The Left Wing Immigration - Unemployment Paradox

In a conversation with a left leaning friend of mine I raised the idea that two main left ideas may well be incompatible.

Basically we were discussing unemployment and particularly his belief that most people who were unemployed wanted a job but that there were simply not enough jobs available for them - and therefore that Labour's new jobs for kids policy is set to magically solve unemployment. This led me to question another conversation we had at an earlier date that immigration is not detrimental to the UK, particularly the lower paid sections of the country.

My argument went that if as he claimed the majority of people that are unemployed want to work and are therefore unable to work as there are no jobs available then it stands to reason that one contributing factor is immigration, in fact with unemployment standing at 7.1% and foreign born (Employable) residents of the UK standing at 11.5% it necessarily follows that unemployment would be solved if it wasn't for immigration.

However if Immigration isn't an issue and the immigrants are coming here and doing jobs that nobody else wants then it necessarily follows that the unemployed are at least partly unemployed by choice. It should be a case that it is always easier to hire local staff over foreign staff as they have the language, cultural and society awareness that will aid in training and working life. 

Miliband says No 2 to EU referendum - As he thinks we're all stupid

 

Was nice, but rare, to see Ed Miliband open his mouth without wiping millions of the stock market. This time he was joining the debate about an EU referendum by confirming, what we all new in the first place, that Labour would not be interested in going to the polls.

It is an interesting position for the official party of opposition to take, before he spoke the parties stood roughly where The Conservatives would hold an Referendum and the Lib Dems will only hold a referendum if further powers were passed to Brussels. Now Labour have set the cat amongst the pigeons by lining up directly behind the Lib Dems. Hardly a decisive new policy.

But my scorn for Miliband's ability as a politician aside what I found most interesting about his statement is his complete mistrust of the British People, he clearly believes that the British people are so stupid that they can not make a simple decision (But then I guess most of the voters he meets are Labour voters so I'm not that surprised.:-) ) The reason I say this is that Miliband stated in his speech that there is an "overwhelming economic case" for EU membership. So if the argument is so overwhelming why not let the people know it and trust them to make the sensible decision. As I see it there can only be two possible reasons for this:

1) The reasons are not really overwhelming (In which case Miliband is clearly lying)

2) Miliband has such a low opinion of the British People that he thinks they can not handle a real decision.

As if his turning up to the debate 6 months too late wasn't a sure enough sign that Miliband is atrocious at picking the big issues of the day his claim that he was setting out a "Clear Lead" - By copying the Lib Dems policy - is perhaps the biggest sign yet of his ineptitude, although where Miliband is concerned there is a great deal of competition for this category.

RIP Bob Crow

Bob Crow 1961 - 2014

Looking through the news headlines this morning my I read "RMT Union Leader Bob Crow..." and immediately I thought 'Oh great what now.' I clicked on the link ready to get wound up by whatever Bob was going to be complaining about this time. As long as I have had an interest in politics I have had a dislike for Bob Crow, His complaints often seemed very self serving and trivial and his view of strike chaos being his ultimate symbol of success I always found abhorrent. However when I read that the final word of the headline was "..Dies" I actually found myself sitting in a mild state of shock. As tends to be the modern way I immediately went onto Twitter to try and cage the reaction of my fellow man and most seemed to be in agreement - there were a few distasteful comments, as there always are unfortunately, but the general view was altogether very respectful - Which is how I feel it should be. As much as I disliked pretty much everything about Bob Crow's Politics I still appreciate that he is a human being with family and friends who are in mourning.

When all of the nasty negative attacks were circulating after the death of Margaret Thatcher I did have a conversation with a "leftie" friend of mine in which I said. "How would you like it if everyone acted like this if Bob Crow died." Ironically I picked Bob Crow as I reasoned that despite being a Union Boss rather than a publicly elected official he has probably been the most important and gutsy Left wing politician since Gordon Brown sneaked away. Whatever your feelings on the politics of Bob Crow you can not say that he has had no effect and whilst I personally will not miss him from our political landscape I am sure that he will be greatly missed and I feel slightly sorry for whoever succeeds him as RMT Secretary as they will have very big shoes to feel - I do worry that in order to try and make a name for themselves they may over reach early on so I would expect some interesting times ahead for the London Underground.




