Facebook LinkedIn Twitter Login
May 192017
 

The Bank of mum and dad is often relied upon by first-time buyers to give them a leg up onto the property ladder, but increasingly grandparents are helping out financially too.

Nearly one in 10 (8%) of first-time buyers now turn to their grandma and grandpa for financial support, recent research by Santander Mortgages found, up from 2% just five years ago. Separate research from insurer Legal & General found that around 22,000 grandparents last year provided financial support for first-time buyer grandchildren.

It’s hardly surprising that many first-time buyers need help from the bank of gran and grandad, given that soaring property prices in recent years have pushed up the amount needed as a deposit. Most mortgages lenders require buyers to put down at least 5% of the property value, but even this often isn’t enough to ensure that their property purchase goes through.

According to a survey by Nottingham Building Society, 35% of would-be first-time buyers saw their property deals collapse in the past year because they didn’t have a big enough deposit.

Property website Rightmove’s latest property index shows that the average price of a first-time property – one with up to two bedrooms – is at a record high of £194,881. That means a 5% would amount to £9,744, while a 10% deposit would be £19,488.

Grandparents who are keen to help their grandchildren buy their first home often find most of their wealth is tied up in their own property.

One option that might be worth considering is Equity Release, whereby you unlock wealth from your home, without the upheaval of having to move. Drawdown lifetime mortgage schemes are usually the most popular type of equity release plan, as they enable you to release equity as and when you need. Interest rolls up over time and is only repaid along with the amount released either when you and your partner move pass away or go into long-term care.

Latest figures from equity release specialists Responsible Equity Release found that 4% of those who took out equity release plans last year gave the money as early inheritance. The most popular reason for older people to unlock wealth from their homes was to clear their own mortgages (36%), while 28% wanted the funds as a cash cushion in retirement.
Nigel Waterson, chairman of the Equity Release Council, the trade body for the equity release sector, said:

“Older homeowners are increasingly realising that there are a number of potential uses for their housing wealth beyond supplementing their retirement income, including re-investing in their homes and helping younger family members by providing a living inheritance.”

However, equity release should never be undertaken lightly, or without seeking professional financial advice, as it can affect your entitlement to state benefits and will also reduce the value of your estate.

It’s also important to understand that equity release rates are higher than standard mortgage rates, although they have fallen in recent years. According to Moneyfacts.co.uk, the average fixed rate for equity release deals has fallen to a record low of 5.63%. There are also far more options to choose from, with the number of fixed equity release products having increased from 52 options in 2015 to 82 today, the highest recorded figure in eight years.

Steve Wilkie, managing director at Responsible Equity Release, said:

“The equity release industry has also been far more receptive to innovation, recognising the importance of meeting the changing demands of customers who are more aware of equity release but want more choice and flexibility.

“The greater variety of products, such as interest-only lifetime mortgages and flexible repayment, has attracted a whole new market to the benefits of equity release.”

Feb 022017
 

Do you know……

From 6 April 2017, you’ll get a larger IHT threshold if you give away your home to your children.  A new residence allowance (the residence nil rate band ‘RNRB’) was announced in the 2016 Budget.  the allowance is set to increase by £25,000 each year, from £100,000 in April 2017 to £175,000 per person by 2020/21.  This in addition to the main nil-rate band.

Please contact us for information as to how you can make the most of your estate planning options.

Jan 112017
 

Getting married

Getting married or entering into a civil partnership is a very exciting time, but it’s also a time to start thinking about your finances and how things will change once you are married.

Whatever your situation was as a single person, when you get married you take on new responsibilities and so it’s a good idea to make sure both of you have a strong focus on your personal finances.

There are often big decisions to be made such as choosing a mortgage and deciding who’ll pay the bills (if you’re not already living together).  There are simple things that need to be done too, like changing your name on bank accounts and life assurance policies.  With the help of an independent financial adviser (IFA), you can make a structured plan that will help you cope with your finances as a couple.

We can give you expert guidance on a whole range of issues, from securing your assets outside the marriage, to helping with pension planning, or finding ways to spread to cost of your wedding.  In every situation, getting a little professional advice before you walk down the aisle is a good idea.

Questions you might like to ask us…

  • What’s the best way to organise our savings for tax-efficiency?
  • What are the implications of having our house in joint names?
  • Can we set up life assurance policies on each other?
  • How could we benefit from making pension plans together?
Dec 012016
 

An article form this month’s Money Marketing magazine

Paul Lewis: Use housing gold mine to pay for long-term care

Paul Lewis

Changes in the way long-term care is paid for was the dog that did not bark in Chancellor Philip Hammond’s first Autumn Statement. It failed to get even a mention, despite many telling us there is a crisis in long-term care for older people.

There have been calls for tax subsidies for those who save up for their own care or take out insurance to pay for it. In other words, those who could afford to pay for it would get a subsidy from other taxpayers to do so. There is a much better solution.

