“January is a great time to reflect and to look forward.

January takes its name from the two-faced Roman god Janus, who looked both back to the past and forward to the future. That seems particularly appropriate today, when we are looking optimistically towards the future, whilst warily thinking about what we have left behind in 2020.

I will be the first to admit that since the start of the crisis I have been at the pessimistic end of the spectrum of expectations for economies and financial markets. Though thankfully, to some degree I have been wrong.

Though from the perspective of markets, I remain worried that we are living in a bubble and when I look beyond the pandemic, markets could get worse before they get better. I find myself constantly pointing out unemployment stats, government debt levels and highlighting businesses going bust.

We have to accept economies will be deeply scarred by the impact of COVID and they will take a very long time to heal.

When delivering client valuations the feedback I am getting from our clients is one of surprise when they see how well their Innes Reid portfolios have held up during the pandemic.

Clearly, this is not by chance and the valuations confirm we have been positioned correctly.

When viewing valuations, I stress to clients it is important to remember investing is for the long term, not a few good days, and markets don’t go up in a straight line. The global economy faces many challenges even once the pandemic has passed.

Investors are to some degree looking beyond COVID and we believe it is right to do so. We accept COVID risks have not been removed and a second wave is clearly upon us, but this is largely short term and our clients are investing for the medium to long term.

The market downside to date has been offset by ‘whatever it takes’ global fiscal and monetary policy support from national governments. Of course, once COVID is decisively put behind us, the consequences will have to be confronted and the accumulated national debts will have to be addressed. That, however, would almost certainly be as a result of a positive COVID outcome and so should not be feared today.

There will come a point in time when Governments will have to balance the books and taxes inevitably will rise.  As tax legislation changes, Innes Reid will be here to plan and ensure we reposition our clients as tax efficiently as possible.

It is so difficult to predict when ‘normal’ levels of economic activity will return, However, the clear catalyst for the recovery in Global Markets is the end in sight to the pandemic, as the vaccine rollout is now underway.

In years to come I think we will look back on the impact of COVID and the societal changes it has brought about. Our habits have changed and we won’t fully return to the way we lived pre pandemic. What we are witnessing is the unstoppable march of technology as we have all had to adapt to a different way of life and we are getting used to it.

Many uncertainties remain and we must fully expect periods of heightened volatility. Our message will not change, it is not timing the market that matters, it all about time in the market.

It is important to have an attitude that says ‘I’m not going to panic or be panicked’ and to stick to your plan.

Rest assured at Innes Reid we have never worked harder to ensure we continue to navigate our clients planning through this crisis and beyond.

Thank you for being a client and taking time to view this video.

Let’s look forward to a better 2021!”

Mark Reidford
Managing Director

Time to reflect and to look forward.

Time to reflect and to look forward – If you have any queries, please contact us by email: info@innesreid.co.uk or telephone our office: 01244 347 583.

For further business updates regarding coronavirus, please visit our designated webpage at: www.innesreid.co.uk/coronavirus/

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Few could have predicted the range of challenges 2020 would pose. In peacetime, we have not previously seen so much change. You will be fully aware of affairs to date, so our focus is on what comes next and we have no doubt that 2021 will spring its own surprises and challenges.

It could very well be that the start of 2021 will be characterised by many of the same restrictions to which we have all become accustomed. But, from where we stand, there is cause for optimism as we believe that vaccine prospects are likely to make 2021 a year of global economic recovery. While markets have priced in a fair amount of the good news already, more gains seem possible as corporate profits rebound and central banks remain supportive.

We all want to believe we are entering the final straight on Covid-19, but in the short term restrictions to control the spread of the virus are set to remain. In addition, as with PPE and ‘track and trace’, distribution of the vaccine may not go to plan, delaying a return to normality. The vaccine has been the catalyst for investors to go from fear of the economic impact of the pandemic to looking at the prospects for recovery.

At the end of a challenging year, we believe the prospects for equities appear favourable. Bond yields remain low and holding cash is similarly unappealing. Economies, especially in the West, are likely to bounce back as activity recovers from the lockdowns of 2020. Households will start with higher levels of savings and pent-up demand, not least to get out, to have fun and probably, to travel.

