By Michael Doyle
This article is published on: 18th October 2024
I’m not a big puzzle fan but I do like the odd sudoku grid. Recently, however, my 5 year old son has taken a vague interest in jigsaw puzzles. I like the ones for his age as they max out at around 16 pieces.
It got me thinking about my job, what I can do for my clients and how I can add value.
Typically, when a client comes to see me they have questions on investments, pensions, tax, domiciliation, inheritance, banking, life insurance and wills to name just a few.
It’s like a jigsaw puzzle.
I put the pieces of the jigsaw together for my clients so that in the end they are not left weighing up 16 individual pieces but can see the whole picture. This is where I add value.
Let me be clear – I am an International Financial Planner and I like to stay in my lane. What do I mean by that? I try not to cross into areas that are not my field of expertise (such as domiciliation, for example). But I am fortunate to be working with a wide range of clients, colleagues and professionals.
I have access to accountants, lawyers, domiciliation specialists, fund managers, investment houses … the list goes on. I’ve also been a financial adviser in the UK from 1999 until 2008 before I decided to move abroad and have been working in the same industry ever since. So as well as the specialists I can contact I also come with 25 years of experience.
What does this mean for you? Typically, this means I can contact these specialists on your behalf to get initial information and relay that to you. This could be legal or tax advice for example. I do this at no fee to my client and often save them a small fortune in fees for asking a few simple questions.
Let’s meet and start putting your jigsaw puzzle together.
By Chris Burke
This article is published on: 16th October 2024
I am guessing most of us are back in the old routine after summer (sorry to tell you that the summer is now over, even if you don’t want to hear it!) – How quickly do the hours/days/weeks/months/years/life go by….it only seems like yesterday I was starting out in my career, now I am the wrong side of ………something!
I myself don’t have that long to go until I retire. It never is too late to start your financial planning but the sooner you do it the easier and more fruitful your finances should be. Do I ‘practice what I preach’ and take the advice I pass on to others? Absolutely! That’s another reason why I am best placed to give the advice……..
This month we are focusing on the following investment planning tips to inspire you to get organised financially and feel good about it:
Making sure you have a ‘Plan’ for your savings and investments
Managing your personal finances should be just as, if not more, important than managing your work or business role – You should make sure you are achieving your set objectives, regularly reviewing along the way to make sure you are hitting your targets, goals and aspirations for life. Apart from your health and family, what could be more important than that?
Imagine if you received one EXTRA annual bonus each year, for the whole of your working life, how much difference would that make to you? Then, investing that prudently over your working life to provide for your family and retirement? With some knowledge, know-how and someone to guide you along the way and making sure you regularly review, in the good and bad times, that this can be achieved.
Use the ability to offset, defer and mitigate tax for your investments/savings
Alongside making your monies work and grow for you, being smart with your tax situation will make sure that those ‘hard earned gains’ you have achieved over the years, when you need them most in retirement, are subject to the least amount of tax, legally.
For decades those ‘in the know’ have used tax experts and legal teams to makes sure they pay the minimum amount of tax possible, which can make an incredible difference to your wealth – This is a major area we focus on with our clients’ investments/portfolios. Investments set without professional advice, for example via on-line platforms or banks, are normally nowhere near as tax efficient as those established with the help of an experienced financial planner.
Using your investments to pay for children’s future expenses without paying any taxes yourself
“At what age are children financially independent?” I hear some parents say. In my experience it can be never…….however, many of my clients plan to support them financially for their education and university fees, if possible. Parents are then very surprised to hear that rather than pay the tax themselves on their investment gains for these future expenses, they can arrange (with proper financial planning) that their children can, if they wish, receive income from these investments directly. This means any tax due would come under the children’s tax bracket, instead of the parents’ – which can make a significant difference to the tax payable in total, but particularly for the parents.
Investment quiz – what’s most important to you?
Many people get in touch with me when they feel they need help with investment planning and advice, however that is not always the case. Sometimes, after reaching out for a different reason and talking their situation/aspirations through, they then decide they want to set up an investment strategy.
