The cost of living crisis has dominated headlines for more than a year now. And, although some forecasts are tentatively optimistic, stories about high inflation and rising prices are still a daily occurrence.
When your finances are stretched, you may not be thinking about investments or pension contributions as you try to cut costs. However, it’s during difficult times that forward planning is more important than ever.
That’s why you may want to consider taking financial advice in 2023. Here are some of the key reasons why advice is especially valuable right now:
1. Inflation is not going away
High inflation is not going away, and could affect your finances in several ways.
Indeed, even though the rate of inflation has come down slightly, it was still 8.7% in the 12 months to April 2023 according to the Office for National Statistics (ONS). While a drop in inflation is positive, it is coming down slower than expected.
What this means is that your outgoings could well increase as the cost of basic essentials like food and fuel continues to go up. Additionally, inflation could mean that your cash savings lose value in real terms.
That’s because if the rate of inflation is higher than the interest rate on your savings account, the cost of goods and services is likely increasing faster than your savings.
Fortunately, working with a financial adviser can help you find ways to combat the effects of inflation, like investing a portion of your wealth, for example.
2. Tax bills could increase
Mitigating a large tax bill is a crucial benefit of working with a financial adviser, and this may be especially important in 2023.
That’s because the latest announcements in the Spring Budget mean that your tax bill could well increase in the near future.
The Income Tax Personal Allowance – the amount you can earn before paying Income Tax – remains frozen, as does the threshold at which you start paying higher-rate tax. The threshold for additional-rate tax also reduced in April 2023.
As a result, according to FTAdviser, more than 1 million people could find themselves in a higher tax band by 2027.
Additionally, the annual exempt amount for Capital Gains Tax (CGT) and the Dividend Allowance was reduced in the 2023/24 tax year. This means you may be more likely to pay tax on investment gains, dividends, or when selling certain qualifying assets.
More people are also likely to pay Inheritance Tax (IHT) in the future as Professional Adviser reports that IHT receipts hit a record high between April 2022 and March 2023. This is because the “nil-rate bands” – the amount that you can pass on without your family incurring an IHT charge – remains static while the value of your estate could increase.
The good news is that, while you will need to pay some tax, a financial adviser can help you minimise the burden.
3. Mortgage payments could go up
The Bank of England base rate has risen from 0.1% in December 2021 to 4.5% in May 2023, and mortgage rates have increased alongside it.
As a result, your monthly payments may have already increased if you are on a variable deal. And if you have a fixed-rate deal that is ending soon, you could experience a large increase in your payment overnight, as new deals are likely to have a much higher interest rate than you are currently paying.
This sudden increase in your outgoings could put a strain on your finances. Luckily, an adviser could help you find the most affordable deal and manage your increased outgoings.
4. You need to be prepared for major life events
Forward planning is a big part of financial advice, and that includes being prepared for major life events and how they could affect your finances.
This could be positive things like a promotion that comes with an earnings increase, or a financial windfall. Getting married or entering into a civil partnership also has potential financial benefits. Working with an adviser can help you adjust your financial plan as you navigate these big life changes.
Equally, you may need to prepare for difficult life events like long-term illness or the death of a loved one.
This is especially important in 2023 as FTAdviser reports that 22% of people are considering cutting back on life insurance during the cost of living crisis.
But without this vital protection, you and your family could be vulnerable. So, it may be a good idea to seek advice to make sure you are prepared for major life changes.
5. Financial scams are on the rise
The 2023 UK Finance fraud report found that ÂŁ1.2 billion was lost to all types of fraud in 2022, and ÂŁ114.1 million of that was to investment scams.
Unfortunately, anybody can fall victim to a scam because they are often very difficult to spot, and criminals use advanced methods to make themselves appear legitimate.
Fortunately, a financial adviser can undertake due diligence on any investments to significantly reduce your chances of falling victim to a scam.
Get in touch
Recent events have put financial strain on many people, but we can give you the advice that you need to protect your wealth and continue working towards your goals.
Email at info@lloydosullivan.co.uk or by calling 020 8941 9779.
Please note
This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.
Buy-to-let (pure) and commercial mortgages are not regulated by the FCA.
Think carefully before securing other debts against your home.
This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
Note that financial protection plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse. Cover is subject to terms and conditions and may have exclusions.
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