Brexit will be behind us; as I write it is impossible to say whether there is going to be a good, bad or no deal, but these impacts may be small for our clients’ global portfolios when compared to the economic impact of the pandemic.

As the economic recovery builds, governments will look to return their budgets to more sustainable positions. Central banks will slow quantitative easing (QE) in due course. The good news is that between now and then we anticipate a strong recovery in the global economy. Policymakers will probably allow economies to run a little ‘too hot’ rather than replay austerity. As ever, we are looking forward and remain mindful of the risks.

I think we will all be glad to draw a line under 2020 and we look forward to a better year in 2021.

The team and I here at Innes Reid wish you all a Happy Christmas!

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The co-ordinated response of governments across the world to the pandemic-induced collapse in economic activity has been to inject hundreds of billions of pounds of borrowed money into the system in an effort to plug the gaping holes inflicted upon the economy by the virus.

A particular feature of this policy response is the extent to which policy makers and commentators around the world accepted the need for governments to borrow money and spend it at this time.

One of the negatives that typically arises from higher levels of government borrowing is much higher inflation in the short term. This can happen either because too much cash is pumped into the economy, so demand rises faster than supply, or because the extra currency entering the system leads to a fall in the value of the currency, making imports more expensive.

We are of the opinion the reduction in economic demand has been so severe that inflation will remain low for an extended period.  In addition, the unemployment rate may be relatively high for a prolonged period of time. This is deflationary in an economy as it means individuals have less money to spend.

Government debt never really needs to be paid back. It shouldn’t be forgotten Britain finally repaid its World War Two loans on the 31st December 2006. What will happen with the debt is over time it is refinanced, that is, as the bonds mature and investors get their capital back, the capital is repaid with newly issued bonds. It should be noted that ten year UK government bonds currently have an interest rate of 0.1 per cent.

It is not the case that the UK government will in ten years have to find all of the money to repay bondholders, though the uncertainty comes from what interest rate the government will have to pay on the debt in ten years. If it is much higher than the current rate, that will create future funding problems, however, the government will clearly be motivated to keep interest rates low.

The nature of the recession

While the definition of a recession as two consecutive quarters of negative growth is universal, there are a multitude of different types of recessions. The downturn caused by Covid-19 is what economists call an exogenous shock, that is, caused by an event outside of the financial system.

Such recessions tend to be very sudden, very deep, and over very quickly. They end relatively quickly because if the shock is from outside the system, as the shock subsides, the system is intact and activity can return to previous levels.

This is the thinking behind those who believe the UK economy will recover in a V shape.

However, we do not view this as a typical exogenous shock-induced recession, because the impact of the pandemic may have changed long-term societal trends. For example remote working, will lead to “permanent “ changes in the structure of the economy.

Exogenous shocks do not typically leave permanent changes, but the combination of the Covid crisis and the changes to society are creating “lost growth” which will not be recovered by the economy.

The multiplier effect

The rationale for government’s increasing spending in a downturn was first created by the UK economist John Maynard Keynes, who described a “multiplier effect”. This is the idea that, if the government stimulus is spent properly, it can generate more activity and wealth in the economy than the cost of the original debt.

Some economic activities have a larger, and faster acting, multiplier than others. For example, a pound spent by the government on a construction project tends to move quickly through the economy as such a project employs many people in different trades and requires the purchase of raw materials.

If the multiplier in an economy works, then the pace and rate of Gross Domestic Profit growth should increase rapidly.

Using borrowed money to increase the salaries of already relatively highly paid people may not have the same effect, as the extra salary may not be spent quickly.

We fear that despite the vast sums pumped into the economy, we do not expect the multiplier to be high in the UK. While a lot of money has been pumped into the economy, it has not delivered the traditional benefits of a stimulus. This is because while the money went in, we were told to not go out, we couldn’t spend it, so it didn’t multiply. We also think there are factors in the UK such as the ageing population that were already present and not really conducive to growth.  What we now wait to see is how we come out and spend and this is clearly key to some of Rishi Sunak’s policies, i.e. Eat out to Help out.

