A Guide to Crypto

Cryptocurrency has been around for more than a decade, with the oldest, Bitcoin, making its debut in 2009. Initially dismissed as a fad, it has since gained serious attention from investors, governments, and central banks.

During his presidential campaign, Trump declared his ambition to make America the “crypto capital of the planet.” Since Trump’s election, the cryptocurrency market has experienced significant growth and volatility. Initially, there was a surge in investment and optimism, with Bitcoin and other cryptocurrencies reaching record highs. However, the market has seen fluctuations, with some cryptocurrencies losing up to 45% of their value this year.  

Last year, investments in cryptocurrency index funds in Europe and America surged from $48 billion to $146 billion, according to Morningstar, with most of the increase occurring in the last months of 2024. This surge in investment reflects the heightened interest and optimism in the crypto market driven by Trump’s pro-crypto policies and promises of a clearer regulatory framework. However, such funds are banned in the UK.

The Rise of Crypto Ownership
In the UK, about 7 million people own cryptocurrency, up from around 5 million in 2022, according to the Financial Conduct Authority (FCA). The average holding is worth £1,842. The FCA describes crypto as “high risk and speculative,” warning that investors should be prepared to lose all their money. Despite this, those who have stuck with crypto have seen significant rewards. Since the beginning of 2023, the value of Bitcoin has surged by 515%, compared to a 14.6% rise in the FTSE 100 index of leading UK shares.

What is Cryptocurrency?
Cryptocurrency is digital money not issued by a central bank. It is based on a mathematical formula that creates a finite number of coins, with transactions recorded on a blockchain. Many cryptocurrencies, including Bitcoin, are designed to have a finite supply. New coins enter circulation through “mining,” where computers solve complex mathematical problems. About 19.5 million of the maximum 21 million Bitcoins have already been mined. This limited supply means the value cannot be manipulated like traditional currencies.

Investing in Crypto
To invest in cryptocurrency, you need to go through an intermediary firm such as Etoro, Coinbase, or Crypto.com. These platforms function similarly to investment platforms like Hargreaves Lansdown or 7iM. There are usually fees for buying or selling crypto, and a currency conversion charge since investments are made in dollars. For example, Etoro charges 1% to buy or sell, with a currency conversion fee of 0.75%.

Spending Crypto
To spend crypto in the real world, it typically needs to be converted into cash first, which involves fees. However, digital banking firms like Revolut allow users to buy and spend cryptocurrency directly through their app. By changing the debit card settings, payments can come from your crypto holdings, with Revolut converting it into a currency like sterling.

Should You Invest?
Investing in crypto should not be driven by the fear of missing out. Since September 2025, Bitcoin has been nearly five times as volatile as US stocks, and Ethereum has been nearly ten times as volatile. Andrew Oxlade from Fidelity International warns that potential investors need to consider whether they can handle the volatility.

Tax Implications
Gains from crypto assets are subject to capital gains tax (CGT) at 18% for basic-rate taxpayers and 24% for higher or additional-rate payers. You can make up to £3,000 a year from capital gains before any tax is due. Last year, HM Revenue & Customs sent “nudge letters” to those suspected of failing to pay, warning of penalties on top of any tax due.

Halving Events
Bitcoin undergoes a halving event approximately every four years, which increases scarcity and potentially makes the coins more valuable. The last halving event was in April 2024, with the next expected in the spring of 2028.

Investing Without Buying Crypto
If you’re looking to invest in crypto without directly buying it, consider through funds or companies whose share prices are closely linked to crypto assets.  For example, MicroStrategy and Coinbase. MicroStrategy’s shares have soared by 80.88% over the past year, thanks to its substantial Bitcoin holdings. Coinbase, a major crypto trading platform, has seen its shares rise by 160% in the same period. Another option is the Blockchain ETF, which invests in companies involved in blockchain technology and has shown promising returns. These investments offer exposure to the crypto market without the need to buy and manage digital currencies directly.

Remember, while the potential for high returns is enticing, the crypto market is highly volatile and speculative. Always do thorough research and consider your risk tolerance before diving in.

By Jack Smith |  April 2025

Pension Funds – Long Term Reset?

Was it a big surprise when the Chancellor recently announced that pension funds will form part of our estates for Inheritance Tax purposes from 2027? I guess the answer is, not really.  

This has been muted for quite some time and although the change is quite hard for some to swallow, there is some logic behind the argument that pension funds should exist to deliver income in retirement, rather than being morphed into an inheritance tax saving scheme for the wealthy.

From a financial adviser’s perspective, we have had to deal with many legislative changes over the years, some good, some not so good, but it’s fascinating how quickly the changes seem to get accepted and we move on to find new ways to deal with our financial affairs as tax efficiently as possible.

In fact, over the next few years, before the new regulation becomes effective, if our advice to clients is – try to spend as much of your pension as possible, that might not be the most disappointing advice they’ve had from their adviser! Of course, ‘spending’ might include ‘giving away’ and again, this might open up a range of new opportunities to mitigate against inheritance tax, whilst potentially observing their loved ones enjoying some of the family wealth.