But how do you decide whether investing is right for you? I have compiled below the following questions in two columns – If you agree more with those in column A than B, then you should strongly consider getting in touch to discuss investment plans and strategies:
| A | B |
| You want your money to grow and give you greater wealth in the future | Keep your money accessible in case it’s needed, knowing it will not grow and keep up with inflation, but you have instant access |
| You would like to have a financial plan/strategy keeping some money accessible, but also make sure your other monies are ‘working’ for you, increasing your wealth and finances over the years | Employ all of your spare money into paying off your mortgage early, then look at your retirement investment strategy (click here to read whether it is best to do this or not). |
| Retire early using FIRE (Financial Independence, Retire Early) - early being well before the typical retirement age of 66. | Not retire early, enjoy life fully now and see what happens when you get to retirement |
If you would like to discuss any of the topics above in more detail or you would like to have an initial consultation with Chris to explore your personal situation, you can do so here.
Click here to read independent reviews on Chris and his advice.
If you would like any more information regarding any of the above, or to talk through your situation initially and receive expert, factual based advice, don’t hesitate to get in touch with me.
By Andrew Lawford
This article is published on: 15th October 2024
If you follow Italian media reports, you may have picked up on the idea that a one-off wealth tax may be on the way to help lower the levels of government debt.
It probably comes as no surprise that Italy has a long history of over-promising and under-delivering when it comes to reducing its debt levels. If a picture is worth a thousand words, then the graph below shows how each budget forecast (dotted lines) promised a reduction in the ratio of Debt/GDP, whilst the actual level (solid red line) generally heads in one direction only.
Of course, the Debt/GDP ratio is one thing, the absolute level of indebtedness is quite another. I note with some uneasiness that over the last 20 years Italian Government debt levels have increased by almost 100% whilst nominal GDP has only increased by around 60%. Soon I fear that Italy will cross the threshold of €3 trillion in debt. That’s €3,000,000,000,000 for those who like lots of zeros.
Is a wealth tax a likely route to try and bring the public finances back into line? Italy has seen this sort of thing before, and the mention of a wealth tax (una patrimoniale) is enough to provoke any Italian who had a bank account at the time to start grumbling about the “patrimoniale del ‘92”, when Giuliano Amato, the recently appointed prime minister, did an overnight raid on Italian bank accounts, withdrawing 0.6% of the value to try and bolster the parlous state finances. Interestingly, Mario Draghi was Director General of the Italian Treasury at the time, apparently willing to do whatever it took even back then.
In considering the likelihood of new wealth taxes, it must be noted that Italian residents already suffer an annual 0.2% tax on the value of their financial holdings (either through stamp duties or the foreign assets wealth tax known as IVAFE). A one-off wealth tax of 0.6% would be preferable to 0.2% per annum in my opinion, but getting both would be a bit rough.
One must also consider the current political landscape compared with 1992. Back then, the system was beginning to crumble as the tangentopoli bribing scandal was getting started. This eventually led former prime minister Bettino Craxi to flee to Tunisia and brought about a supposed cleansing of the political classes dominant in the post-war period. The new system, known as the Second Republic, continues to this day and is currently dominated by Giorgia Meloni. Notwithstanding her somewhat inauspicious background and the fact she is surrounded by a cast of more or less unsavoury individuals, she has managed to convince the world that she is a force for good. My own view is that she is an able political operator and figured out fairly quickly that, if you play by the rules of modern conservatives, you get invited to far better parties – have a look at this video from the Atlantic Council who recently gave her the Global Citizen Award. From minute 1.30 you can hear what Elon Musk has to say about her.
As far as Meloni’s attitude towards raising taxes, she has recently declared them to be una cosa di sinistra (a left-wing thing), presumably meaning that any dirty work of raising extra taxes will be left to a technocrat like Mario Monti or Mario Draghi at some point in the future.
Whatever the case, it is always prudent to maintain a solid asset base outside of one’s country of residence and it should be clear that any overnight raid on financial assets could not include those deposited outside the Italian financial system.