We are also concerned that the borrowing and spending now may actually reduce the multiplier of future government spending. By this we mean the cash that has been spent now is to sort out an emergency. It is absolutely the right thing to do, but it also is likely to mean that there is less ability to borrow in future, so there would be less cash for spending on long-term projects in areas such as infrastructure that contribute positively to economic growth. As a result it may be the borrowing now, lowers the longer-term growth rate in a way that is almost permanent.

Other policy decisions taken over the past decade probably mean any multiplier effect will be much slower. The policy of quantitative easing, whereby the Bank of England buys government debt and other bonds helps to keep borrowing costs low, but also reduces the multiplier achieved on that debt. This is because the bond buying programme causes asset prices to rise.

So, for example, in the decade after the global financial crisis, house prices in the UK rose much more quickly than did incomes. This meant people seeking to get onto the housing ladder had to save more of their income and for longer to do this, and that reduces the amount they can spend in the economy.

So, here is the positive with central banks continuing to buy bonds as part of the Covid response, we believe the rise in asset prices is likely to continue. The reality being those with assets will be a beneficiary of the borrowing as a result of increases in asset prices and those that have to save to buy assets will need to save more.

Portfolio impact

It is a central tenet of investment theory that if interest rates are low, then equities will rise in value. This is because many equities are priced relative to the return available on cash on bonds. Low bond yields and low interest rates therefore make equities relatively more attractive.

With interest rates unlikely to rise by very much for many years into the future, this will be supportive of equities and this will be another positive for our clients. So the impact of government debt on investors could be summarised that we will witness lower equity returns in the years ahead, but the returns will be more attractive than those available from other asset classes.

Whatever the climate, we are here to help you to manage your finances and plan for your family’s future. 

If you would like a consultation with one of our Independent Financial Advisers about recent changes in your finances, do not hesitate to contact us by email: info@innesreid.co.uk or on our normal number: 01244 347 583 during office hours.

For further business updates regarding coronavirus, please visit our designated webpage at: www.innesreid.co.uk/coronavirus/

Past performance is not a reliable indicator of future performance. Investors should remember that the value of an investment and the income received from an investment can go down as well as up, and they may not get back the amount they invested.

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Job Support Scheme

The existing job support scheme – the furlough scheme – comes to an end on 31 October. The government will be introducing a new Job Support Scheme from 1 November 2020.

For employers to participate in the scheme:

• employees will need to work a minimum of 33% of their usual hours;
• for every hour not worked, the employer and the government will each pay one third of the employee’s usual pay;
• the government contribution will be capped at £697.92 per month.

Employees using the scheme will receive at least 77% of their pay, where the government contribution has not been capped. The employer will be reimbursed in arrears for the government contribution. The employee must not be on a redundancy notice.

The scheme will run for six months from 1 November 2020 and is open to all employers with a UK bank account and a UK PAYE scheme. It will be open to such businesses even if they have not previously used the furlough scheme, as part of the Winter Economy Plan.

All small and medium-sized enterprises will be eligible. Large businesses will be required to demonstrate that their business has been adversely affected by COVID-19. The government also expects that large employers will not be making capital distributions (such as dividends), while using the scheme.

The Job Support Scheme will sit alongside the Jobs Retention Bonus which was announced by the Chancellor in July. The Bonus will provide a one-off payment of £1,000 to UK employers for every furloughed employee who remains continuously employed through to the end of January 2021 and who earns at least £520 a month on average between the 1 November 2020 and 31 January 2021. Businesses can benefit from both schemes.

Support for the self-employed

The Self-Employment Income Support Scheme (SEISS) will be extended under the name SEISS Grant Extension for the Winter Economy Plan. The grant:

• will be limited to self-employed individuals who are currently eligible for the SEISS, and
•  who are actively continuing to trade but are facing reduced demand due to COVID-19.

The scheme will last for six months, from November 2020 to April 2021, and will consist of two grants. The first grant will cover a three-month period from the start of November until the end of January. This initial grant will cover 20% of average monthly trading profits, paid out in a single instalment covering three months’ worth of profits, and capped at £1,875 in total. The second grant will cover a three-month period from the start of February until the end of April. The government will review the level of the second grant and set this in due course.