 

CGT on the Sale of Shares

THIS ARTICLE CONTAINS GENERAL INFORMATION ABOUT CAPITAL GAINS TAX, IT IS NOT SPECIFIC ADVICE AND IF YOU THINK YOU NEED TO PAY CGT PLEASE SEEK SPECIALIST ADVICE OR CONTACT THE TAX OFFICE.

To calculate if you need to return a Capital Gains Tax (CGT) you need to follow the following steps:

N.B. There is no CGT payable on shares held inside an ISA or SIP, if you have your shares in these “Tax Wrappers” then you do not need to calculate your gains or report them to HMRC.

1    Step 1: Find out how much you received, this will normally be the sale price, but, if you gave the asset away for free or a reduced rate to someone that is connected to you then you will need to use the current market value.  (There is a special exemption to passing assets to legal spouse)  

2       Step 2: Work out the cost that was paid, this is normally the price paid at the point of purchase but again there are cases when you may need to calculate the market value, for example where you received a gift or if it was owned before 31/03/1982 for which you can use the value at that date.

3        

      Step 3: How much you spent to buy and sell the shares, when calculating CGT you can deduct the money spent on Stamp Duty, Valuations, Solicitor’s Fees and broker fees.

4        

      Step 4: Work out the gain or loss, Subtract the loss from the gain to give you your CGT liability. 

      

      Example: If you sold £100,000 worth of shares that you bought for £10,000 and that you incurred £1,000 worth of fees on you would calculate it as 100000-(10000+1100) = £88,900 

5        Step 5: If you have other CGT liable assets you must work out this calculation for each asset separately.

6    

      Step 6: Subtract the Personal CGT allowance (For 2013-14 this was £10,900) 

      

      So on our £88,900 gain you will be liable to pay CGT on £78,000

7       Step 7: Calculate your tax due, CGT is payable at 18% for basic rate and 28% for higher rate tax payers 

      

      So assuming you are a higher rate tax payer the tax due on the £78,000 will be liable for £21,840.

When you know that you are liable to pay tax you will need to fill out what you owe on a Self Assessment form, you must register for Self Assessment on the 5^th October following the April you are claiming for. (So for Tax year 2013-14 you must sign up by 5^th October 2014) and pay what you owe by the 31^st January of the following year (Tax year 2013-14 must be paid by January 2015)

If you do not make more gains than the personal allowance you do not need to fill out a self assessment form. If you do owe tax then the section you need to fill out is called the Capital Gains Summery Supplementary Pages.

An Introduction to Stock Trading Part 6 - Buying Shares

Ok so you have read all of the guides so far and now want to buy shares, so how do you go about it?

Firstly use the Metrics, Terms and Dividends information to select your target. Check for any impending Corporate Actions and work out which Types of Accounts are suitable for your circumstances. When you have identified the security (company) you want to invest in go to your brokers website to make your deal.

For this demonstration I will be using my iWeb ISA account as it has a simplified web interface - I am in no way endorsing iWeb and I myself actually hold accounts with several companies so be sure to look around and make sure you get the account that is best for your personal circumstances.

Access your account and make sure you have sufficient money deposited to cover your deal, it is important to also work out how much Stamp Duty and Commission you will be liable as this will reduce the amount you can purchase.

Step 1: Go to the Trade screen, Most trade screens will have the fields below available although they will be laid out differently.

 

Enter either the Ticker symbol or the company name, Below I have used LLOY for the Lloyds Banking Group. Make sure that you are getting the correct shares. Normally you will be looking for Ordinary Shares (ORD) but some companies (Such as Shell) have two different types of Share A&B and they behave differently so make sure you put in the correct Ticker.

 

 After you have the correct Share listed decide if you want to purchase an amount of Shares or a certain value of shares, Remember if you are buying a number of shares then the amount you pay may be different to what you expect. if You choose Value of shares then you will need to enter the amount you want to spend, including commission and stamp duty.

When you have the amount selected click on dealing quote (Or similar) and you will be moved to a confirmation screen - It is very important to know that the confirmation screen is Time Sensitive, You will be given an amount of time (Normally 15 seconds) to confirm or reject the deal this is because the deal is being held open on the exchange. The screen should show the amount you are spending on shares (Here called the consideration), the amount you are paying in Commission, the amount of Stamp Duty and if applicable (On deals of over £10,000) the PTM Levy.