Let me tell you about my neighbour Marjorie. When I moved into my house in 2001, Marjorie was already well into her 80s. She had one hip operation, then another, but still could not get about and her condition deteriorated.

She had been living in the house since the 1940s, inheriting it when her father died. She had no children and when she could no longer live alone she used the money from the house to buy herself care in a home she wanted to go into in a part of the country near her friends.

It would have been completely wrong if the £485,000 value of that house had been protected and hard-working millennials, who spend half the week keeping their landlord and the other half keeping themselves, had their taxes used to pay for her care.

But if Marjorie had been married that is exactly what would have happened. While her husband lived in the house, its value would have been protected and the local council would have paid for almost all the cost of her care. If this imaginary husband had died a few months after she passed away the whole value of the home would have been intact, to be left to whatever heirs he had.

The care home fee rules ignore the value of the resident’s home as long as their spouse or partner – or any elderly relative aged 60 or more – lives in it. But why?

Society has more right than the heirs sitting thinking: ‘Other taxpayers should pay for mum to go into care for two or three years, otherwise I won’t get the house’

The Miras mirage

The losers are not the people who need the care; they will be dead when it is all sorted out. It is the middle-aged children who complain. They expect to inherit the whole value of the house. Of course, many parents want to leave that legacy to their children. “It’s my home,” they say. “I worked hard for it. Why shouldn’t I pass it on as I choose?”

They may have worked hard to pay the mortgage but they rarely pay anything like its full value.

I bought my first house in 1975 for £9,350 (that was more than 3.5 times my earnings). I did my job and worked some evenings to earn more. My wife worked too.

We paid the mortgage. We kept our three children. And eventually the mortgage was paid off. Today that house is worth £325,000. We paid perhaps £20,000 for it, including interest. Where did the rest of the value come from?

Some came from other taxpayers. Between 1969 and 2000 mortgage interest relief at source meant I did not pay tax on the interest I was paying on my mortgage. That saved me 35 per cent off the bill in the early days.

If I had paid higher rate tax (a dream of mine then) I would have got even more Miras: anything from 40 per cent to 83 per cent off the interest cost. So society – all those other taxpayers, many of whom could not afford to buy their own home – helped pay for mine. Thank you very much.

But that is just the start. Allowing for RPI inflation, the price of £9,350 in 1975 is equivalent to around £75,000 now. Where did the other £250,000 of its current value come from?

It was created by the way society works. By a shortage of housing. By that Miras subsidy. By a growing population. By those who buy more than one home. So there is an argument that society has a right to its share of that windfall gain.

They have more right than the heirs sitting there thinking: “Other taxpayers should pay for mum to go into care for two or three years, otherwise I won’t get the house.”

That is why I say the value of a home should be taken into account when the local council considers the means test to pay for care. That happens now if there is no one left living there.

It should also happen even if there is a spouse or elderly relative in it. Of course, they could stay there for their lifetime, but when they died the cost of their spouse’s care would be taken from the estate and paid to the local council.

Putting the gold to work

The average cost of a nursing home is around £39,000 a year and the average life in care is two-and-a- half years. This means the total cost averages around £100,000. The average price of a home in the UK is £218,000.

So there is enough value in the average home to fund the care for two people at the end of their life. If it does run out, then the council would pay the cost, as now.

When the problem of paying for care was looked at under the coalition government, the Social Care Funding Commission chairman Lord Warner said, in the fashionable phrase of the time, that there was no silver bullet to solve it.

But there is a pile of gold – perhaps a trillion pounds’ worth – sitting in the unused assets of homes owned by the elderly. That is the same amount as the total gold reserves of the top 40 gold-owning countries in the world. It is serious wealth and it should be put to work.

Paul Lewis is a freelance journalist and presenter of BBC Radio 4’s ‘Money Box’ programmeYou can follow him on Twitter @paullewismoney

Nov 102016
 

Mike Oliver was nominated by Haywards Heath Town Council for a Community Service Award.

The award is in recognition of his year round commitment to raising thousands of pounds for local charities.  He was presented with the award by the High Sheriff of West Sussex, Mark Spofforth OBE FCA CTA, at a special ceremony hosted by the Chairman of Mid Sussex District Council, Cllr Peter Reed.

Aug 122016
 

What about getting a mortgage certificate?

The very first thing you must do before even looking at a property to buy, you must obtain a mortgage certificate, otherwise known as a mortgage promise or an agreement in principle. This is a document from a lender showing how much they will be willing to pay you. These statements only last for a short period of time, usually 3 months, so make you know how long yours lasts for.

It has many advantages being that it demonstrates to the seller that you are a serious and determined buyer, and that you have enough money behind you to purchase the property. It will also speed up the mortgage process later on when you make a formal application because it will already have some of your information on record. You must remember that a mortgage certificate is not a guarantee that the lender will actually give you the money for the property you want to buy. It depends on details such exact details of the property, the outcome of credit checks and the correctness of information you supplied about yourself.