The amount of the first grant under the SEISS grant extension will be significantly less than the grants made under the SEISS. The initial SEISS grant was based on 80% of profits (capped at £7,500) and the second SEISS grant was based on 70% of profits (capped at £6,570).

Temporary VAT reduced rate for hospitality and tourism

The government is extending the temporary reduced rate of VAT (5%) from 12 January to 31 March 2021. This will continue to apply to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises, supplies of accommodation and admission to attractions across the UK.

VAT deferral

Over half a million businesses deferred VAT payments, which were due in March to June 2020, with these payments becoming due at the end of March 2021.

The government has now announced the option for such businesses to spread their payments over the financial year 2021/22. Businesses will be able to choose to make 11 equal instalments over 2021/22. All businesses which took advantage of the VAT deferral can use the spreading scheme. Businesses will need to opt in and HMRC will put in place an opt-in process in early 2021.

Enhanced Time to Pay for self assessment taxpayers

Taxpayers were able to defer the income tax self assessment payment on account for 2019/20, due by 31 July 2020, to 31 January 2021. There are also other amounts due on 31 January 2021 – a balancing payment for the 2019/20 tax year and the first payment on account for the 2020/21 tax year.

Taxpayers with up to £30,000 of self assessment liabilities due will be able to use HMRC’s self-service Time to Pay facility to secure a plan to pay over an additional 12 months. This means that self assessment liabilities due in July 2020, and those due in January 2021, will not need to be paid in full until January 2022. Any self assessment taxpayer not able to pay their tax bill on time, including those who cannot use the online service, can continue to use HMRC’s Time to Pay self assessment helpline to agree a payment plan.

The Bounce Back Loan Scheme (BBLS)

The BBLS has provided support to many UK-based small businesses. Loans are between £2,000 and £50,000, capped at 25% of turnover, with a 100% government guarantee to the lender. The borrower does not have to make any repayments for the first 12 months, with the government covering the first 12 months’ interest payments. Under a Pay as you Grow scheme businesses will have options to:

• repay their loan over a period of up to ten years;
• move temporarily to interest-only payments for periods of up to six months (an option which they can use up to three times);
• pause their repayments entirely for up to six months (an option they can use once and only after having made six payments).

Coronavirus Business Interruption Loan Scheme (CBILS)

The CBILS provides loan facilities to UK-based businesses with turnover under £45 million. The scheme provides loans of up to £5 million with an 80% government guarantee to the lender. The government does not charge businesses for this guarantee and also covers the first 12 months of interest payments and fees.

The government intends to allow CBILS lenders to extend the term of a loan up to ten years.

Extension of access to finance schemes

The government is extending the BBLS and the CBILS to 30 November 2020 for new applications as part of the Winter Economy Plan.

Applications for the Coronavirus Large Business Interruption Loan Scheme and the Future Fund will also be extended.

How we can help

Further technical details of the schemes will be published by the government but no date has been announced as to when. Please be assured we will be here to provide you with support and please contact us if you have any queries on the measures announced.

> View the full Winter Economy Plan here

Whatever the climate, we are here to help you to manage your finances and plan for your family’s future. 

If you would like a consultation with one of our Independent Financial Advisers about recent changes in your finances, do not hesitate to contact us by email: info@innesreid.co.uk or on our normal number: 01244 347 583 during office hours.

For further business updates regarding coronavirus, please visit our designated webpage at: www.innesreid.co.uk/coronavirus/

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1. US Election: Who will win and what will it mean for equities?

The next two months will be challenging. Right now, Joe Biden is still in the lead, but it’s slowly eroding. We think the US coronavirus case numbers will continue falling, which will benefit Donald Trump. The election is wide open – but Trump has the edge.

A Trump victory would extend the market-friendly policies of the last few years. But Biden is no socialist, and if he won, he might curb some of the social and trade policy excesses of the Trump era. Regardless of who wins, we think the US economy will be strong, and US companies are likely to flourish.

Certain economic sectors might be affected by the election. Trump would be good for fossil fuels and healthcare, Biden might be better for trade and infrastructure.

2. Is there a bubble in US Equities?

We don’t think so.