After this screen you will get a receipt showing all of these details which you should keep as this will be used for calculating if you are liable for any Capital Gains Tax.

I am not showing this screen here as, whilst I am happy to try and write up as much as I know about share trading I'm not going to buy shares just to show you what it looks like :-) So at this point I pressed Cancel.

The other option that was available on the trading screen was Set trade Plan, this may be written differently on different accounts but normally consists of Limit Orders and Range Orders.

A Limit Order can be either a Buy or a Sell and simply consists of your limit that can be set in advance. For example if I set up a Buy Limit for Lloyds above at 80p then the deal wouldn't have gone through unless the price of Lloyds dropped below the 80p mark at which point the deal would have gone through. It is important to note that this is the price that the deal is triggered, if you set a buy order at 80p but the shares drop to 70p then you will get the shares at a lower amount, if the shares drop to 80p but are immediately increased to 81p then you will not get the deal as the system is still tied to it's ability to action the deal which is sometimes just not long enough. This is especially important on a sell when you can set a Sell order if the shares drop below 80p but if they drop straight from 80p to 40p then your sell will be at the 40p mark.

A Range order is where you can add multiple Limit Orders on one account, so for Lloyds for example I could set a Buy Limit at 80p with a Sell Target of 100p this means I can then (In theory) leave it alone and as long as the share price drops below 80p before surging to over 100p I will return at a later date to find myself 20% (Less fees and taxes) better off.

An Introduction to Stock Trading Part 5 - Metrics

The Next Topic I am going to look at is Metrics - basically a few ways to look at a company and try and decide if they are going to be a good investment. It is worth pointing out that no metric can predict the future so they are mostly concerned with looking at the past but it is always important to do your own research so that you are happy with how you think the future is going to go. Never invest your money unless you are happy with where it is going.

Follow these links for earlier posts on Terms, Dividends, Corporate Actions and Types of Accounts

Earnings Per Share

The most basic measure of a companies performance is the earnings per share, this is simply the profit earned divided by the numbers of shares in circulation so for a company with 1,000,000 shares and £1,000,000 in profit then the EPS would be £1

Price Earnings or PE Ratio

PE Ratio is calculated as Market Price of the Share divided by the annual earnings per share (You can also predict a future PE by looking at the forecast earnings) this basically shows how much each pound of profit costs to the shareholders so for example if the above companies shares were trading at £10 per share then the company would have a PE of 10/1 The FTSE 100 average P/E is around 17 (Historically) Simplified a company with a higher P/E is considered by the market to be "Growing" where as a Lower P/E would show that the market thinks that the company has limited growth prospects.


Liability Ratio

The Liability Ratio is a measure of how well a company can survive in hard times, it is calculated by dividing Assets by Liabilities. For Example if a company has £1,000,000 of Debts and Liabilities but has £3,000,000 of Assets on it's books then it will have a Liability ratio of 3/1 and so the company will be seen as having a good viability over the short term, The acceptable Ratio is different for different industries (With perceived riskier industries needing a higher ratio) The Average ratio is between 1.5 and 3.

Return on Capital Employed (ROCE)

The ROCE is a measure of how effective a company is at utilising its capital. it is calculated as Earnings/Capital Employed so if a company has a profit of £1,000,000 for the year and has employed £500,000 then it has a ROCE of 2/1 (So it can earn £2 for every £1 it uses.)

An Introduction to Stock Trading Part 4 - Types of Accounts

Part four of the Beginners Guide will look at the different types of account that can be used to hold your shares.

Follow these links for earlier posts on Terms, Dividends and Corporate Actions

One of the main differences in the types of accounts is to do with Tax treatment and as such they will change by tax jurisdiction, Therefore the information I am listing here is related to the UK Tax area only.

The first two accounts Traditional and Nominee can be grouped together as Non-Tax Efficient accounts, neither of these accounts offer any tax relief on your savings. 

Traditional Broker Account (Paper Certificate)

Before the proliferation of the internet and the digital Revolution most shares were held physically in paper form either by yourself or by your broker.

With this type of broker account you request for your broker to make a deal they will then purchase the shares and the companies register of stockholders would be updated and a new paper certificate would be dispatched to you to show your ownership, after this point all correspondence will be directly from the company to the shareholder with the broker only being involved when you wish to sell.