Foreign assets may well be dragged into the tax net in other ways, of course, but at least you won’t wake up one morning suddenly poorer than when you went to bed. In extreme circumstances, which admittedly are almost unimaginable for the moment, capital controls and the like could severely reduce your financial flexibility in the event that all your assets were held in Italian financial institutions. This may seem like scare-mongering, but remember that the unthinkable has happened in the EU in recent memory, so it pays to be prepared. If the weather is uncertain (and when is it not?) then it’s always a good idea to have an umbrella with you. If you end up not needing it, all the better.
If you feel like discussing your own financial set-up to see if it can be improved, then do get in touch. I’m happy to provide a no-obligation consultation to discuss any concerns you might have and the options you have available.
By Michael Doyle
This article is published on: 14th October 2024
It has been a tough couple of years in the financial markets – there is no getting away from that.
Mortgage interest rates have rocketed (although 3% isn’t too bad, depending on the era in which you mortgaged your first property). For savers rather than borrowers, some banks in France have started offering close to 3% returns on cash deposit accounts (mostly fixed term deposits, i.e. you don’t touch your funds for 2-3 years).
When I first started in financial services in 1998 one of my mentors said to me:
“Michael, always ask this question: Who does it benefit?”
Why would banks give you 3%? Who does it benefit that you tie up your funds for 2-3 years? Will you outperform inflation? Is your money safe (what is the bank’s guarantee)?
I just listened to the late, great Jim Rohn and he said there are two different types of pain:
There’s the pain of discipline and the pain of regret.
So which pain do you prefer?
Yes, the markets have performed poorly over the past couple of years (https://spectrum-ifa.com/russias-invasion-and-its-effects-on-markets/) – so can you remain disciplined?
At Spectrum we don’t generally advise on short term investing (less than 5 years). To that extent we ask and encourage our clients to be disciplined.
Here’s what we know (https://spectrum-ifa.com/time-not-timing-investing-for-the-long-term/).
I can’t tell you when markets will recover, but I do know that there will be a recovery (this is certain) and typically assets then to go on to achieve higher valuations than achieved previously.
Is now a good time to invest? If you have a medium to long-term time horizon, it definitely becomes an interesting conversation. Whatever is going on around us (and whatever is in the new headlines), discipline and patience really do pay when it comes to investment decisions.
If you are hoping to pre-empt short term market direction (with a view to buying in at low point), I’d be inclined to say investing is probably not for you right now. Could this mean that you will miss a ‘rebound’ in the markets? Quite possibly, with the inevitable regret that follows.
Either way, if you’d like to discuss suitable investment planning for your circumstances, please feel free to drop me an email and we can set up an initial no obligation chat.
By Spectrum IFA
This article is published on: 14th October 2024
Despite stormy conditions locally, our 152nd Le Tour de Finance event was well attended in the beautiful setting of Chateau Val Joanis, north of Aix-en-Provence.
Our expert panel, hosted by Jonathan Goodman and Victoria Lewis of The Spectrum IFA Group, included assurance vie provider Prudential International, Novia Global Pensions, investment manager RBC Brewin Dolphin and tax lawyer AGN Avocats.
Quick-fire questions and answers on wide-ranging subjects allowed the panel to share their knowledge in an informative and interactive format over 90 minutes followed by a delicious buffet lunch and wine.
Our 153rd Le Tour de Finance event was well attended on the 9th October at the Chateau de Saint Martin in Taradeau in the Var.
Our expert panel, hosted by Jonathan Goodman and assisted by Tim Yates and Lorraine Chekir – all of The Spectrum IFA Group, included assurance vie provider Prudential International, Novia Global Pensions and investment manager RBC Brewin Dolphin.
The format was a question and answer session over a period of 90 minutes or so with some of the questions pre-prepared but many also coming from the audience. The questions were wide ranging covering subjects such as assurance vie, pension transfers, fund management, portfolio construction and tax treatment. These allowed the panel to share their knowledge on all these diverse but highly relevant topics in a lively and interactive way. A number of people commented after the seminar that they appreciated the format and that it was better than having people simply standup and lecture to them on their chosen subjects. They also found it refreshing that the emphasis was on being informative with no attempt at a “hard sell”. The event finished with an excellent buffet lunch with wine.