Apple, Amazon, Alphabet, Facebook and Microsoft have carried the rest of the US market so far this year. Alphabet (or Google) has increased its size by a quarter compared to 2019. Microsoft and Facebook are around 50% bigger. Apple and Amazon have nearly doubled in size.

If it weren’t for these five companies, the US index would be more than 10% lower than it is now. So the question is, are these companies worth it, or is it all hot air?

Looking at their last three years of results is enough to convince us that these businesses deserve to be massive. On average, these companies have grown their sales by over 20%. At the same time, their profits have grown by over 50%.

Not only are these tech titans selling more, they’re doing so more efficiently with every year that goes by! And their markets are global. While current valuations may be too high, or too low, there’s no doubt that these companies make real money. Bubbles are built on people paying high prices for nothing, and that’s not the case here.

3. China vs the West

The US has been the dominant global power for a century, and is not happy about China’s increasing political power and influence across the world. All the more so when China plays fast and loose with foreign technology, trade, islands and territory, and other issues.

The tensions will continue. China will continue flexing its economic and political muscles. The Cool War between China and the West will last for decades yet. The world economy is so integrated via trade, capital flows, foreign investment, technology and people moving around, though, that it’s in everybody’s interest to reach compromises.

And in some ways, China’s influence is at a maximum right now. Its growth is slowing and its population will begin falling in a few years. It will push hard but open conflict would not suit its economic plans. Trade and other barriers may rise a little, but won’t choke off growth and the spread of ideas and technology across the world.

4. How do Governments even begin to pay back the debt built up in the last year?

With people’s livelihoods at stake since March, governments across the world wrote blank cheques to get them to comply with lockdown measures: furlough schemes for households, loan guarantees for businesses. The result is that government debt is higher than before: the Office for Budget Responsibility says that UK government debt will cross over 100% of national income this year.

But we’ve seen worse – UK debt was double this coming out of World War II and was brought down in the fifties and sixties. The popular narrative says governments seek to ‘inflate’ the debt away. But this isn’t quite right. It’s not higher inflation but rather low interest rates compared to inflation that matters. So continue to expect nothing from your savings account!

But what’s often forgotten is that the post-war economic recovery was the strongest in the 20th century. Pent-up demand, new technology adoptions and government rebuilding projects led to a huge productivity boom.

Analogies with war are everywhere: from referring to NHS staff on the ‘frontline’ or defeating the ‘common enemy’. But comparisons don’t stop there: there’s a huge savings pile ready to be spent, the crisis has accelerated trends towards adopting more technology (think how many people will continue working from home) and governments are readying green infrastructure projects for the future. COVID-19 was a unique event, but government debt levels certainly aren’t.

5. Will the end of the furlough scheme trigger a recession in the UK?

No – because the recession is already here, it just hasn’t been fully felt in the labour market.
The furlough scheme merely delayed the economic pain of lockdown. It gave employers time to consider their business models and plan for the future, rather than immediately go out of business. With a bolt from the blue like COVID-19, that made sense.

What doesn’t make sense is keeping over 10% of the country on artificial life-support – if a job doesn’t exist, there’s no use pretending it does. So businesses are now being asked to make their own decisions again on whether they can still function. For some, that will mean closing completely, others will have redundancies, and others may ask workers to take a pay cut.

So the next year is likely to see a strange pattern in the data, where economic growth and unemployment both move higher at the same time. Good news at the national level may not translate to good news for individual firms and workers.

6. Is Brexit going to come back on the agenda in the next few months?

Just like the movie sequel that no one wanted, Brexit is no longer box-office. We’re in for the third – and hopefully last – instalment of the Brexit deadline.

The market’s attention has drifted, though, and so has pretty much everyone else’s. The media and some politicians will try to tell us that this time will be different but it never is. The character arcs – more like character circles! – are non-existent; remainers are still remainers, leavers are still leavers. The plot is unchanged; complicated trade deals should only be decided at the 11th hour. And the twist isn’t a twist if we all see it coming; ‘No Deal’ continues to be averted because we know it’s the only threat.

That twist felt credible when the characters looked like they would actually go through with it. But the last movie saw the UK sign up to a Withdrawal Agreement, allowing for a border in the Irish Sea. As we approach the December deadline expect much of the same: No Deal will be averted because it’s no longer a credible twist.

