dates are imprinted in a person’s
memory from an early age. Some dates in
our calendar are just learned and accepted as
events, we never question or ask why or what
their significance is. For instance, the tax year
in the UK runs from the 6th
April to 5th
April the
following year. Indeed, a strange set of dates
to remember – yet we all do! These two dates
affect millions of individuals, thousands of
businesses and a multitude of countries alike.
However, most of us get very little satisfaction
from paying tax and politicians of all stripes
seem to believe they need your money more
than you do. So where can you turn if you want
to invest tax efficiently?
ISAs, Pensions, Venture Capitalist Trusts,
Enterprise Investment Schemes and Seed
Enterprise Investment Schemes (SEIS) are all ways
of investing your capital that involve favourable
tax treatment, be it for tax efficient growth,
income tax relief or capital gains tax deferral.
Investing through a tax-efficient wrapper
can give a significant boost to an overall
investment portfolio, but they have to
be blended with an appropriate investment
strategy to give the best outcome. There is a
danger, moreover, of letting the tax tail wag
the investment dog - so if you’re going to look
to some of the racier schemes, you need to be
sure that you are prepared for a potentially
volatile ride and more importantly, seek
professional advice.
INDIVIDUAL SAVINGS ACCOUNT (ISA):
ISAs offer huge investment flexibility and
all income and capital gains on investments
within them are free from further tax.
For higher-rate and additional-rate taxpayers,
income tax rates of 40 and 45 per cent
respectively are higher than those for capital
gains tax, so it can make more sense to
prioritise income-generating shares and other
income-producing investments such as equity
income or bond funds for an ISA. In this way,
it’s possible to generate a long-term, tax-free
income stream, which will be particularly useful
in retirement, when income becomes a priority.
However it is worth reinvesting dividends in the
early stages of building up your ISA portfolio
when you’re likely still to be working, as the
effects of compounding can be very beneficial.
The ISA allowance for tax year 2016/17
is £15,240 and for 2017/18 will be £20,000.
PENSIONS: Income from a pension, in
contrast to that from ISAs, is taxable but the
key advantage is that investors get tax relief
on their initial contribution at their highest
marginal rate, up to an annual allowance of
£40,000 – this, at a time when many people
are likely to be higher-rate taxpayers. The
current lifetime allowance (the maximum
amount you can hold in your pension before
HMRC claw back tax advantages) is £1 million.
Unused annual allowance can be brought
forward from three previous tax years and used
in the current tax year. However, you must have
been a member of a registered pension scheme
in the tax year giving rise to the unused relief
that is brought forward.
It is important to take advice on contribution
levels because if the total contributions
you make, or that are made on your behalf,
exceed your available allowance (including
any unused relief brought forward), a tax
charge will arise effectively withdrawing
tax relief on the excess contribution.
For those interested
in investing in some of
the UK’s most dynamic
and entrepreneurial
small companies, there
are some extremely
tax-efficient options

4. Proud to offer independent advice
04
A further attraction to pensions is that they
tend to be long term as they cannot be
accessed before the age of 55; and, like ISAs,
all income and capital gains are free from
tax within them. This allows investors to take
greater risks and therefore perhaps look at
investment areas such as emerging markets
or smaller companies, which are more volatile
but may have higher growth characteristics
over the longer term.
Pensions are also outside of your estate
and therefore not measured against your
inheritance tax nil rate-band when you pass
away. You can also pass the proceeds of your
pension to your immediate family.
VENTURE CAPITALIST TRUSTS (VCTs):
For those interested in investing in some of
the UK’s most dynamic and entrepreneurial
small companies, there are some extremely
tax-efficient options, chief among which are
Venture Capitalist Trusts.
The majority of these are inherently high risk.
To retain maximum tax benefits VCTs must
be held for at least five years. Income tax
relief of 30 per cent is available on new issues
of VCT shares.
Investors can put up to £200,000 a year in a
VCT and receive income tax relief on the entire
amount, although they cannot receive more
in rebates than has been paid in income tax.
When holdings are eventually sold, any gains
made are free from capital gains tax (CGT).
