Author: richard

Join a no-present pact

Do you ever find that your friends and relatives buy you Christmas gifts you don’t want? The sort that are used once on Christmas Day before being relegated to a dusty top shelf for a few years and then eventually given away to a charity shop?

We’re sure that most of us have been in this scenario at some point.

Joining a present pact is a great way of avoiding giving and receiving more than you need.

Not only will this save you money, it will also go a long way to reducing your environmental impact at a time where we buy and receive plenty that just ends up going to landfill. It can be a liberating revelation to admit to ourselves that others don’t really need ‘gimmicky’ Christmas gifts and neither do we.

Keep a Christmas present list

For people who don’t enter into your no-present pact, writing a list will give you a clear idea of what you need to buy. As well as avoiding traipsing through various shops by giving you a precise idea about exactly what you need, it means you won’t overspend by ‘panic-buying’ gifts at the last minute.

Brave Black Friday (and Cyber Monday)

Black Friday is a massive shopping event which this year falls on 23rd November. First implemented in the US, it became established in the UK in 2014. Despite its relatively recent history, you can find some truly incredible deals if you can brave the in-store queues and general bargain mania that this event famously provokes.

Cyber Monday follows on 26th November, when online retailers heavily discount their goods.

Some items sell out in seconds so it’s worth creating online accounts with your favourite shops in advance to save precious time.

Send your cards second class

Even small savings add up to make a difference. As the saying goes, ‘look after the pennies and the pounds will look after themselves’.

A standard first-class stamp now costs 67p, whereas a second class stamp costs 9p less at 58p. If you send 50 cards out at Christmas, this will add up to a £4.50 saving. This might not sound much, but trimming your Christmas spendings down in plenty of places will add up to a substantial amount.

Whatever you’re buying this Christmas, being thrifty never hurts. Thinking carefully about your choices and starting early are the easiest ways to make savings.

Changes to income tax thresholds
This was arguably the announcement from the budget that will have the most tangible effect on people’s lives. In his speech Hammond himself referred to it as his ‘rabbit in the hat.’ The personal tax-free allowance will rise from £11,850 to £12,500 and the higher rate threshold from £46,350 to £50,000. These income tax thresholds were part of the Tories’ manifesto in the last election, a pledge they have fulfilled a year earlier than they originally said. (Scottish rates will be decided in the Scottish budget in December).

IR35 Changes
Changes to the tax rules for self-employed workers in larger private companies who are effectively working as full time staff are in fact the biggest new revenue raiser from the autumn Budget.
The Chancellor announced that companies with more than 250 employees will be responsible for checking that they are not disguising employment by contracting to so-called personal service firms.

Changes to Entrepreneurs’ Relief
Before the budget, many expected Hammond to abolish Entrepreneurs’ Relief. It has remained but the qualification period has been extended from one year to two.

Changes also mean that shareholders must be entitled to at least 5 percent of the distributable profits and net assets, as well as 5 percent of the business and voting rights before sale.

Rejuvenation of Britain’s high streets
2018 has been a testing year for the high streets. Thousands of stores have shut, costing tens of thousands of jobs.

Smaller shops, with a rateable value of below £51,000 have had a third knocked off their business rates.

On top of this, Hammond announced a £675m ‘future high streets fund’ that councils can access to redevelop their high streets.

Don’t just be concerned about the money side of things

That may sound a curious thing to read in a financial newsletter. And pensions will form a key part of any more retirement planning. There’s also no denying that pensions can be complex so it’s important to find the right solution for your situation whether it’s taking an income or accessing a lump sum. But the financial side of things is much wider than just your pension. So take time to think about what your ideal lifestyle would look like. Think about some proper financial planning. What are your goals and ambitions for retirement? Are your current finances on track to help you reach them? The money is just an ends to enable you to live a happy retirement and find a new purpose.

Be clear in your mind what you really want to do

In today’s world, where such value is placed on career status, retirement can be seen as an end rather than a new beginning. But you don’t have to be in paid employment to be happy and fulfilled. You may, in fact, find you achieve far more satisfaction in life after work. Why not do something you’ve always wanted to but never had time to? Learn to play a musical instrument, take up a sport, sign up for some volunteering, enrol on a course, get involved in a conservation project, travel the world… This is your time to do as you please. Remember, you don’t have to be constantly busy – sit back and reflect on your true values.

Adopt a proactive mindset

You often hear stories of people becoming ill, or even dying, within months of stopping work – a cruel twist of fate after they’ve laboured hard for years, looking forward to their retirement. According to the Office for National Statistics, though, health and wellbeing do actually increase in retirement while depression and anxiety often fall. This is as people have more time to adopt a healthy lifestyle and find new sources of fulfilment and exercise. The key seems to be to make a determined effort to stay sharp, be proactive and keep stretching your boundaries. It may sound surprising but workaholics often love retirement as much as they loved their careers.

The high cost of later life care is something that looms for many of us.

Currently, those in England and Northern Ireland who have assets of more than £23,250 will be expected to self-fund their care completely. This can mean selling the family home and spending a chunk of your savings on funding care.

Councils are becoming increasingly ruthless in cracking down on people who deliberately deprive themselves of assets by giving them away. There is no time limit on how far a council can go back when claiming deliberate deprivation.

A Care ISA would mean that, if a saver comes to need later life care, more of their assets would be protected.

However, the Care ISA has been widely criticised by both providers and financial commentators.