What does this year 2020 still have in store?- Whatever the climate, we are here to help you to manage your finances and plan for your family’s future. 

If you would like a consultation with one of our Independent Financial Advisers about recent changes in your finances, do not hesitate to contact us by email: info@innesreid.co.uk or on our normal number: 01244 347 583 during office hours.

For further business updates regarding coronavirus, please visit our designated webpage at: www.innesreid.co.uk/coronavirus/

Source: 7IM

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As we all begin to contemplate what life might look like in the coming months, we’ve had no shortage of questions and queries on how life might look for our clients’ financial plan. Inspired by the need for clarity at the time we need it most, we have taken on the seven most common financial advice questions we’ve received about the aftermath of the pandemic.

1. How bad is the mess?

Officially, 15% of the US working population is now unemployed – unofficially the figure is closer to 20%. In the UK, the furlough scheme has kept the figure under 10% for now, but for almost every nation in the world, double-digit unemployment has become a threat.

So, it’s bad. Monetary policy and government support have softened the blow, but there’s no doubt that the world has taken a hit. The global economy is likely to shrink by at least 4% this year – the worst since the 1930s. It may well have been worse without intervention, but a recession is still a recession.

And the cushion has come at the cost of increasing government debt rapidly. The UK Government borrowed £62 billion in April; before Covid-19 the budget for the whole year was £55 billion. Every nation in the world is racking up wartime-like debt levels as they try to stabilise their economies.

Of course, for investors, there’s not just the mess to consider, but also how the clean-up goes.

2. Why is the market ignoring the economy?

We don’t know. There is no edge when it comes to the coronavirus – nobody we know of has extra information, or a better model. It may be that investors have just become habituated to the ‘bad news is good news’ cycle, by which anything negative in the economy is sorted out by the central banks pumping money.

The wave of stimulus has certainly created an air of optimism that the world won’t fall apart. Markets seem to be looking through the immediate economic data, which is normally a sensible approach. Now though, there’s so much uncertainty around a second spike – and the timing of a vaccine – that it seems strange to be so bullish.

3. Aren’t markets too expensive if there’s going to be a second spike?

On the surface, the rebound does seem to have been selective – technology and consumer companies have rebounded, whilst airlines and oil producers have continued to suffer. That makes sense intuitively, because Amazon will survive Covid-19, while Virgin Atlantic may not.

However, Amazon’s share price is now 30% higher than at the start of the year. That does start to look expensive – while it is true that Amazon is taking a slice of the pie from physical retailers, it’s also true that there is less pie to go around.

A second spike in Covid-19 would not only shrink the economy, it would also send confidence to rock-bottom. People would lose faith in the government, in the hopes for a vaccine, and in a quick return to normal. Equity markets aren’t pricing in much room for disappointment.

4. Is this a good time to invest?

This question has been coming in regularly since markets began falling. In March, people wanted to know whether to wait until markets recovered. In April, people wondered if they should wait for a pullback before investing.

Our answer is consistent. If taking a long term view and as part of an overall financial plan, today will be a great day to invest.

An investment plan should keep you on track for the long term, making sure you meet your goals. A well-designed one ignores short-term market movements because it is focused on the overall outcome, rather than the day-to-day ups and downs.

5. How will the crisis affect Brexit?

The crisis put Brexit into perspective. Loss of human life trumps trade deals – as it should. However, there aren’t likely to be too many direct impacts, other than the understandable possibility of delays.

Covid-19 won’t affect the eventual shape of the deal too much. The crisis has done nothing to improve relationships between the EU and the UK, but it hasn’t done too much to worsen things either.

Trade negotiations have slipped down the agenda for both sides – but as lockdowns end, normal course of business will be resumed. There’s still a long way to go though and lots of questions remain unanswered, of which perhaps most pertinent still is the question of the border on the island of Ireland. That’s nothing to do with the pandemic, and is still a problem without a solution.

6. What does this mean for income / dividends?

This year, dividends globally will be poor. Some companies are being asked not to pay dividends by governments, while others are taking the opportunity to conserve cash, so cancelling theirs as well. UK companies have cut an estimated £30 billion of dividend payments so far – and that’s based on earnings accumulated last year!