Any dividends received are also free from tax.
ENTERPRISE INVESTMENT SCHEME
(EIS): The tax reliefs available on Enterprise
Investment Schemes (EISs) are even
more generous than those on a VCT. EIS
invest in very small, start-up style companies,
so they are also high risk. The tax relief
on an initial investment into an EIS is also
30 per cent but investors can invest between
£500 and £1 million, potentially getting rid
of their entire income tax liability for a year.
There is also the potential to defer capital gains
made on a separate investment by reinvesting
them into an EIS. The reinvestment has to meet
certain criteria - disposal of the original asset
has to be less than 12 months before the EIS
investment or less than 36 months after it.
In this way, gains can be deferred until
a tax year in which you are not using your
CGT allowance, or have retired and are paying
lower tax rates anyway.
For the EIS investment itself, no CGT is
payable if you sell the shares after three years,
provided the EIS initial income tax relief was
given and not withdrawn on those shares.
Is your ISA caught in the
inheritance tax trap?
Many people use Individual Savings Accounts (ISAs) to build wealth in a tax efficient
manner. If you paid in the full allowance since the introduction of ISAs in 1999
you would have contributed £166,560 into your ISA, (£333,120 if a couple) which
most likely would have enjoyed some investment growth.
An ISA offers valuable tax benefits during your lifetime, but it is still subject to
inheritance tax along with the rest of your estate.
A recent study by the Prudential suggested that the average inheritance tax bill was
in the region of £177,000. This figure is higher in London with the average amount
paid per liable estate totalling almost £236,000. (https://www.pru.co.uk/press-centre/
inheritance-tax-bill/)
This could mean on death (or second death in the case of a married couple) that the
tax efficient ISA is hit with a 40% inheritance tax bill. In the case above, where a couple
has saved the full amount into ISAs since 1999, the £333,120 saved into an ISA could
potentially be hit with a tax bill of £133,248, or for an individual a tax bill of £66,624.
We can help you move your ISAs out of the inheritance tax trap, without losing
your ISA tax benefits and without losing access to your capital. We can also do
this if a power of attorney is in place and without any impact on your nil rate band.
Both VCTs and EISs can only invest in
companies less than 12 years old, unless the
investment will lead to ‘a substantial change
in the company’s activity’.
SEED ENTERPRISE INVESTMENT SCHEME
(SEIS): The Seed Enterprise Investment
Scheme (SEIS) is a version of EIS, offering
an even larger tax break on very small
start-up businesses. Launched in 2012,
SEIS give tax breaks to individuals
investing up to £100,000 in qualifying
companies.
By committing cash to a SEIS for three
years, the investor benefits from a 50 per
cent income tax break, CGT relief and capital
gains loss relief.
In summary, making the most of tax efficient
investments brings us back to those dates
which are imprinted in your memory and
you could therefore say that tax-efficient
savings are like an early birthday or Christmas
present and nobody is going to make a fool
out of you from one April to another!
If you would like to discuss the potential
benefits of tax efficient investments and
how they can form a part of your financial
planning, please contact one of our
Independent Financial Advisers.
Please note these messages are
for information only and do not
constitute advice.

5. Proud to offer independent advice
05 | Dentons Wealth | Newsletter Spring 2017
Forthcoming
Events
8th
March – UK Spring
Budget – the last to take place
in the Spring, before the budget
is moved to the Autumn
31st
March – UK government
to trigger Article 50 to formally
begin UK’s exit from EU
March – Netherlands
Parliamentary election
April-May – French
presidential election
Sept-Oct – German federal election
Spring 2018 – Austrian and
Italian general elections
Elections across the EU could lead
to some further market volatility.
> Your own independent solicitor to act
for you and explain the risks and benefits
In addition to the above your financial
adviser must be authorised and qualified
to advise on these plans and present plan
illustrations in a standard format which is
comparable with competitors.
There is now, therefore, a better overall
market for the consumer and 2017 should
see more plans taken out than ever before
with lending on course in 2016 to exceed
£2bn in a single year for the first time.