Interested in finding out how to make the most of your finances as an expatriate?
Do you have questions about Assurance Vie, tax efficient investing, pensions (including QROPS), investment markets, estate planning etc?
Join us, and our panel of guest speakers, for informed guidance on Italian resident tax and financial planning opportunities, commentary on investment markets and to meet like-minded people in your local area.
By Richard McCreery
This article is published on: 8th October 2024
Impact investing is increasingly becoming an important element of ESG-orientated investment portfolios.
Many people are familiar with the concept of sustainable investing, where a company may incorporate Environmental, Social and Governance (ESG) principles into its decision-making and risk management.
The aim is to promote positive long-term values that should improve the way a business is run by aligning its interests with those of society.
For example, in order to improve its effect on the environment, a company may introduce measures to reduce its carbon footprint, to minimize the use of finite resources or to eliminate waste. To improve the way it plays its part in society, it may insist on minimum standards in labour practices in its supply chain, it may introduce policies to expand its gender diversity or it may fund projects that build its standing in the community. When considering governance issues, a company might focus on how it balances executive compensation with performance, it might assess how ethical its operations are or it may improve transparency in its financial reporting.
Over the long term, it is believed that a more principled company culture that ultimately makes it more sustainable will improve the financial performance of that business, creating a win-win for all stakeholders. That is why the global ESG investing market was estimated to have grown to more than $25 trillion in size by 2023.
Sustainable investment funds that invest in a range of underlying companies may choose to exclude certain industries or sectors that don’t comply with ESG principles, such as gambling, tobacco or controversial weapons. But they may also choose to favour companies that have a strong ESG rating, that have made a conscious efforts to develop better behaviour along defined guidelines, such as those laid out in the United Nations 17 Sustainable Development Goals.
Impact investing goes one step further, because it favours companies that intentionally make a measurable positive contribution towards solving environmental or social problems alongside a financial return. It fills a funding gap when traditional philanthropy and government aid might be insufficient. Investments could be in healthcare, education, recycling, social housing, sustainable agriculture or climate change action. For example, investing in a renewable energy company could positively impact climate change, whilst investing in a plant-based meat company could positively impact public health and the environment.
Today, fund managers can incorporate impact investing into their sustainable funds or as part of an overall ESG strategy, ensuring that investors have the opportunity to make a financial return and generate a positive return for society. As you would expect, the addition of investment criteria other than just financial performance means that more work has to go into researching and selecting the best investments. However, clients can gain exposure through individual funds or managed portfolio services that offer liquidity, expertise and ongoing monitoring to ensure that goals are met and principles are adhered to.
If you would like to find out more about how to align your investments with ESG criteria and make impact investments, please get in touch.
At Spectrum, whilst we are committed to offering comprehensive solutions for sustainable investing, we also believe that all clients should decide freely on how to allocate their capital. We recognise too that no single, simple solution exists for how to invest responsibly. For these reasons, we include responsible investment discussion in our advice process but do not impose personal or corporate views.
By Gareth Horsfall
This article is published on: 7th October 2024
Welcome to this E-zine once again. I thought I would share a few bits of news which have cropped up in the last week or so and which may interest you, non more so than a rearrangement of income tax rates in Italy from the 1st Jan 2025.
But before I get into that I thought I would just give you an update on the house situation here in Umbria.
Thankfully all the major works have now been completed, the last of them being the installation of the new windows and persiane and the painting of the outside of the property. These were all finished last week (thankfully before some of the rains moved in). I also spent the last weekend in September digging a trench to run water pipes and a new electrics cable through.
It has been asked why I didn’t just get someone with an excavator to come and dig it, but we learned that there were a number of hidden pipes in the ground and cables which no-one knew exactly where they were positioned and so it was digging the old way – by hand. That was a big job, but now completed and once the new ‘impianti‘ are in place then I can have the enjoyment of filling the long trench back in again. The ‘idraulico‘ has nicknamed me ‘la talpa‘ for my efforts!
