Ways to Reduce Inheritance Tax in the UK

UK Investor Magazine
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Ways to Reduce Inheritance Tax in the UK

Many people in the UK seek ways to reduce inheritance tax. There are a few perfectly legal routes you can take to boost the portion of your inheritance that you get to keep. Tax reduction avenues often go unused because people aren’t aware of how they work, so let’s shed some light on some of the ways you can reduce your inheritance tax. 

What is inheritance tax?

When someone dies, the government levies a tax on their property, possessions, and money at set thresholds of value if any of it is to be inherited. For the most part, if everything is left to a spouse or civil partner, or a charity or community the amount of inheritance tax paid can be reduced.

Inheritance tax has two thresholds for liability. Inheritance tax only applies over a certain threshold. If the valuation of an estate (the sum of their money, property, and possessions) comes to below £325,000, the heir won’t be liable to inheritance tax, as long as the value of the estate is reported. This is known as the nil rate band. For giving away a property to step, foster, adopted, or direct children, the threshold can be bumped up to £500,000.

Whenever an estate exceeds these thresholds, a 40 percent taxation comes into play. This is on the value that exceeds the threshold. For example, a £400,000 estate due to be inherited by someone’s children would see £75,000 of that subject to 40 percent tax (i.e., £30,000).

Ways to reduce inheritance tax

Source: Unsplash

Many estates aren’t simply passed over to one person. People often leave a divide of their assets in their will to give away.In this case, one way to reduce liability to inheritance taxon particularly valuable assets, such as shares, is to transfer shares as a gift to your spouse or civil partner. The government won’t apply Capital Gains Tax on shares if they’re gifted(only later when they are sold), so you could invest in shares, gift them, and reduce some liability to inheritance tax by way of doing so. 

You may also want to consider making the most of the reduced inheritance tax rate that comes with giving a certain percentage of the estate to charity. If you leave 10 percent of the net estate to charity, the 40 percent tax rate an estate is liable to is reduced to 36 percent. In addition, the amount of tax owed is calculated based on what is left of the estate after some of it has been donated to charity.

Another great way to reduce inheritance tax liability is through a “whole-of-life” insurance policy. This type of policy enables someone to plan in advance to cover an inheritance tax bill so that heirs to their estate don’t need to foot the bill themselves. It’s a proactive way to make inheritance tax easier on heirs. 

There are always ways to reduce the amount of inheritance tax you owe, as long as estate holders are smart and plan in advance, and heirs are informed about the methods they can use. The key is to remain educated on the topic.           

Calnex revenue rises 23% to £22m on successful product launches

Natasha Doris
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Calnex revenue rises 23% to £22m on successful product launches

Calnex shares were down 3.2% to 161.6p in late afternoon trading on Tuesday, after the company announced a 23% rise in revenue to £22 million in FY 2022 compared to £17.9 million the last year.

The telecommunications solutions group reported a 16% EBITDA rise to £6.3 million against £5.4 million, alongside an adjusted pre-tax pre-tax profit jump of 18% to £5.9 million compared to £5 million.

Calnex attributed its profits growth to strong demand for test instrumentation, with a series of well-received product launches driving customer interest.

The company also mentioned its completed acquisition of iTrinegy Limited in April 2022, marking the group’s move into the Software Defined Networks technology for software application and digital transformation testing market.

“The transition to 5G and growth in cloud computing continues to drive demand for test instrumentation and Calnex is in a strong position to continue benefitting from these market trends,” said Calnex CEO Tommy Cook.

“We have made good progress in executing on our strategy, paving the way for accelerated future growth. The recent acquisition of iTrinegy represents a move into a new adjacent market and we anticipate accelerated sales in the long-term.”

“Furthermore, we have invested in our team and resources, the continued positive response to the new product launches provides optimism with regards to the long-term demand for our offering.”

So far, the company has reportedly navigated semi-conductor shortages across the international supply chain with success, and the group said it remained optimistic for its 2023 business prospects.

The software manufacturer commented that its business continued to benefit from evolutionary trends in the telecoms sector, especially cloud computing and 5G, driving the firm into 2023 with a record order book as a result of strong demand for test equipment.

“Whilst looking to the future with a degree of caution given the continuing component shortage situation, we can take confidence from the ability with which we have managed the situation to date, successfully shipping scheduled orders as planned,” said Cook.

“We move into FY23 with a record order book and look to the future with a strong sense of optimism.”

Calnex confirmed an adjusted EPS drop of 11% to 5.1p against 5.8p and a proposed final dividend of 0.5p per share, bringing the total payout to 0.8p per share over FY 2022.

