There is nothing like a hard deadline to focus the mind. This is why tax year-end has traditionally been the busiest time of year for advisers. However, we have reason to believe that, for some, this is not so much the case any longer.
We recently carried out a survey of advisers to get their views on tax year-end planning, the findings of which revealed that:
- Just one in five consider tax year-end as ‘very’ important or ‘most’ important to their business
- Some 30 per cent feel tax year-end holds little or no importance for them
- A quarter try to finish their tax year-end work earlier; for example, by the end of February.
So what has changed? First, it is likely the RDR has played a role in shaping the subtle shift in priorities. It has certainly changed the way many advisers look to service their clients. Judging by the survey results, it seems some have adopted a more year-round approach as a result.
Indeed, one adviser told us “planning should be ongoing and our industry makes out tax year- end is far more important than it is. I would prefer to see ‘tax year-start’ planning instead.” Food for thought.
Second, the conversations advisers have with their clients have changed over the years. For instance, Isas used to be considered the tax year-end staple, with pension arrangements a close second. Increasingly, however, clients are recognising that taking advantage of Isa allowances means investing well before the end of the tax year.
What is more, concerns over pension changes, such as shrinking annual allowances, mean that waiting until April to do something about their financial planning may not be the most desirable option.
Sometimes, however, the tax year-end rush is an inevitability. For example, tax-efficient solutions such as EISs and VCTs still generally seem to experience an uplift in demand. With this in mind, it is important advisers and their clients recognise these products may reach capacity and close for further investment before April.
Meanwhile, advisers often report facing a spike in demand from clients directly following the March Budget. In the past few years the Chancellor has used the Budget to announce significant changes to pension regulations as well as to rules relating to tax-efficient investments.
It is also hard to fight basic human behaviour, meaning some clients will always be reactive to events. The post-Christmas period between January and March is traditionally when they think about money and are in the mood to get things done.
The end of the tax year is still viewed as a deadline for getting investments completed but client education is a vital part of the process and that needs to begin far earlier in the tax year.
When some advisers tell us tax year-end is less important than it has been before, they often mean they do the “hard work” of client education and product due diligence well in advance of deadline day. According to our survey, January is the most common starting date for preparing for tax year end, with 38 per cent advisers doing so, followed by December (15 per cent) and February (14 per cent).
And when it comes to deadline day itself, technology has improved the adviser’s lot. There is no longer the need to dash to an investment company’s offices with a hastily scribbled paper application form, with most product providers now having an electronic application process.
As a result of these findings we have moved our tax year-end seminars way back in the calendar: instead of starting our programmes in January and February, the majority now take place in the previous October and November.
Neil Buckland is head of business development at Octopus Investments