Next year, dividends are likely to be poor again. Even if the economic environment is more favourable, earnings will be lower – so there’ll be less to pay out.

Over time, normality will return. However, over the next couple of years any investment strategies that rely on dividends for income are going to face challenges – which is why we adopt a total return approach to managing money.

7. How will the world look post-Covid and how we are positioned for that?

Predictions about the future are easy to make. Correct predictions about the future are a lot harder. We just don’t know what kind of future we’re talking about – there’s a big difference between a world with a vaccine and one where Covid-19 is still a threat. We don’t think the world is going to fall apart, but we also don’t think we’ll wake up tomorrow and find we’re back to 2019. There’s a lot of room for error with timings and on outcomes.

7 most asked financial advice questions during the Covid crisis

Whatever the climate, we are here to help you to manage your finances and plan for your family’s future. 

If you would like a consultation with one of our Independent Financial Advisers about recent changes in your finances, do not hesitate to contact us by email: info@innesreid.co.uk or on our normal number: 01244 347 583 during office hours.

For further business updates regarding coronavirus, please visit our designated webpage at: www.innesreid.co.uk/coronavirus/

Past performance is not a reliable indicator of future performance. Investors should remember that the value of an investment and the income received from an investment can go down as well as up, and they may not get back the amount they invested.

7 most asked financial advice questions during the Covid crisis

The post 7 most asked financial advice questions during the Covid crisis appeared first on Innes Reid.

“Hello, for those of you that don’t know me, I am Mark Reidford and for the last 20 years I have been the Managing Director of Innes Reid.

I have received a lot of positive feedback from IR clients during the last six weeks with regards to how we have continued to communicate and deliver some reassurance during these times.

I believe it is vital to communicate with everyone regularly, to keep you informed of how we have adapted to the current working conditions to ensure our delivery of the services we provide are not interrupted and to provide some peace of mind to our clients when you need us most.

We are now well into the fourth week of lockdown and I wanted to update you and to do it in a different way by using video for the first time.

My thoughts being this demonstrates how we adapt and move forward. It is inevitable so many things in our lives will be different in the new post lockdown world and Innes Reid as ever will adapt to ensure we deliver great outcomes for our clients moving forward.

We are constantly being told these are unprecedented times and I know that it all feels very uncomfortable and uncertain at the moment.

Ongoing volatility will unsettle some investors and the urge to react to short-term market events can often be tempting.

I was looking forward to 2020 with a view to engaging with our clients as we celebrate 20 years of Innes Reid.

I was particularly looking forward to the opportunity to thank the clients that have been with Innes Reid from the start.

The list of clients I have to thank is long, as we have a large number of very loyal clients who have been with us since the early years and they are our best advocates, as we work in a results business and if we don’t deliver, clients will vote with their feet.

Innes Reid officially started trading on the 1st January 2000 and those clients that have been with us from the start have experienced a number of stock market meltdowns but they have stuck to their plan.

We launched at the absolute peak of the dotcom boom, the highest point of the market and we then suffered the full effects of the crash with falling markets through to March 2003.

We experienced 9/11 followed by the Global Financial Crisis and the Brexit vote June 2016, each event having a significant impact on markets and investment values.

Importantly, markets have always bounced back. We are confident markets will recover this time too, though we fully expect more of U shape recovery rather than a V.

We are also of the opinion in the short term we could well see global stock markets go lower as they work out the full economic effects associated with the coronavirus.

We fully expect continued market volatility until the markets can see beyond Lockdown.

However, it is clear centrals bank are fully committed to providing support which will underpin the markets.

You must also remember, volatility is a two way street; the biggest daily market gains often follow the biggest falls though, as always, there are no guarantees.

While there’s no doubt the coronavirus will continue to impact markets, that doesn’t necessarily mean long-term investors should be overly concerned.

Timing the market is notoriously difficult, even professional investors get it wrong.

Trading on news events can often lead to bad outcomes – panic selling often locks in losses, and jumping back into the market is hard to do.

Our message is consistent – volatility is a feature of long-term investing and it is time in the market that counts, not market timing.