FTSE 100 falls as windfall tax hit SSE

Natasha Doris
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FTSE 100 falls as windfall tax hit SSE

The FTSE 100 was down 0.3% to 7,489.7 in midday trading on Tuesday, as reports, initially by the FT, rolled in that the UK government looked set to impose a windfall tax on £10 billion of excess profits from electricity generators.

The spiking cost of living has spurred calls for the government to intervene and lift some of the pressure from struggling households on the back of rising energy bills, after the energy price cap rose 54% in April and inflation hit a 40-year high of 9%.

However, calls for a windfall tax have been met with comments that the measures might serve to undercut green energy investment in the sector.

“The Government wants to raise money to help households hit by a sharp rise in energy bills,” said AJ Bell investment director Russ Mould.

“While it is right that some support should be given to those most in need during these difficult times, the way in which new funds are raised means the Government runs the risk that energy companies slow down investment in new green projects which could make it harder for the country to hit its net zero emissions targets.”

SSE shares tumbled 8.6% to 1,750p and Harbour Energy fell 3.7% as a investors scrambled from the stock on the back of windfall tax fears.

BP and Shell also suffered a hit from the speculation, as their shares fell 1.5% to 422.1p and 1.1% to 2,359p, respectively.

Meanwhile, an exodus of advertisers from US tech companies saw app developer Snapchat tumble 31% in after-hours trading after its CEO warned of a lowered revenue and profit outlook for June, with Meta dropping 7%, Pintrest sliding 12% and Alphabet dipping 4% across the Atlantic.

Marketing-reliant groups in the UK followed the trend, with ITV shares falling 3.7% to 71.5p and WPP falling 3.6% to 930p.

Barclays shares gained 3.1% to 162.4p as a result of the banking giant’s highly-anticipated £1 billion share buyback scheme, which is set to launch today.

The programme had been delayed due to an over-issuance of US securities earlier this year, which pushed the buyback date from its scheduled launch in March.

The buyback will reportedly cover ordinary shares only, with no American depository receipts, and will be cancelled in a move to lower share capital.

UK energy price cap to shatter records at £2,800

Natasha Doris
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UK energy price cap to shatter records at £2,800

The UK energy price cap is set to increase in October to a record-shattering £2,800, with the average UK household anticipated to pay an additional £800 per year in energy bills.

The entire country is on track to pay an extra £18.3 billion in energy costs from October 2022, just as the cold weather starts to settle into houses and family requirements for heating surge.

The move follows April’s price cap rise of 54%, which sent consumer bills through the roof with an estimated £700 per year in extra energy expenses.

Meanwhile, the CPI hit a 40-year high of 9% in April, as the cost of living crisis began to eat into consumer pandemic savings and into credit allowances, and borrowing started to climb on the backs of desperate families struggling to catch up with spiking costs.

“The hike is even more stark when we consider that in September last year the average bill was £1,138 – an amount that seemed a lot at the time but has been eclipsed now,” said AJ Bell head of personal finance Laura Suter.

“It means the average household will have to find an extra £1,662 just to pay for the same energy to heat their homes or cook their food over the past year.”

An estimated 22 million people are currently on the price cap tariff, double the number the same time last year.

“What’s tough for most households is that there is no other option – all the fixed rate deals out there are far higher than October’s price cap rate,” said Suter.

“What’s more, Ofgem’s planned changes to the price cap mean that people need to brace for another potential increase just three months after this one.”

Consumers are set to struggle at the worst time for financial relief, as the war in Ukraine continues to send the price of foodstuffs including wheat surging, and supply chain impacts cripple companies until they can’t afford to absorb the expenses any further, sending prices spiking across the board.

The price cap rise will impact the most vulnerable in the UK, and without urgent government intervention, the rising tide of energy costs will continue to swallow consumer wallets whole.

“At £2,800 the average energy bill will now represent 30% of the annual state pension payment for a single person and 70% of the amount a single person gets each year from Universal Credit,” said Suter.

“It now feels almost impossible that the Government can ignore the pressure these rising bills are putting on the lowest income households.”

The pressure is now on Rishi Sunak to deliver tangible change in his Summer Statement in response to struggling household calls for support with bills.

“The Government isn’t short of ideas that have been suggested, from turning the £200 energy loan scheme into a grant, or increasing the Warm Home Discount, to bringing forward benefit increases or handing out another council tax rebate,” said Suter.

“But waiting until October to announce any handouts feels both unlikely and cruel to those families struggling now.”