We are still living among boxes, but after the kitchen is finally fitted correctly (the first attempt was a complete mess! – Apparently they were not used to working with ‘wonky’ walls in old houses), then we should be able to move forward with unpacking and start to reassemble our home again. My son, Alexander is loving his new school, despite the 6 days a week and 40 min bus ride to school, so that makes everything much more easy to withstand. (They got a day off today on Thursday 3rd Oct due to high winds and torrential storms in the area!)
Anyway, I know many of you have been through similar experiences and much worse, so I finally feel like I understand your pain and despite all of this I am loving living among the olive trees, nature and the fresh air. I need to take some trips back to Rome regularly enough to see clients so I will get my city fix often enough.
So onto the new and interesting things which might affect you, the first is for everyone who is a resident in Italy.
IRPEF
From Jan 1st 2025 the IRPEF scaglioni (income tax bands) will be changing again. The government is following up on its promise at the elections to modernise the taxation system and move to simpler and more ‘interesting’ tax bands.
Giancarlo Giorgetti (Finance Minister) said ‘ We are committed to not only cutting the tax rates and reducing the 3 tax bands, but also realising them from the next tax year [2025]’
So, the current and proposed (but not yet confirmed) IRPEF rates for 2024 and 2025 respectively are as follows:
| 2024 | Tax rate% | 2025 |
| € 0 - 28000 | 23% | 23% |
| €28000 - 55000 | 35% | 33% |
| €55000+ | 43% | Here they will likely leave the rate at 43% but instead increase the band to income over €60000 |
Now, let’s be honest, I don’t think this is going to affect many of us in any significant way, however, it might mean some savings here and there. So not to be sniffed at!!
But, you might ask why they don’t amend the first income tax bracket to make it more attractive to lower earners?
From submitted tax returns completed in 2023 we learn that 40% of 42 million taxpayers declare less than €15000 per annum in Italy and 70% of all taxpayers pay less than 20% in tax (after deductions). In 2023, the declared average income from calendar year 2022 was €22806. So given the majority of Italy’s income tax take comes from the bottom income tax bracket, it is unlikely that they will start tweaking with that any time soon, in my opinion.
However, all will be revealed in the ‘Legge di Bilancio‘ (Budget) in Jan 2025, as usual!
The UK Budget
The UK autumn budget will be taking place on October 30th this year and there are some interesting changes afoot. As yet, nothing confirmed until the big day, but I attended a couple of online seminars looking at possible tax changes that could turn out to be quite interesting ( positive and negative) for any Brit’s looking to move to Italy and become long-term residents, or those of us who are already here.
Let’s start with the positives:
Inheritance Tax Overhaul
The UK inheritance tax system has always been determined by a UK person’s domicile. This always meant that the UK could wield the right to tax the estate of a UK national, even where they may have lived abroad for many years.
The classic tale regarding this situation is the story about the actor Richard Burton. I have told this story before on my E-zine, but the story goes that he was born in Wales (UK) but got into the movies and became very famous and moved to the USA, earned his money there and transferred his whole life to the US owning no more assets in the UK. On his death the UK, under the domicile rules, reserve the right to tax the estate where there are significant ties back to the UK. In Richard Burton’s case he ‘supposedly’ (I have never researched whether this is true or not, but it’s a good story anyway), wrote in his last will and testament that he wished to be buried in the Welsh cemetery where he grew up. Apparently, this was considered a sufficient tie back to the UK and the UK HMRC taxed his entire worldwide estate. I am not sure if this story is true but it does go to demonstrate the lengths to which the domicile system can come knocking, should the UK tax authorities wish to do so.
However, the talk on the street is that from October 30th the UK will move to a residency based test for inheritance tax purposes. So what does this mean?
In brief, the proposal is to allow any UK national who has lived away from the UK for more than 10 years to be able to have their estate taxed in their country of residence at the time of death (but with the UK government reserving the right to tax the state for a further 10 years should they wish to do so). This presents a HUGE financial planning opportunity for residents of Italy, as I shall discuss below.
If your intention is to live and die in Italy then Italian IHT rates are so low that it could be classed as a fiscal paradise for inheritance tax purposes. I won’t go into details, but just to say that direct line descendants (spouse and kids) all get a €1million allowance before they would pay tax at just 4%. Compared to the UK’s 40% on estate value over £325,000 (plus the possibility of main residence relief), the Italian system is much more attractive.