At the moment, people can leave £325,000 and, from April 2020, couples with children and property will be able to leave £1 million jointly. Much of the population dies with less assets than these. So, for many people, an inheritance tax break isn’t relevant, which could limit the Care ISA’s uptake, making it unattractive for providers to offer it. They may prefer to take advantage of other products, such as a pension, because they offer immediate tax relief.

Additionally, financial services firm Hargreaves Lansdown suggest that only one in four people ends up paying for long term care costs, making the Care ISA even more unattractive.

This means that providers are unlikely to see the Care ISA as a significant business opportunity. The upfront costs of implementing the niche ISA could make it unprofitable.

What’s more, it is unclear how the government would clamp down on the tax loophole that will emerge if savers pay for their care from funds outside of the Care ISA and use the ISA as an inheritance tax exempt savings fund.

The abundance of negative feedback means that the Care ISA may well remain the stuff of fantasy for the treasury.

According to HMRC guidance, in the event of a ‘no deal’ scenario, the government says it will introduce ‘postponed accounting for import VAT’. This means that UK VAT-registered businesses who are importing goods to the UK will be able to account for import VAT on their return, rather than paying VAT directly at the border. This would reduce friction for imports at the border because they won’t be charged VAT on import, but later on.

Interestingly, in ‘no deal’ Britain, the government would introduce this VAT system on all imports, not only those from the 27 remaining EU nations. VAT will no longer be collected at the point that goods enter the UK’s VAT area. This means that a system known as postponed accounting would be introduced on all goods.

Why HMRC would choose to do this is a topic for debate. Perhaps the government feels constrained by WTO (World Trade Organisation) rules on differentiating between the EU27 states and the rest of the world. It could also be because HMRC may fear ‘gumming up’ the borders to an unacceptable degree. Worrying about scenes at Britain’s borders akin to a baggage handlers strike at Heathrow on ‘Brexit-Day’ would be a rational anxiety.

In the event of a no deal, the government would also abolish Low Value Consignment Relief for all imports. This means that parcels from businesses over a value of £135 and of non-zero rated goods, will be charged VAT. HMRC claim that they will implement a technology based solution to charge VAT, the details of which remain unclear, as does how HMRC are attempting to collect VAT from overseas countries.

The HMRC guidance is preliminary only and highly vague. How post-Brexit VAT will look is dependent on a whole range of factors, not least the nature of any deal eventually achieved between the UK and the EU.

Having a property you could make a considerable rental profit from during the peak season, within easy reach, sounds like a dream for landlords.

The rise of Airbnb has made it easier than ever to make a holiday property available to holidaymakers. What’s more, it provides a secure platform for both property owners and the person letting the property.

Getting a mortgage on a holiday buy-to-let has, historically, been rather difficult. On the whole, this was because lenders were wary about the potential for the property to be vacant for large periods of the year, meaning large fluctuations in landlords’ income.

In the past, they were only offered by building societies and rarely allowed owners to use the property themselves – one of the clear attractions of buying a holiday buy-to-let closer to home.

This is changing fast. A crowded buy-to-let mortgage market has meant that mortgage lenders are moving into increasingly niche areas.

Mansfield Building Society recently released a holiday BTL mortgage that provides loans of up to 70% of a property’s value and permits the landlords to occupy the property for 60 days a year.

Tipton and Coseley Building Society have even announced that they will accept applications from borrowers who wish to list their property on Airbnb.

Rising uncertainty around the eventual outcome of Brexit, with a heightened chance of ‘no deal’, means that it is ever more likely that the pound will not recover its previous heights and that travelling abroad to E.U. countries could possibly become difficult.

Potentially, ‘staycations’ will become the norm, reverting back to an earlier era of holidaying, when British people rarely strayed abroad and Britain’s seaside towns thrived.

In addition, the number of foreign tourists travelling to the U.K. for holidays is rising fast. The Office for National Statistics reports rose by 11% in 2017 on the previous year.

A holiday buy-to-let in the U.K. could be an attractive purchase for investors looking to profit from recent changes to consumer behaviour driven by Brexit.

Why would you consider transferring out?

DB pensions are very rigid in their structure. You receive X amount of money every month until you die. This doesn’t give you an enormous amount of flexibility if you plan initially to have a few years of activity after retirement before settling down into a more frugal life in your later years.

Transfer values have really shot up recently. Pension firm Xafinity claims that a 64 year old entitled to a £10,000 yearly pension starting at 65 would get £31,000 more today than they would have received in June 2017. This is making an increasing number of people explore the possibility of transferring out but it is a complex subject and important to consider all the implications.

What downsides are there?

First and foremost, on a DB pension you are guaranteed steady earnings for the rest of your life. Transferring out means you need to take responsibility for your own savings. If your circumstances change in later life and you don’t have enough savings left to cover these changes, you could find yourself in a rather difficult scenario.

DB pension schemes offer real peace of mind – something that is hard to match when managing your own pension as a lump sum. Here, you have to take responsibility for your own investments.

Secondly, think about what it is you are offered. A large sum of money paid out in one can often seem more valuable than it is. Think about how the amount you are offered compares to the regularity and consistency of a DB scheme’s payouts.

What’s more, if you transfer out you could be faced with a large tax bill. The current lifetime saving limit for pensions states that any amount over £1.03 million gets charged at 55% tax. Bear this in mind, if you are offered a payout which will take you close to the threshold.

If you are considering the option to transfer out, you should see a financial adviser. In fact, it’s the law to seek independent financial advice if you have a DB pension worth more than £30,000, before transferring out of your scheme.