Bytes Technology Group revenues grow 13.8% to £447.9m

Natasha Doris
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Bytes Technology Group revenues grow 13.8% to £447.9m

Bytes Technology Group shares increased 0.1% to 440p in early afternoon trading on Tuesday, following a revenue growth of 13.8% to £447.9 million in its FY 2022 results against £393.6 million in FY 2021.

The software company announced a gross profit uptick of 19.9% to £107.4 million compared to £89.6 million the last year, with an operating profit rise of 57% to £42.2 million from £26.8 million.

Bytes Technology further noted a gross invoiced income growth of 26.1% to £1.2 billion against £958.1 million over its financial year, as a result of strong growth across all businesses and continued expansion on the back of public sector customers.

“This is another record set of results for BTG, with positive contributions from all parts of the business,” said Bytes Technology Group CEO Neil Murphy.

“During the year we continued to strengthen our market position, by deepening our relationships with key software vendors and expanding our expertise in areas such as cloud, security and annuity software and services.”

“These steps enabled us to make meaningful progress against our strategy and ensure our customers continue to receive the highest quality of service.”

The company highlighted estimated disruption as a result of macro-economic pressures going into FY 2023, however, it assured investors that the group was confident of a strong outlook for the remainder of its financial year.

Bytes Technology mentioned an EPS of 13.7p against 8.5p year-on-year, with an adjusted EPS growth of 18.3% to 15.4p compared to 13p.

The firm also reintroduced its dividend with a final payout of 4.2p and a special dividend of 6.2p per share.

“I would like to thank all my colleagues who have done an outstanding job supporting our clients through the past year,” said Murphy.

“The progress we have made is a direct result of their efforts and would not have been possible without them.”

“With our growing customer base, strong reputation with key vendors and focus on sustainable growth, our business remains well placed to deliver against our strategy and capitalise on the exciting market opportunities ahead.”

Technology Minerals wins EA permit for Wolverhampton plant

Natasha Doris
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Technology Minerals wins EA permit for Wolverhampton plant

Technology Minerals shares gained 4.7% to 3.3p in early afternoon trading on Tuesday, after the battery metals group won an environmental permit from the Environmental Agency (EA) for its 49% owned Recyclus battery recycling firm.

The company commented that the permit would provide the key legal foundation for Recyclus to receive the variation of licence needed to kick off full-scale of operations at its Wolverhampton site.

The permit represents the second licence Recyclus has received over the past two weeks, including its previous permit for its Tipton recycling facility earlier in May.

Technology Minerals confirmed that the licence was required due to the unusual undertaking of recycling lithium-ion batteries within the UK.

The EA also reportedly reportedly prioritised the determination of the group’s application to transfer its permits across its Wolverhampton plant and its lead-acid Tipton plant, as a result of its contribution to protecting the environment.

The circular-economy firm added that its Wolverhampton plant would be the first in the UK capable of recycling lithium-ion batteries, once it was fully-operational, and would be the lynchpin of the company’s aim to increase its lithium-ion battery recycling capacity from 8,300 tonnes in its initial year of operations to 41,500 tonnes by 2027.

Technology Minerals further said it aimed to ramp up operations at its Tipton plant from 16,000 tonnes in the first year of full production to 80,000 in the next five years.

“Receiving the EA permit for our Wolverhampton plant is a critical step for the recycling facility to become fully operational which, for the first time, will bring industrial scale recycling capability for lithium-ion batteries in the UK,” said Technology Minerals chairman Robin Brundle.

“To be awarded priority status and be categorised as an organisation critical for environmental protection is fantastic. This high-level of recognition from the EA is reflective of the importance of Recyclus’ ambition to recycle batteries and establish a circular economy for battery metals in the UK.”

“With the increasing demand for critical battery metals, we are pleased to be seen as integral to ensuring a domestic supply through recycling.” 

Titanium Rutile, Graphite and EVs with Sovereign Metals

UK Investor Magazine
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Titanium Rutile, Graphite and EVs with Sovereign Metals

We were thrilled to welcome Sapan Ghai, Chief Commercial Officer of Sovereign Metals, to the Podcast. Sapan joined us earlier in the year to introduce Sovereign Metals, since then the company has released a raft of significant news that has been transformational for the company.

We start by discussing Sovereign’s key developments including the recent mineral resource estimate that confirmed Sovereign’s Kasiya resource in Malawi is the largest Titanium Rutile deposit in the world with some 1.8 billion tonnes.