However, if you have invested assets (not real estate!) which you would like to protect from inheritance tax altogether, then you can potentially invest in an Italian polizza assicurativa (Investment Bond) which protects all assets within it from any inheritance in Italy, so effectively reducing your IHT bill to zero.
What a planning opportunity
I am not sure the UK government had this little tax opportunity in mind when thinking about the change but for UK nationals who are long term residents in Italy and who want to live out the rest of their lives here, this represents a great financial planning opportunity.
And here come the negatives:
Gifts for Inheritance tax purposes
There is talk of removing the gift tax break known as PET’s (Potentially exempt transfers) where a gift made, after a 7 year period, is no longer considered in the inheritance tax calculation. May they remove this? It might be a good time to discuss with family members, who may want to gift you funds, to do this before October 30th before the rule would likely come into force.
There is also the question of money being paid to a non-resident individual and whether that could attract a UK exit charge (see Potential exit charge for UK nationals section below)
Capital Gains Tax increase
For anyone holding onto UK property assets and thinking of selling them you may want to watch carefully what happens with capital gains tax rates in the UK post 30th October 2024.They are expected to be increased; currently at 18% and 24% for residential property, they are likely to increase and the change be effective immediately!
Remember that as a non-UK resident UK property owner, if you sell the property then you are subject to UK CGT on the proceeds. If you have owned the property before 2015 (when the law came into effect) then the cost (purchase) basis for your property is 6th April 2015. If purchased after then the purchase value in the contract is the cost basis for capital gains tax purposes.
If you have owned the property/ies for more than 5 years then Italy will not deem them speculative and will not tax you on them.
Potential exit charge for UK nationals….and maybe UK located assets?
I have to say that this one surprised me, and as of yet I haven’t heard anything more about it, but the jungle drums are beating that there may be a possible exit charge on anyone who becomes UK non-resident.
A tax of this nature is currently applied to UK trusts who become non-UK resident. A deemed disposal value of the assets is made just before the moment of non-residency and a subsequent deemed re-acquisition of the same assets at market value is made for the purposes of calculating the CGT.
Here we are faced with a clear financial planning necessity because if you are invested in tax efficient vehicles (ISA’s) in the UK then it would make sense to cash them in and pay no capital gains tax on them in the UK whilst still a UK resident, and then leave them in cash (no capital gains tax on cash!) whilst you transition over to your new residency in Italy and reinvest from there. However, if a tax is levied on capital rather than assets then it may not be avoided. How the UK HMRC will do this is anyone’s guess but should this be introduced then financial planning before the move for UK resident individuals will be very important.
The bigger question is what they might do with already non-UK resident individuals who have assets still situated in the UK? Tax on transfers overseas?
Whatever law is likely to be announced will probably come into effect from April 6th 2025, so there may be time to plan, but it might be time to look at how to remove some or all of your assets (depending on your circumstances) from the UK and potentially avoiding any exit taxes.
I would repeat that this has come as a bit of a shock, but does not surprise me given the UK’s current economic difficulties. Putting in measures to avoid flight of capital overseas would not surprise me and has been bounded about as an idea in the past by a Conservative government. Will Labour finally follow through with these more draconian measures? We will soon find out.
Pension tax free lump sums
As anyone with a UK pension will know you are currently eligible to withdraw 25% of the valuation of the pension at age 55 (moving to age 58). The possibility is that this will be reduced to a maximum of £100,000 for all pensions and will likely be effective immediately.
As a reminder to anyone thinking of moving to Italy, it is always better to take the tax free lump sum in the UK before moving to Italy because Italy does not respect this tax break and would tax the whole amount as income. However, in light of this new UK proposal you might want to accelerate your decision to remove your full 25% before October 30th and hold it in cash/deposit, before you make your move to Italy.
Surcharge for non-resident buyers of UK property.
Here we have a tax increase for anyone who may be non-UK resident at the time of buying UK property. The surcharge may increase from 2% to 3%.