Traditional Brokerage is now likely to hold the shares in CREST (The UK's security settlement system) which allows direct ownership but with the advantages of same day clearing and faster confirmation of the deals.

Nominee Account
These days most shares of small holding share owners are owned through brokers electronically in what is known as a Nominee Account. The advantages of the Nominee Account is that the shares are traded and cleared a lot sooner, as you do not hold the shares directly then you are known as the beneficial owner where as the broker is the nominee owner. Technically the Broker remains the owner of the shares so all decisions that are owed to you as the owner are passed to you through the broker rather than coming from the company directly.


Forms of tax efficient accounts include

ISA - Individual Savings Account

The Individual Savings Account (ISA) is probably the most important of tax efficient savings accounts and I have never heard any advice different to filling your ISA before thinking about using any other account. Shares saved in an ISA are free from paying Capital Gains Tax (If you are over the CGT threshold) and Income Tax (Only payable for higher rate tax payers.)

The ISA comes in two types, Cash or Stocks and Shares, each year the government sets a limit to hhow much can be invested in ISA accounts per person. The amount for 2014 is set to £11,520 of which half (£5,760) can be stored in a Cash ISA.

You can combine a Cash ISA with a Stocks and Shares ISA so you could have £5,760 in each or any proportion as long as you do not exceed the total limit or have more than 50% as cash. The other thing to remember with an ISA is that the limit is money paid in regardless of what is withdrawn so if you pay in £6,000 and then withdraw it you will be unable to repay it all in as it would be over the total ISA Limit.

An ISA is a flexible account as subject to the account providers terms and conditions there is no limit to when you can withdraw the money and it is entirely tax free.

SIPP - Self Invested Personal Pension

A second type of tax free savings account is the SIPP, The SIPP as the name suggests is essentially a pension plan that is managed by you rather than by a fund manager. As it is a pension plan the money paid in is not available for withdrawing until you are at least 55 years of age, at 55 you have the option of withdrawing up to 25% of the balance tax free as a lump sum with the option of using the remainder to purchase an annuity to provide a retirement income or to start drawing down the SIPP as an income. All income that comes from a SIPP is taxable at the usual income tax rates.

Although you pay income tax on the money withdrawn from a SIPP the main tax advantage is that the money placed in is pre-tax, so if you are a standard rate tax payer (20%) you will get £1,000 for ever £800 you put in and if you are a higher rate tax payer you can also claim a further 20% relief on your tax return.

So as an example if a higher rate tax payer wanted to invest £1,000 in a SIPP he would pay £800 to his broker who would request the additional £200 tax relief from HMRC giving him £1,000 to invest. When he fills out his self-assessment (providing that he has paid more than £200 of higher rate tax) he can claim an additional £200 of his tax liability.


SIP - Share Incentive Scheme


The SIP is a specific shares scheme operated by a company for their employees. Only share schemes that are approved by HMRC are SIPs and valid for tax relief. A SIP can include Free Shares, Partnership Shares, Matching Shares and Dividend Shares.

Free Shares: A company can give up to £3,000 a year worth of free shares per employee, The shares can be given free of tax, if the shares are removed less than 3 years after being awarded then Income Tax and NI is payable at the current market rate. If the shares are removed between 3 and 5 years of the award date then the shares are taxed at the lower of the value of when they were awarded and when they were sold. If they have been held over 5 years then there is no tax payable.

Partnership Shares: These shares are bought by the employee with pre-tax pay (Also known as salary sacrifice) There is an annual limit of £1,500 each year that can be used to purchase partnership shares. The tax implications are the same as for free shares so holding them for over 5 years will result in no tax to pay.

Matching Shares: These shares can be awarded by the company for each partnership share that is bought up to a rate of 2 matching shares for each partnership share. Matched Shares can only be awarded if the Employee remains employed by the company for three years after the award date. They will also be liable to tax if removed from the scheme before 5 years after the award date.

Dividend Share: These shares are the reinvested company dividends, like the matched shares they can not be removed from the scheme less than 3 years after the award date unless you leave the company, unlike the other shares in the SIP there is no Income Tax or NI paid on these shares regardless of how long they have been held.