Although the final clarification of the rules is not expected until Q3 in 2025, we are already building some interesting solutions for clients to consider, and the conclusions might not be so bad after all.

By Philip Harper  |  February 2025

How to recognise a financial scam

During recent Cyber Security training at Penn Barn, all the staff found the Hive Systems Password Table insightful, so we thought it was worth sharing with our clients.

It shows the number and type of characters used in passwords and how long it would take a hacker to crack the password.  There is a huge difference between it taking two seconds to hack a 7-character password (numbers, upper or lowercase letters) compared to 53 years when you add five more characters or 779 million years when your password is 16-characters. 

Here are five password tips:

1. Use 3 random words joined by punctuation and numbers e.g. Train_Chelsea_Bucket
2. The longer the password the safer it is
3. Setup dual or multi factor authentication
4. Use a different password for each account
5. Use a password manager – a program that stores passwords in an encrypted space, so you don’t need to remember them.

Stay alert!  We are here to help, so if you are ever unsure please contact us first.

By Philip Harper  |  January 2025

Act now to boost your State Pension

You have until the 5th April 2025 to fill in missing national insurance contributions, which could make a difference to your retirement.

Normally, you can fill in gaps going back six years, but until the 5th April 2025, those who reached or will reach state pension age after April 2016 can fill in gaps dating back to 2006-07, meaning that you can make up for a total of 16 years of missed contributions.

The official retirement age
You receive your state pension when you reach the Government’s official retirement age. When this is will depend on when you were born. It is increasing to 67 for men and women by April 2029, with a further rise to 68 expected between 2037 and 2039. Although recently there has been discussion about bringing this forward to save money.

Buy ‘extra’ pension years
If you’ve had a career break, a low income or worked abroad, you may not have paid national insurance. new state pension rules, you need 35 qualifying years for a full rate pay-out. If you’ve spare savings, it’s possible to replace some missing NI qualifying years. This could lead to a significant increase in your basic state pension pay-out over your retirement. In a nutshell, you pay a one-off lump sum to buy a higher state pension sum. Assuming you live long enough, the extra cash you earn from a higher weekly state pension could be worth £1,000s over a lifetime. However, they need to be considered carefully.

 How to check that you are on track

1. Request a state pension forecast from gov.uk to see how much you are on track to receive and at what age you will get it. It should also advise you if there is anything you can to do to increase the amount.
2. Call the Future Pension Service helpline on 0800 731 0175 to make sure filling in gaps in your national insurance record will boost your pension. It is worth double-checking – as always with pensions – there are some tricky rules!
3. If you top up your national insurance contributions by paying HMRC online or by cheque or bank transfer, include your national insurance number as a reference. For help, call the national insurance helpline on 0300 200 3500.

To determine whether it’s worthwhile, see how many NI years you already have. If gov.uk shows you’ll receive £185.15 per week, then this is a full pension, and you don’t need to do anything.

Is it worth it?
The rate is £17.45 per missing week of NI contributions – £907.40 for a full year. Paying £9,074 to make up a ten-year gap could give you an additional £2,750 a year – this would be worth £55,000 extra over a 20-year retirement without taking inflation into account. So, if you live at least four years after retiring you’ll earn back what you paid, which is an investment return very hard to find elsewhere!

The calculations above are based on the cost of buying contributions for 2024-25 and 2023-24.  The cost changes depending on the year you are looking to buy.  Gov.uk lists the amounts.

By Philip Harper  |  February 2023 (Updated January 2025)

Bring your cash ISAs to life

Millions of pounds still sit inside cash ISAs earning modest rates of return and this situation is likely to get worse as the expectation of lower interest rates becomes reality.

The question is, was it a mistake by investing in the first place?  The answer in many cases is no. The reason is having the option to organise an ISA transfer, which is effectively moving the tax-free ISA value across to a product that might be more appropriate and with the potential for better returns.

This can involve increasing the investment risk, however, is does not necessarily mean moving from low to high risk. The most popular choice is for retirees to move cash ISAs across to an income portfolio and although this does mean introducing higher volatility, the income stream from a well-managed portfolio can be extremely consistent, currently delivering tax free monthly income between 4% and 5%.

Alternatively, for those not requiring income, an option to invest into a risk graded model portfolio often provides an attractive solution using the following fund profiles:

• Cautious
• Moderately Cautious
• Balanced 
• Moderately Adventurous
• Adventurous.

What makes this opportunity even more viable follows the introduction of the new Personal Savings Allowance (PSA). This is the amount of interest which can be earned tax free and for a basic rate payer this amounts to £1,000 per annum. A deposit account can be seen as an extension to the cash ISA allowance, leaving your proper ISA open to find a better home.

By Philip Harper  | January 2025

Budget Summary

Following the long-awaited Labour Party Autumn Budget, please read our summary which we hope you find helpful.