However, there are still issues with equity
release, not least the cost of these plans
compared to a standard residential
mortgage. Lenders, of course, argue that
the increased costs reflect the guarantees
that are built into the products such as
the home for life and no negative equity
guarantee. For some plans roll up of
interest is a feature and this compounding
of interest can see a lump sum double in
about 10 years. Costs can be contained
by covering interest rather than allowing
it to roll up, or a drawdown facility where
you take sums only as and when needed.
Indeed there are new product features
regularly introduced in response to
consumer demand.
A number of consumers currently have
standard interest only mortgages and
are reaching an age where these products
are due for repayment: equity release
could offer a realistic solution for these
borrowers to continue into retirement.
In conclusion, this is a market
that has been controversial for
many different reasons. Today
standards are higher and regulation
is more focused and appropriate.
It is not always a perfect solution,
but for the right client and their
circumstances it is certainly well
worth considering. Contact our
equity release specialist to see
how this could work for you.
Is equity release
still a dirty word?
Equity release is a range of products that
allow you to access the value – or equity –
tied up in your home. It is primarily aimed
at the over 55’s. Cash can be taken out
as a lump sum or in smaller amounts or a
combination of both and the funds raised
can be used for pretty much anything
- helping with bills, a new car, gifts to
children or education for grandchildren.
Some people are even looking at
creative ways to reduce potential
future inheritance tax bills.
So, why does the “dirty word” or perhaps
more appropriately “dirty phrase”
question persist when talking about
equity release? Well, the history of this
sector has been problematical with issues
surrounding lenders, product terms and
costs. At its heart, these products were
aimed at elderly clients and their most
valuable asset. It was almost inevitable
that these products would come under
considerable scrutiny and questions were
raised as to whether they were structured
to satisfy client needs or were in the
best interests of the more sophisticated
finance providers.
The finance industry recognised
these issues and the growing need for
consumer protection. As a result it formed
SHIP (Safe Home Income Plans) in 1991.
In May 2012 this body was relaunched as
the Equity Release Council with a broader
membership and covering all aspects of
equity release advice and products.
The Equity Release Council Code includes
the following provisions:
> The right to remain in your property
for life or until you need to move into
long-term care
> No negative equity guarantee – you
will never owe more than the value of
your home
> The right to transfer the equity
release plan if you move to another
eligible property
> Fair, simple and complete presentation
of products

6. DW.Newsletter.0217
Dentons Wealth
Sutton House, Weyside Park
Catteshall Lane, Godalming
Surrey GU7 1XE
T 01483 521 521
F 01483 521 515
E enquiries@dentonswealth.co.uk
w www.dentonswealth.co.uk
Dentons Wealth is a trading name of Dentons Investment Services Limited which is
authorised and regulated by the Financial Conduct Authority, with the FCA register
number 194538. Dentons Investment Services is registered in England & Wales
under number 3955927.
This document is not a recommendation for a particular course of action. It is
intended to be for information purposes only and should not be relied on for advice
or recommendations. Information herein is believed to be reliable but Dentons Wealth
does not warrant its completeness or accuracy. No responsibility can be accepted for
errors of fact or opinion. This does not exclude or restrict any duty or liability that
Dentons Wealth has to its customers under the Financial Services and Markets Act
2000 (as amended from time to time) or any other regulatory regime.
Contact us
For a review of your personal, business
or financial circumstances, or to find
out more information about any of the
subjects mentioned in this newsletter,
please contact one of our Advisers.
Tel 01483 521 521
Fax 01483 521 515
Email enquiries@dentonswealth.co.uk
www.dentonswealth.co.uk
Dentons Wealth
Independent Financial Adviser
Sutton House
Weyside Park
Catteshall Lane
Godalming
Surrey GU7 1XE
The value of investments and the income
from them can go down as well as up
and you may not get back your original
investment. Past performance is not
an indication of future performance.
Tax benefits may vary as a result of
statutory change and their value will
depend on individual circumstances.
The content of this newsletter should
not be taken as being professional
advice and reflects Dentons Wealth
interpretation of the current law and
HM Revenue and Customs practices.
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