Sovereign Metal’s graphite resource shouldn’t be under estimated and we talk about applications for graphite flake and the importance of in the electric vehicle revolution.

We finish with looking forward to what the rest of 2022, and beyond, holds for Sovereign Metals.

For more information on Sovereign Metals, please watch their presentation at the UK Investor Magazine Metals & Mining Conference earlier this year.

Advertising exodus leads to plummeting US tech stocks

Natasha Doris
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Advertising exodus leads to plummeting US tech stocks

An exodus of advertising revenue from popular online companies has led to tech stocks plummeting today, as experts warn that advertisers are rolling back marketing due to less customer demand, as the cost of living continues to eat into consumer wallets.

Tech giant Alphabet reported falling advertising revenue in April, with Snapchat’s CEO issuing warnings of similar trends across its platform.

US markets took a brutal beating, as Snapchat shares tumbled 31% in after-hours trading, Meta Platforms dropped 7%, Pintrest shares fell 12% and Alphabet dipped 4%.

“Advertising spend typically tracks economic activity. When times are good, companies are confident to spend heavily to promote their products and services,” said AJ Bell investment director Russ Mould.

“When the outlook is gloomier, advertising spend is pared back. After all, why splash the cash on promotions if fewer people are going to open their wallets?”

Snapchat Spirals

Snapchat reported a lowered revenue and profits outlook for June, pinning the blame squarely on the spiralling macroeconomic environment as analysts proposed that advertising revenue had hit its peak for the current time.

The tech company currently trades below its $17 flotation price, and has plummeted 80% from its peak at September 2021, as a result of its second profit warning after Q2, which signals a bleak economic outlook for the firm.

Snapchat has also faced problems in its advertising rollout linked to Apple’s recent privacy and data protection guidelines, which stipulate that app developers must gain permission from a device operator to access their unique tracking number.

If the user denies access, it subsequently stymies Snapchat’s tailored advertising, which strikes a significant blow to the company’s already struggling advertising revenue.

“Whether Snap’s problems lie with the economy weighing on customers’ willingness to advertise, and or their growing concerns as to whether they will get an adequate return on that spending, remains to be seen,” said Mould.

“But what is clear is that Snap is not having much joy in turning new users into more profits.”

Fed next step

The US market is set to pivot its focus towards the Federal Reserve, as investors await an update concerning how Fed chair Jerome Powell intends to handle a rise in interest rates and how it will manage its bond holdings.

“With the era of cheap money hurtling to an end the focus will be on a speech from Jerome Powell, the chair of the Federal Reserve later, with investors keen to glean any new titbit of information about just how far and fast the US central bank will go in raising rates and offloading its mass bond holdings,” said Hargreaves Lansdown senior investment and markets analyst Susannah Streeter.

Tortilla Mexican Grill – latest purchase shows a leap forward

Mark Watson-Mitchell
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Tortilla Mexican Grill – latest purchase shows a leap forward

The latest deal by Tortilla Mexican Grill (MEX.L) this fast-expanding burrito and tacos food restaurant group looks to be a cracker.

When it came to the market in October last year it declared its aim to open 45 new sites over the next five years to add to its existing chain the UK and in the UAE.

This week it made a very quick leap toward its target.

Paying just £2.75m to an investment firm, it has added another eight sites in what, to me, looks like a cracking deal.

Buying a competitor

It has acquired the competing Mexican food Chilango chain, in what seems to be a deal that will really boost Tortilla’s coverage of premium sites, with six in London, one in Croydon and another in Manchester.

Chilango’s London sites are in Soho, London Bridge, Chancery Lane, Brushfield, London Wall and another in Islington, from where Tortilla built up its own operations.

Excellent synergy

The synergy of the acquisition is almost ‘textbook’ – it adds already operating sites, it creates another springboard from which the group can expand, while adding to its attractions to property owners with vacant sites anywhere around the country.

Plus, it also operates on a takeaway and delivery basis, making the operating of delivery kitchens and the group’s central production unit in Tottenham Hale even more economic. 

It significantly increases the group’s buying power.

Expansion continues

At the end of March, the group had 68 sites worldwide, some 52 sites in the UK operated by the group, three sites franchised to the SSP Group in the UK, four sites franchised to Compass Group UK & Ireland and nine franchised sites in the Middle East.

Richard Morris, CEO of Tortilla, stated that: 

“Chilango is a highly complementary brand that, similarly to Tortilla, provides a fantastic value-for-money proposition and embraces popular and growing sector trends for healthy, customisable food from an estate of restaurants situated in premium locations in London and Manchester.

