January is always a miserable month to be in London. Thankfully I managed to get away a bit during the month (not to Davos, no), and enjoy myself in London despite the wintry weather.

What you’re paying for in Mayfair these days
Market movements in January
The markets on the other hand were positively hot. There was some general sentiment – in Davos in particular from what I read – that the doom/gloom of Q4 was overdone. Inflationary expectations are declining. And markets, as a result, lifted dramatically. Equities and bonds rose markedly everywhere. In constant currencies, the markets I’m exposed to (with my leverage included) rose 5.0%.

The GBP rose slightly against the USD, and dropped a bit against AUD. On balance, foreign currencies dropped 0.94%. So my index rose 4.0% – the currency movements taking a small dent out of the constant currency figures.
My portfolio in January
Against that benchmark, my actual portfolio rose 7.0%. A key reason I’ve outperformed in January is that some of my key holdings rose significantly: GOOG +11%, AMZN +20%, and DIS +22% for instance.
I made some quite significant adjustments to my portfolio in January, following on from my 10 year review. The purpose here is to simplify – to reduce the number of unique holdings that I have. After a dismal 2022, I have quite a few unsheltered holdings sitting at a loss so now is quite a good time to sell. I’ll provide more of an update around the end of Q1.
I had feedback from my 10 year review to start reporting on dividend income more. A good idea, I think. I don’t have bang up to date reporting on this, but my January dividend income was up around 5% (year on year) I think. My forecast gross yield, across all investment accounts (including ISAs and SIPPs) and excluding debt costs, is about 3.8%. However my net yield after debt costs is only 2.4%. And my net income from fully taxed accounts (and my buy to let property) is only half of my target income.
Taxes
For many UK readers, January is tax month.
And not just for UK readers, but for former chancellors of the exchequer (the UK’s Finance Minister). The former vaccine minister / chancellor and current Tory chair Nadhim Zahawi has had a torrid month, after revelations that he has been on the wrong end of tax investigation and has ended up owing almost £4m of (capital gains) tax plus a ~£1m penalty for ‘carelessness’ as he puts it.

I don’t know any more details about Mr Zahawi than have been published. However I must admit I can empathise with his plight – and I think I can see the situation from both sides.
I have a couple of non dom friends. One of them has a somewhat similar background to Mr Zahawi. My friend was born in the UK but has non-dom status due to his family’s Indian background. This particular friend is particularly focused on tax. He is very much somebody who would set up an offshore trust, and use it to hold founder shares in a new business. He would perceive that any capital gains made by that trust are tax free from the UK’s perspective, and he would have set up his offshore trust somewhere that has zero capital gains tax – like Guernsey or the Cayman Islands.
What appears to have happened in Mr Zahawi’s case is that when his UK business YouGov was sold, the fact that shares were held in an offshore trust was, for tax purposes, deemed irrelevant . So in fact Mr Zahawi ended up having to pay the tax as if the offshore trust’s shares had been held directly in his name after all. If my interpretation is correct then I am somewhat surprised that the offshore-i-ness of the trust didn’t help, after all.
Now, based on conversations with my non-dom friend, if he had set up a business like YouGov, and sold it for £millions, he would have just assumed that the offshore trust’s gains did not need to reported as capital gains in the UK. If it turns out he was wrong, then I can imagine him saying ‘oops, that was careless of me’ – with careless being a synonym for ‘not bothered enough to get full advice’. He wouldn’t have thought he was evading tax, just avoiding tax. While not approving/condoning his tax-avoiding behaviour (and for the record, when I have created Ltd companies myself I have deliberately not attempted any tax avoiding manoeuvres like this, despite some eye-rolling from my Indian non-dom friend), I would have thought what he was doing was legal and by not paying tax – though apparently he should have done – he had made a mistake, not committed a crime. But this is just conjecture and supposition, and readers should (and will) be their own judge.
In any case, this sort of activity is definitely not a good look for an erstwhile Chancellor of the Exchequer. And, after a bit of dilly dallying, Mr Zahawi has just been sacked as Chairman of the Tory party. Separately, and not co-incidentally, the Tory party is becoming synonymous with ‘corrupt’ (paywall), and the UK has just slid seven places down to its worst ever ranking (18th) in Transparency International’s Corruption index.
Closer to home, I have had my own tax bombshell this month.