Taking a medium to long term view, COVID-19 provides a buying opportunity. Clearly no-one buys at the bottom and sells at the top and as I said earlier, markets may well go lower in the short term, but if investing for the long term, today will be a great day to invest.

As the Managing Director of Innes Reid I feel an enormous sense of responsibility to all our clients. I don’t take for granted for one minute the trust that clients have put in Innes Reid and that responsibility rests heavily on my shoulders.

I am determined that Innes Reid and our clients will come through this crisis and we will justify the trust you have placed in us. I simply want to remind you we are here. If you have any queries with regards to your individual financial plan, do not hesitate to pick up the phone and speak to your adviser.

In the meantime, keep safe.

Thank you.”

Mark Reidford
Managing Director

COVID-19: An Update from Mark Reidford, Managing Director

If you have any queries, please contact us by email: info@innesreid.co.uk or on our normal office number:
01244 347 583 during office hours.

For further business updates regarding coronavirus, please visit our designated webpage at: www.innesreid.co.uk/coronavirus/

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HMRC will pay a taxable grant to Self-Employed individuals and partners equivalent to 80% of their average trading profits for three months, capped at £2,500 per month.

Who gets what?

It is difficult for HMRC to determine how much Self-Employed individuals earn in real time, in order to replace their lost income with government support. If Making Tax Digital for income tax had already been in place, reporting Self-Employed income on a quarterly basis, the calculation of the support needed for each person may have been much easier.

The government has therefore chosen to base the amount of grant for each taxpayer on the average of their trading profits as reported in their last three tax returns for the years: 2016/17 to 2018/19. If the taxpayer started trading within this three year period the monthly average of profits will be calculated from the periods in which they were trading.

The taxpayer (or their tax agent) does not need to provide any figures at this stage. HMRC will arrive at the taxpayer’s average earnings by totalling up the reported profit for the three tax years (or shorter period as applicable) and divide by three to arrive at a typical average year. One quarter of that average annual profit will then form the basis of the SEISS grant awarded – at the 80% rate.

The number of months covered by a SEISS grant may be extended beyond three months if the coronavirus shutdown continues beyond the end of June.

Who doesn’t qualify?

The SEISS grant will not be payable to anyone who meets any of these conditions:

• has average annual profits of £50,000 or more – those taxpayers will get nothing;
• has not submitted a tax return for 2018/19;
• receive less than half of their annual taxable income from Self-Employed profits;
• has already ceased trading permanently.

If the taxpayer has not submitted their 2018/19 tax return, they have until the 23rd April 2020 to submit it in order to qualify for the grant. Penalties for late filing and late payment of tax will apply as normal.

Those who started trading on or after the 6th April 2019 are not eligible for the SEISS grant which seems harsh.

The purpose of the SEISS grant is to help traders through the coronavirus crisis. To qualify for the grant the business must have traded in 2019/20 and would still be trading if it hadn’t been for the interruption to business due to the coronavirus. If the trader has taken the decision to cease trading completely, no grant is payable.

How will the grant be delivered?

HMRC will contact those taxpayers who are eligible for this grant and will invite them to apply for the payment online. It is not clear if this contact will be made by letter, but it certainly won’t be by email or text message.

HMRC warns taxpayers not to be taken in by scammers who email, text, or call, offering money from HMRC then ask for the business bank details to be confirmed. Do not click on a link in an email, or reply to a text, purporting to be from HMRC.

The taxpayer may need to confirm to HMRC that they were trading in 2019/20 and expect to continue to trade in 2020/21. Some indication of the business turnover for 2019/20 may have to be provided at that point.

When will the money arrive?

The SEISS grant for three months will be payable in one lump sum into the taxpayer’s bank account, but the money will not be available until June at the earliest.

The grant will be treated as taxable income, and will have to be reported on tax returns 2020/21. Taxpayers in receipt of working tax credits or universal credit will have to treat the SEISS grant as part of their Self-Employed income for 2020/21.

Also view the HMRC website here.

If you have any queries as to how this may affect you, please contact us by email: info@innesreid.co.uk, or on our normal office number: 01244 347 583 during office hours.

For further business updates regarding coronavirus, please visit our designated webpage at: www.innesreid.co.uk/coronavirus/
 

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