Hold on tight

This year couldn’t have got off to a worse start. We thought the floods and rain were bad until the financial markets opened. They made the perfect background for comments by the Chancellor, George Osborne, that we’re by no means out of the financial crisis. The plunging Chinese stock market triggered a global slide and crystallised a growing loss of financial confidence. There’s a fear that we could be facing a new global recession, and the wiping off of over £35 billion in the value of UK companies on the first day the Chinese market crashed showed how quickly economic contagion now spreads.

Looking back to the signs that were there in 2007, before the last crash, we now see new causes for concern. On top of China, the low oil price is robbing oil-rich countries of spending power; countries in the Middle East are unstable due to terrorism, and bellicose words from North Korea are making matters worse. Confidence is always fragile and when it goes it quickly becomes a downward spiral, where good news is quickly squeezed out by bad. Proof of this comes if you look now at new year forecasts made in late December for markets and other aspects of the economy. No analyst called them as gloomy as they’ve been over the past week or so.

Things will settle, but a nervous start to the year isn’t going to be easily set aside, and 2016 could be a worse year for investors, economies and employment than people imagined.

But, this isn’t something individuals can control. All they can do is strap themselves in for a bumpy ride and be cautious about trying to take advantage of shares deemed bargains because the price has dropped. The best advice has to be to sit tight until the turbulence eases, or we at least know where it’s leading. Shares are still a good long-term investment, but that term’s looking longer now than a few months ago.

Compared with global events, the financial calendar at home for 2016 looks less daunting. The year will see the start of the process of making all dealings with HMRC for tax and national insurance digital only. For some taxpayers this will involve submitting returns and payments up to four times a year, and this could be fully implemented by 2018.

In place now is a lower limit on saver deposit protection for when a financial institution goes bust – down from £85,000 to £75,000, or twice that for a joint account. This is because this is an EU scheme and the reduction reflects the weak euro. Be aware that this applies per bank, regardless of product; for example, deposits with HSBC and First Direct count as a single account.

If you’re hoping to take advantage of green tariffs for supplying electricity, the subsidy paid fell by almost 70% this month, potentially ending new installations, but if you already have a facility the financial arrangements won’t be affected.

April will see the introduction of higher stamp duty for second homes and buy-to-lets, but this shouldn’t affect on-farm developments of holiday lets. It will also see the start of the universal pension rate of £154 a week, but this won’t affect those already drawing pensions. April will also bring a radical new form of ISA for approved crowd-funding sites raising money for specific projects – which is an interesting concept.

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