In the UK the final final deadline for paying your annual personal tax is 31 January. Our tax year runs not according to calendar years, but instead ends on 5 April. So I owed outstanding tax for the year ending 5 April 2022. I did my sums mid month, bracing myself for a significant bill – because the year ending 5 April 2022 was the year I bought the Coastal Folly, liquidating some significant holdings (at hefty gains) to do so.
As it turned out, my capital gains bill was indeed substantial – well into five figures (at the 20% rate due on stocks/shares). But I had overlooked another tax liability payable (as income tax, in fact, payable at 45% on my marginal income) on one of my windfall gains in 2021 – and this liability came to six figures. So I had a six figure tax bill to settle, with about a week’s notice.
That left me selling down my portfolio. In part. I have also borrowed £100k by extending my margin loan – which took 24 hours, zero red tape/process – to give me time to think. So right now I have paid the tax bill partially by borrowing, and partially by selling. I intend to repay that £100k within a month (at a net cost of about £300).
In any case, in a month where my portfolio rose by 7%, my portfolio has expanded significantly despite having paid my six figure debt to the taxman. Thank you, Mr Market. Please stay roughly where you are until I have had repaid that extra loan!
As of 31 January, here is my £ imbalance from my target allocation

This all looks rather similar to the previous month, albeit my US holdings are somewhat overweight. There is quite a bit more shuffling to do behind the scenes, so I’ll just carry on and post another update in a month’s time.
Respectfully I can’t agree with your charecterisation of Mr Zahawi. He gave his father (via an offshore trust) founder shares in his business and took none himself (even though he was far more heavily involved in the business than his father) in what appears to have been an effort to pay less tax. He then denied receiving a benefit from the trust even though documents show that he did. He also described reports he was being investigated by HMRC as “smears” when he knew he had been under investigation by HMRC for over a year. He then tried to silence journalists who reported on the story by threatening to sue them and claiming (falsely) that his threats of legal action could not be published. It now turns out that their reports were substantially true. Mr Zahawi has not apologised for his behaviour and has suggested that he is a victim and the press and racism are the cause of his downfall. I cannot agree that his behaviour was innocent or that his effort to reduce his tax bill by using an offshore structure in his father’s name was inadvertent.
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I totally agree re his handling of enquiries and use of libel threats. But if you research offshore ownership of companies I think you can conclude that you can do what he did and not owe tax provided you never remit money into UK.
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” the press and racism are the cause of his downfall”: he seems ignorant of the proposition that he who plays the race card is in the wrong. It’s not a universal truth but it is a darn good rule of thumb.
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With regard to Zahawi. If this was an innocent error, he would not have been fined, just paid interest. He was fined for carelessness which in tax terminology means he was not innocent at all. He set up a UK company and then ascribed an economically unjustified ownership to his father. Once sold, he, rather than his dad, magically was a major beneficiary of that trust’s proceeds. Remittance is not an issue. This was a UK company. If what was sold was a foreign company/proceeds, it may be valid but you can’t just use an offshore trust as a carrying vehicle for a few years for onshore proceeds and pay zero tax. People try this all the time, and often get away with it, but the HMRC will clobber you if they catch you at it. As someone who’s just paid another seven figure tax bill and has now paid an 8 figure amount of tax in my career, let’s say I’m not sympathetic to his plight.
Regarding your tax bill, I’m surprised you don’t hold more cash. It might have been painful for hold that in the prior decade, but with GBP cash now at 4% and USD cash at almost 5%, I find it perfectly reasonable to hold large lumps of cash now. Given how volatile markets are and the great opportunity set that creates for trading, it seems to me holding cash is ever more valuable so that you have the money to deploy instantly. I found this out in September when index linked Gilts collapsed in price. Yes, I had a margin loan to buy them with but that was limited and took too long to increase (24 hours). More cash in the right account was what I actually needed.
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I have to echo the other comments which are spot on. Zahawi is bang to rights. His scheme would never have worked. He was/is UK tax resident and UK domiciled – offshoring in this manner is almost completely pointless for avoiding tax (the situation is different for your non-domiciled friend).
Put it another way, just because you slap a label on something saying it’s not yours and is from Gibraltar doesn’t make it so. The substance is important.
There’s an FT article that explains this in simple language: “Is it ever worth parking money in a tax haven?”
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