At the moment we don’t know any specifics and so I can only relay that which I have heard on 2 different tax seminars specifically on this topic. Some of these proposals may rightly cause some level of immediate concern and others maybe there is the opportunity to wait. At this point, if I hear anything else I will report on it straight away but I imagine that the next time will be Budget day itself.
If you would like to discuss these or any other tax or financial planning related issues in Italy then please don’t hesitate to contact me on gareth.horsfall@spectrum-ifa.com or call / message on +39 3336492356
Always happy to help where I can!
By Katriona Murray-Platon
This article is published on: 5th October 2024
As we head into October, this means that we are now three quarters of the way into 2024. When we look at the markets we can see that in spite of a short dip in August, the year to date figures for almost all of the main market indices are showing performances in the double figures.
Autumn is the season for what are known as local taxes, i.e. the taxe foncière, taxe d’habitation and tax on vacant lodgings. Whilst the taxe d’habitation only affects those with second homes, taxe foncière has to be paid by all property owners. Properties that are inhabitable but remain vacant, which are situated in one of the 3697 communes listed in the decree number 2023-822 of 25.08.23 and which have been left unoccupied for at least a year as at 1st January of the tax year may be subject to the annual tax on vacant lodgings. For a property to be liable for this tax in 2024 it must have been empty since 1st January 2023. If it has been vacant for 2 years since 1st January 2022 there may be a local tax on vacant lodgings which may apply.
The Taxe Foncière statement should already be available in your account on the impots website. This must be paid by 15th October or you have until 20th October if you pay online. It doesn’t need to be paid all at once, you can set up monthly payments so that by the time October comes along you will have paid most of it with the extra amount being paid in November. Whilst the Taxe Foncière will increase again this year, not everyone has to pay it. Those on benefits (ASPA, ASI) are exempt as are those who are aged 75 or over on 1st January of the tax year and those on disability allowance (AAH) provided that their annual taxable income is under €12,455 per person or €19,107 for a couple. If you fall under the income threshold and are over 65 on 1st January there is a €100 reduction. There is no need to notify the tax offices, any exemptions or reductions will apply automatically provided that you meet the income conditions. However there may be extra allowances granted by your local authority so it is worth making enquiries.
The housing market in France is improving in spite of a difficult first half of the year. As several of the main central banks have started cutting their rates, the mortgage rates are also falling. According to our Spectrum International Mortgages expert Patricia Nadal, the average rate over 20 to 25 years granted in September was around 4.30%, compared to the average of rate for the same length of time in June which was around 4.45%.
The banks are also being more flexible in their requirements for granting mortgages. In the UK even though the Bank of England voted to keep their rate at 5%, mortgage rates have fallen to 4% with some just under this rate.
From 24th October 2024, anyone opening a new French assurance vie or PER will now have the possibility of investing in venture capital investment funds. These are only for those with a balanced risk profile (around 4% of the investment) and adventurous profiles (up to 8% of the assets). There is no obligation to invest in such funds for cautious profiles. For PERs it will depend on the attitude to risk of the policy holder and how long they have until retirement. Also, from the same date, if you have a PER they will now be able to offer more adventurous investment strategies.
Although the weather may be getting cooler and you want to spend more time indoors, if you have any financial questions you would like answering, I would be happy to arrange a video call or I could come and meet you in the comfort of your own homes. Please do get in touch to arrange a time that would suit you best.
By Portugal team
This article is published on: 4th October 2024
After years, or even decades, of building up your pension and investments, you eventually reach the point where you want to start drawing from these savings. This marks the transition from the accumulation phase of your financial life to the decumulation phase.
Navigating this phase effectively can make a significant difference to your financial well-being and your legacy. Below, we outline five key rules to help ensure that your withdrawals are both tax-efficient and investment-savvy.
1. Only withdraw your lump sum if necessary
Under UK pension rules, you can withdraw 25% of your pension fund tax-free. This is known as the “Pension Commencement Lump Sum.” Whilst this payment is tax free for UK residents, those living in Portugal must report and pay tax (unless 0% NHR) on this sum.
