Month: June 2023

Should inheritance tax be scrapped or reformed ?

nheritance tax has been hugely controversial for many years, with some arguing it needs to be reformed, and others saying it should be scrapped completely.

But the noise of the debate has recently gone up a notch, as more than 50 Conservative MPs, part of the Conservative Growth Group, are now actively calling on the government to abolish inheritance tax before the next general election.

Among the members of the group are former Chancellor of the Exchequer Nadhim Zahawi, who wrote in The Telegraph that scrapping this “morally wrong” tax would show that the government “backs families in their desire to pass on their hard-earned savings to the next generation”.

Others include former Business Secretary Jacob Rees-Mogg, who said inheritance tax is “unfair and economically damaging”, and former Home Secretary Priti Patel, who insisted that people should be able to “determine the future of the assets they have worked hard to save and build up”.

This is significant as all three were, until very recently, senior figures in government, and the current administration has – far from scrapping it completely – instead committed to freezing inheritance tax thresholds at their current levels until April 2028.

The inheritance tax threshold is currently £325,000, or £650,000 for a married couple. So if your estate is worth more than this amount, you will be liable to pay inheritance tax, with the part of the estate above the nil rate band being taxed at a rate of 40 per cent.

While many people won’t have to worry about paying this charge, as their estates will be worth less than £325,000, rising house prices mean that more of us are getting caught up in the inheritance tax net.

And as Paul Johnson, Director of the Institute for Fiscal Studies, notes: “The very wealthy pay an average rate half, or less, (than) that paid by the moderately wealthy.”

“If all you leave is the family house, it’s hard to avoid. If you have millions, it is absurdly easy to avoid,” he commented.

Mr Johnson has therefore called for inheritance tax to be reformed rather than scrapped, as he believes the current system is “genuinely unfair”.

Similar concerns have been raised by Dan Neidle, Tax Lawyer and Founder of the Tax Policy Associates, who stated that while most people believe the 40 per cent rate is “unfair”, the wealthiest people only have to pay “about 20 per cent thanks to over-generous exemptions”.

Mr Neidle believes scrapping or limiting the exemptions is “the obvious answer” to this problem, as the revenues raised could be used to reduce the rate to around 20 or 25 per cent.

“Make it a fair tax, applying at a fair rate to the upper-middle class, and at that same rate to the very wealthy,” he said.

“If we abolish it, we’re losing £6 billion of tax revenue to benefit the wealthiest four per cent.”

With prominent Conservative politicians on one side of the debate and the current government on the other, perhaps the only thing we can be sure of for now is that the issue of inheritance tax looks set to feature in more column inches than it has for quite some time.

Who do you think is right? What do you think about the current system? Should it be scrapped or reformed?

As the debate rumbles on, rest assured that we’re here to offer you expert guidance on how to manage your estate and mitigate your inheritance tax liability.

If you have any questions on these issues, please don’t hesitate to get in touch.

How can I use AI at home ?

You won’t have failed to notice the ongoing debate about artificial intelligence and how it’s transforming the world of work in countless sectors.

But did you know you could use tools such as ChatGPT to help with tasks at home too? And we don’t mean helping your children cheat at their homework.

AI could help make countless household tasks easier or speed up those jobs that can be time-consuming.

Here are just a few ways it could make a difference to you…

Holiday recommendations
Do you have a favourite type of holiday, such as sunning it on a beach or enjoying a city break?

If you know what you like, but fancy visiting a destination you’ve not been to before, then asking AI for alternatives could be a good option.

It might throw up a few recommendations that you’ve previously overlooked, and highlight attractions you haven’t thought of before.

Plan your holiday itinerary
Once you’ve picked your destination, AI can help you plan your itinerary. This could be really helpful if you’ve got limited time in your destination and want to make the most of every hour.

For example, if you’re spending three days in Paris rather than a week, and you want to make sure you don’t miss any landmarks, ask AI to put together a plan that takes in all the main sights and how you can travel between them.

Get recipe suggestions
Do you have random ingredients in your kitchen cupboard and not know what to do with them? You could ask AI what to do with them, and will give meal suggestions and even the recipe.

That could have the dual benefit of introducing you to new meal options and preventing food waste.

