Client category: Saver/Investor

Get even – save more tax

Sunday Times columnist Ian Cowie tells readers who are angry about the rich paying so little tax: don’t get mad, get even. He points out that using the annual ISA allowance (currently £15,240 per year, but rising to £20,000 in 2017) every year, a couple can soon accumulate £250,000 in tax-free capital from which they can draw tax-free income.

Client categories: Employee, Saver/Investor

Consolidate those pension pots

There are many reasons why you could be better off consolidating a number of small pension pots into one, says the Sunday Times. You may pay less in charges, get better customer service or get a better choice of investments. This can often make sense for defined contribution pension schemes, but ‘final salary’ benefits should usually stay where they are because you give up valuable benefits if you move. People near retirement will benefit most from consolidation because they can more easily draw tax-free cash and regular income from a single plan.

Client category:  Parent

Back-to-work mums left out of pocket

Mothers of young children returning to work face huge financial penalties, says the Sunday Times. The cost of childcare is so high that a mother of two youngsters needing full-day nursery care needs to earn over £40,000 a year to be left with a surplus after all the bills – including tax – have been paid. However, those childcare costs should fall next year when a new system will provide a subsidy of up to £2,000 per year per child.

Client categories:  Parent, Employee

Check the ingredients in family protection package 

A mother who had planned her family’s protection used the Sunday Times to check out her recipe. It included pure life assurance to pay off the mortgage, family income benefit that would pay a fixed monthly sum until the children were independent, critical illness to produce a lump sum if she or her husband contracted a life-threatening illness and income protection insurance in case either couldn’t work because of chronic illness. Experts said she had all the bases covered but advised her to set up trusts for the life insurance benefits to ensure they could be used flexibly for the benefit of the children until they reached age 18.

Client categories:  Employee, Retired

Pension cash-ins shrink

The number of people cashing in some or all of their pensions dropped to 127,000 in the last quarter of 2016 compared with 220,000 in the first three months of the year, reports the Herald. Large pension providers said that under 5% of their policyholders were cashing in pension plans completely, with the vast majority of complete encashments being worth less than £15,000.  Surveys suggest that almost half of employees surveyed about the ‘pension freedom’ changes were positive about them.

Client categories: Parent, Employee

And the degree winners are…

Graduates who took degrees in medicine and economics were the highest earners ten years after graduation, reported the BBC. The Institute of Fiscal Studies used data on student loan repayments to work out the numbers. Male medical graduates were earning £55,000 (females £45,000) and economics graduates £42,000 (females £38,000) while for creative arts graduates the figures were £18,000 and £14,500 respectively. Other top subjects for earnings were law, engineering and physical sciences. 

Client category: Estate Planner

Cut out of estate by second wife

A Daily Telegraph reader told the story of how his father’s second wife cut him out of a £300,000 inheritance. She and the reader’s father had made Wills where they each left all their assets to each other, with an agreement that on the second death, their children by former marriages would get equal shares. But after her husband’s death, she remade her Will leaving his son nothing. Experts said you would have to create a trust leaving only a life interest to the wife to avoid this problem.

Client category: Saver/Investor

You’re not free yet, Mr Bond

From April 6th 2016 the interest from banks and building societies is paid without any tax being deducted. Because everyone now has a Personal Allowance of £1,000 per year (£500 for higher rate taxpayers) over 95% of savers will pay no tax on their interest. But there is a big exception, says the Telegraph. Funds investing in bonds will go on deducting tax from their interest payments until April 2017 – because HMRC hadn’t worked out a system in advance. If you hold funds of this type in an ISA, it won’t matter because within the ISA the tax is automatically rebated. But people who hold funds investing in bonds outside an ISA will have to make a tax reclaim at the end of the year.

Client category: Business Owner

Business owners pay more tax

The Treasury expects to collect £2.6 billion in extra tax because business owners have accelerated dividend payments to avoid a looming tax hike, says the Financial Times. The tax rate on dividends in excess of £5,000 a year rose by 7.5% on April 6th, and many company owners chose to take higher dividends before this date to reduce their tax bills.

Client category: Property owner

Landlords will survive

Landlords face an extra 3% Stamp Duty on property purchases. From next year, higher rate tax relief on mortgage interest will be progressively withdrawn. And the Bank of England has tightened ‘affordability’ rules for BTL mortgages. But the FT says this will have little effect on what is a huge trend in property ownership. Between 2007 and 2016 the proportion of households in rented property rose from 11.5% to 16.3%.  With property prices as high as they are, that trend is unlikely to change. Moreover, Bank of England data show that two-thirds of landlords only pay the basic rate of income tax so they will be unaffected by the change in rules on mortgage interest. The FT concludes that Mr Osborne has huffed and puffed but he hasn’t blown BTL down.

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