This acquisition accelerates our ambitious plans to further expand the Tortilla brand and these sites are in addition to our initial target of opening 45 UK restaurants over the next five years, helping us to surpass this target. It also adds another brand to the Tortilla Group, enabling us to further strengthen our leading position in the UK’s fast-casual dining market.

We’re very excited about this acquisition and look forward to leveraging our combined knowledge and expertise within the Mexican fast casual dining sector.”

£1m extra for just £2.75m

The latest deal may not add massively in the current year’s figures for the group, but next year it provides an additional £1m a year to its EBITDA – all that for just £2.75m.

The group’s broker Liberum Capital is very bullish about the group and its prospects.

The sales for the current year to end December are estimated to rise from £48.1m in 2021 to £62.0m, while £74.5m is expected for 2023 and then £85.4m in 2024.

The broker is looking for £3.9m pre-tax profits this year, then £4.3m next year and £5.7m in 2024. 

That should take earnings up to 9.8p a share within the next two years or so, while at the same time building up its cash coffers from an estimated £1.4m by this year-end to £5.5m by end 2024.

That is even more impressive for a group that is looking to expand towards its target.

So, what about the group’s current share price?

The group came to the market last year at 181p a share, they hit 200p but have since then just drifted off with the market facing various Covid and Ukraine ups and downs.

Now at only 137.5p they look extremely attractive for investors taking the opportunity to jump aboard the shares of a rapidly growing group – from its float it could well have doubled in size inside two years.

The Liberum Capital analyst Anna Barnfather rates the shares as a Buy and has increased her target price to 235p.

SSP Group revenue grows 212.9% as travel demand picks up

Natasha Doris
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SSP Group revenue grows 212.9% as travel demand picks up

SSP Group shares gained 10.3% in early morning trading on Tuesday following a 212.9% revenue growth to £803.2 million in HY1 2022 compared to £256.7 million the previous year.

The company credited the lifting of Covid-19 restrictions to the resurgence in travel, leading to an uptick in consumer demand at its units across UK bases.

Demand reportedly returned to 64% of 2019 levels in HY1 2022, which was boosted in the first six weeks of the second half to 83% of pre-pandemic rates.

SSP Group said approximately 80% of its estate was currently open, representing 2,200 operating units across the UK and Republic of Ireland.

“The business is recovering well from a hugely challenging period. We have seen a significant rebound in trade since the impact of Omicron, with revenues currently running at over 80% of pre Covid-19 levels and with a similar proportion of our sites now open,” said SSP Group CEO Patrick Coveney.

The airport caterer announced a £14.7 million EBITDA against an underlying EBITDA loss of £110.3 million year-on-year, alongside an operating profit of £26 million from a loss of £219.9 million.

SSP reported a pre-tax loss under IFRS 16 of £2.3 million compared to a loss of £299.7 million the previous year, with a £55.3 million loss on a pre-IFRS 16 basis against a £182 million loss in HY1 2021.

The company mentioned a basic loss per share of 4.1p under IFRS 16 from a 42.3p loss per share.

SSP Group highlighted a free cash outflow of £30.9 million against £140.9 million year-on-year, following a £41.9 million capital investment to support the mobilisation of its new unit pipeline which has seen 50 new units opened over the period.

The travel food company also noted a net debt of £1,154.6 million, including lease liabilities of £814.8 million.

The group confirmed a strong liquidity position with cash and undrawn committed facilities of £606.9 million at the close of March 2022, after the repayment of £300 million borrowed under the Covid Corporate Financing Facility.

The company also noted a pipeline of 230 secured new units, which it expects to open over the coming two years, adding a projected £300 million of annualised sales.

It further expects cumulative net gains secured from the end of FY 2019 to add £500 million to annualised revenue by 2025.

SSP Group commented that its outlook estimated HY2 2022 sales at 80-85% of pre-Covid-19 levels and for FY 2022 sales of approximately £2-2.1 billion, along with a FY EBITDA margin between 5% and 6%.

The food and beverages company warned that it anticipated short-term supply chain challenges across the next few months, and the sharper sting of inflation pressure to impact profit levels.

The firm predicted a strong summer with medium-term expectations to return to broadly pre-coronavirus rates of revenue and EBITDA margins on a pre-IFRS basis.

“SSP has a number of fundamental strengths, including very strong local business platforms around the world, industry-leading operational execution, as well as outstanding financial discipline,” said Coveney.

“We anticipate a full recovery in leisure travel, which drives the majority of our business, and are confident that we are well positioned for the months and years ahead.”    

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