Plan your meals for the week
Meal planning can be an arduous task, particularly if you have fussy eaters in the house or a limited budget. You could make this job easier by telling AI what type of food you all like and how much you have to spend, before asking it to put together a plan for the week of what you’re going to eat.

You could even ask it to write a shopping list that reflects your meal plan, so you’ll be less likely to waste food at home.

Write packing lists
If you’re heading away for work or a holiday, ask AI to put together a list of essential items that you’ll need in your suitcase.

Not only could that save you a little bit of time before you depart, it should make sure that nothing important gets forgotten.

Of course, there are limits to what tools like ChatGPT can do, and it’s not infallible.

Since you don’t necessarily know where it draws information from, it can sometimes throw up incorrect data or present certain opinions as fact.

Add to that the fact that many people want genuine human insights and experiences to guide their decisions.

For example, how many of us check customer reviews online before buying a certain item or booking a holiday to a certain destination?

We do that because we care what other people think and value firsthand accounts.

So while AI can be a good starting point for some tasks, it’s important that you don’t take what it tells you at face value.

Start with AI and then turn to respected, authoritative sources of information for a second opinion, and then you can be confident you’re making the right decisions.

Should I be wary of 100% mortgages ?

Skipton Building Society recently hit the headlines after announcing that it was offering a deposit-free mortgage, aimed at first-time buyers currently living in rented accommodation.

This type of home loan used to be easy to find, but 100% mortgages were taken off the market in the wake of the 2008 financial crisis.

However, 15 years later, the situation is very different, with many people facing staggeringly high rents, and finding the prospect of getting on the housing ladder increasingly distant.

According to figures from RightMove, average monthly rents in London are now £2,500, and in the rest of the UK, tenants are paying about £1,190 a month.

Skipton believes its new mortgage will therefore help those who are “trapped in rental cycles”, don’t have access to the so-called Bank of Mum and Dad, and as a result, aren’t in a position to save up for a deposit on a house.

The building society’s 100% mortgage is for a five-year term at a rate of 5.49%. In order to be accepted, borrowers must demonstrate they have a good credit history and have been able to pay their rent on time for the last 12 months. Furthermore, they don’t need to have a guarantor in order to secure the home loan.

Concerns have been raised, however, by no less than the Bank of England governor himself – Andrew Bailey.

Speaking to the BBC, he said: “I’m not going to say no to 100% mortgages, but both lenders and borrowers have to be very careful about this.

“You can get quite a few problems. People can often get stuck with mortgages for a long period of time which they can’t trade out of. I think we have to watch it very carefully.”

First-time buyers unsure about 100% mortgages
Interestingly, many first-time buyers also appear to be hesitant, even as they grapple with issues such as soaring house prices, rising interest rates and being unable to pay prohibitively high deposits to make a purchase.

According to research by gradual homeownership provider Wayhome, just 26% of those who bought their first home in the last year would have considered taking out a 100% mortgage when buying their current property.

Meanwhile, only 21% said they’d be willing to make bigger mortgage repayments each month to secure a 100% mortgage.

And notably, just 28% of those polled actually knew how much more a 100% mortgage would cost them every month.

Nigel Purves, chief executive of Wayhome, acknowledged that many “beleaguered” first-time buyers will “welcome the prospect of a 100% mortgage”.

However, he insisted that “the devil is very much in the details”, and that anyone considering a 100% mortgage should be “fully aware of just what they are signing up for before taking the plunge”.

“Not only are you unlikely to qualify for a mortgage on the house you actually want due to income limitations and lending caps, but those that do make the cut face a far higher monthly repayment cost as a result,” Mr Purves said.

“With the market also showing signs of cooling in recent months, there’s a very real chance you could find yourself falling into negative equity at the slightest sign of a house price downturn.”

Of course, we are not here to tell you that you definitely shouldn’t take out a 100% mortgage. Depending on your circumstances, it could be the perfect option for you and help you achieve your dream of getting on the property ladder.

But the return of 100% mortgages to the market is a reminder to first-time buyers to look beyond the headline statement in an advert, read the small print and consider their specific situation before committing to anything.

If this seems a daunting task, remember you can always speak to a professional financial adviser, who is able to take a holistic look at your finances and offer advice that genuinely reflects your needs, circumstances and goals.

Please don’t hesitate to get in touch if you have any questions.