Half my deathbed’s ISA has disappeared

This post is late.

More than six months late.

The UK’s tax-free savings accounts (ISAs) operate on an annual cycle. Each tax year, starting 6 April, a UK tax payer gets another £20k annual allowance. ISAs are the tax wrappers that administer this allowance. Any account in an ISA wrapper sees all its gains and income become tax free – not even disclosable on a tax return. You can put most type of investment into ISA accounts, certainly including UK/US/EU listed securities. That makes a “stocks & shares” ISA account the number one fundamental of UK taxpayers’ investing, aside from (in some cases) a pension.

£20k might not sound like that much, but if you have £20k to play with as a 20 year old, and you invest it in equities under an ISA, and always reinvest returns, you can expect your investment to appreciate very significantly. At 7% average return it will double every ten years. So by the age of 60, four doubles later, that original sum would be worth £320k (before taking into account inflation). Now imagine that at age 21 you have a fresh £20k to play with. And at age 22. And so on.

I only realised how imperative ISAs were about 15 years ago. But since then I have made topping up my ISA accounts for both myself and Mrs FvL an annual imperative. I try to do this as early in the tax year as I can – in fact I usually start hoarding cash a few months before the start of the tax year in April. And I typically publish a blog post when I achieve it. This tax year, this is that blog post. It has taken me until December to scrape up the £40k readies.

Continue reading “Half my deathbed’s ISA has disappeared”

Nov ’22: Inflation may have peaked

We ended November in the UK with the same prime minister that we started with. That makes a change on October and September. Moreover, our chancellor of the exchequer (Finance Minister, in any other country!) remained in place too. A sigh of relief at these green shoots of stability could be felt all over the place – not least the political podcasts and Op Ed columns.

The UK government released its well signposted ‘Autumn Statement’, having successfully previewed almost every key measure in it. Bankers bonuses remain uncapped, but almost all the other moves from Truss/Kwarteng have been reversed. Notional tax rates are unchanged, but thresholds are either fixed or have been reduced, so there is a bit more tax to pay all round.

The main changes for me are the drop in the 45% tax threshold by £25k, and the corporation tax staying ‘high’ at 25%. The reduced 45% tax threshold adds 5% x £25k i.e. £1250 of tax to my annual tax bill, and corporation tax being 6% higher than it might have been will cost me considerably more than that.

Input prices are falling

Meanwhile, elsewhere in the markets there was a distinct sound of air coming out of the inflation balloon. Some key input prices have dropped significantly in recent weeks:

  • Oil prices are down below pre-Ukraine levels, and about 25% down from peak.

Avg monthly Brent oil price, Oct 20 to Oct 22

  • Freight costs from Asia have dropped 66-85%
Container freight rates, October 2022
Continue reading “Nov ’22: Inflation may have peaked”