If you have a specific plan for this money, such as paying off a mortgage or clearing other debts, withdrawing the lump sum may be a wise choice. However, if you don’t have an immediate need for it, it might be better to leave the funds in your pension, where they can continue growing tax-free.
Another key consideration is inheritance tax (IHT). Currently, pension funds are exempt from UK IHT. By taking money out of your pension, you may unintentionally move it into your taxable estate. This is fine if you plan to spend the funds, but it could be inefficient if you are simply holding on to or reinvesting the cash.
2. Dynamic withdrawals
When withdrawing from your investments, striking the right balance between enjoying your lifestyle now and securing your financial future is crucial. Some people prefer to prioritize their current lifestyle, while others aim to leave a larger estate for their beneficiaries.
Market conditions should also influence your decisions. For instance, if stock markets have risen, it might be wise to take profits. Conversely, during market downturns, you might choose to reduce your withdrawals until conditions improve.
Cashflow planning can also help you plan for the future. Forecasting allows you to balance your spending today with the need to preserve funds for the future. It also allows you to adjust for variables like inflation, market performance, and unexpected expenses, helping to prevent the risk of outliving your savings while maintaining your desired lifestyle.
3. Plan for the long haul
Many people underestimate their life expectancy when planning for retirement. A couple in their mid-60s today has a good chance of living well into their 80s or even beyond 100. This means it is important to plan (and think in) decades rather than just a few years.
This increased longevity has important implications for how one should invest. In the past when life expectancy was much shorter, retirees often moved their portfolios into lower-risk assets like bonds or cash but with people living longer, this approach is no longer be suitable.
To ensure long-term growth, it’s essential to maintain a healthy allocation of growth-oriented assets such as shares, while balancing this with safer investments like fixed income and cash. The exact mix will depend on your risk tolerance and other income sources.
4. Review Your Plan Regularly
Global markets and tax laws are constantly changing, which is why it is crucial to review your portfolio regularly against this ever-changing backdrop.
This includes keeping up with changes in tax laws across multiple jurisdictions, for example UK pensions has seen huge changes recently and further changes are expected in the next UK Budget. Adapting to new rules in both the UK and Portugal, can help you avoid costly mistakes and optimise your financial strategy.
5. Control Fees and Taxes
While you can not control market movements, you can manage two major eroders of wealth: taxes and fees.
People often end up paying tax in the wrong country or, worse, in multiple countries at once. Additionally, many fail to take advantage of the tax reliefs and allowances available to them.
Regularly reviewing your financial arrangements can help ensure that your investments and pensions are tax-efficient and that you are not overpaying in fees.
Final word
By following these five rules, you can better navigate the transition to decumulation, ensuring that your hard-earned savings continue to work for you in a tax-efficient and financially secure way.
By Portugal team
This article is published on: 3rd October 2024
LONDON, THURSDAY 17TH OCTOBER
Pestana Chelsea Bridge Hotel
354 Queenstown Road London SW11 8AE
Escape the ordinary, embrace the extraordinary, and discover why Portugal is the perfect present for your future.
On Thursday 17th of October 2024, our Moving to Portugal Show & Seminars will return to central London. This one day event, which opens at 10.30am and closes at 7.30pm, mixes live seminar presentations and expert panel discussions with carefully selected exhibitors, who can give you all the information you need on how to make your business or lifestyle move to Portugal a success from day one.
You can learn all about the different visa, residency and tax rules, and how daily life works in terms of jobs, schools, health and the cost of living. You can also learn about investing in Portugal, from the managers of some of the country’s top investment funds who will explain their investment strategies and why some funds are eligible for Portugal’s well known ‘residency by investment’ Golden Visa programme.
If it’s a quiet life you want, come and find out why retiring to Portugal makes good financial sense.
Come and meet our very own team of experts who live and work in Portugal – this means they understand exactly what its like to move to another country. Are team will be presenting and sharing valuable insights on maximising pensions, investments, and estate planning in Portugal.
We are also encouraging the in-person visitors on the day to book one to one meetings in advance with our advisers, or to book a Zoom call or video call with them if you prefer not to attend in person.