In order to get a mortgage certificate you will need to complete a form, giving details of your income and financial commitments, and your employment records. At this stage it is likely the lender will run credit checks on you, and might even ask your employer for references. The lender will then use this information to calculate how much they are willing to lend you. If you intend to keep your options open, there is no reason why you can’t obtain a mortgage certificate from more than one lender. However, if you feel problems with a lender agreeing to the amount you want to borrow, then there is no point in doing this, also, if each lender you go to carries out a credit check, it could harm your credit rating.

Aug 082016
 

As funding for Small Businesses has become more difficult, the advantage of using a registered broker like Mike Oliver Associates to help fund your business has now become more important than ever and this has been recognised at the highest possible level.  The NACFB is engaged with Government and HM Treasury in sourcing not only High Street lending but alternative forms of Finance to help SME UK.

We can work with lenders on your behalf to assist with securing:

  • Asset Finance
  • Business cash advance
  • Buy to let mortgages
  • Commercial Mortgages
  • Development Finance
  • Pension led funding

Call or email now for a now for a confidential review

Jul 012016
 

During these uncertain times the right income protection can be of enormous value to you and any dependants, whether you’re looking to protect a short-term debt, a mortgage, or your income for life.

Call us now to access to expert advice and information, this and other protection and insurance.

Jul 012016
 

Your finances in the wake of Brexit and the General Election

As you are aware, it has been confirmed that the UK voted to leave the EU, and it has been stated by Theresa May that there will be no second referendum, with ‘Article 50’ unlikely to be implemented soon.

The full implications of these decisions will only become apparent over time; in such a fluid situation it is impossible to accurately predict what the possible consequences will be as we enter a new financial era.

Consumers’ rights and protections, including any derived from EU legislation, are unaffected by the result of the referendum and will remain unchanged unless and until the Government changes the applicable legislation.  The longer term impacts of the decision to leave the EU on the overall regulatory framework for the UK will depend, in part, on the relationship that the UK seeks with the EU in the future.

I am committed to helping clients adjust and prepare for the new financial environment as it unfolds, and offer advice based on information as we receive it.

My team and I are dedicated to assisting you with your concerns as they arise.

Please feel free to get in touch at any time.

Kind regards,

Mike Oliver Dip PFS Cert CII(MP&ER)

Personal Savings Allowance

 

Earn up to £1,000 savings interest tax-free

Amy | Edited by Johanna

Updated April 2016

 

From 6 April 2016, savings accounts started paying interest tax-free, and 95% of UK adults no longer pay tax on any saving – it’s the biggest savings shake-up for a generation.

In the past for every £100 interest earned, basic-rate taxpayers lost £20 in tax, higher rate £40. Yet now the new personal savings allowance (PSA) means every basic-rate taxpayer can earn £1,000 interest without paying tax on it (higher rate £500), equivalent to the interest on almost £75,000 in the top easy-access savings account. Here’s the lowdown…

How much is the personal savings allowance?

It depends on what rate of tax you pay:

  • Basic-rate (20%) taxpayers – will be able to earn £1,000 interest with no tax (so a max tax saving of £200 compared with before).
  • Higher-rate (40%) taxpayers – will be able to earn £500 interest with no tax (so a max tax saving of £200 compared with before).
  • Additional-rate (45%) taxpayers: £0 – they do not get an allowance.

The estimate is that it takes 95% of savers out of paying any tax on their savings. See the Treasury’s factsheet for more information.

How much can I have in savings before I exceed it?

Here’s a table of how much you’d need in a standard savings account to hit the thresholds (assuming current best-buy rates).

How much can I save per year before interest is taxed?
Basic-rate taxpayer Higher-rate taxpayer Additional-rate taxpayer
Top easy access 1.31% AER £76,335 £38,167 N/A
Top 2yr fix 2.2% AER £45,454 £22,727 N/A
Santander 123 £33,333 (i) £16,665 N/A
Assumes constant balance. (i) The max you can save at 3% is £20,000 but technically you can open two, see 5% savings loophole. Top accounts are updated monthly.

Is it just interest on savings accounts that counts?

In short, no. Any interest you earn from bank accounts, savings accounts, credit union accounts, building societies, corporate bonds, government bonds and gilts is covered. This includes interest earned on other currencies (eg, US dollars, euros) held in UK-based savings accounts.

Peer-to-peer lending interest is also covered, but dividend income from shares or funds is not included in the allowance. It also includes interest distributions (but not dividend distributions) from authorised unit trusts, open-ended investment companies and investment trusts and most types of purchased life annuity payments.

If I’m already saving into a tax-free account, is that interest covered by this allowance?

No. Interest that is already tax-free isn’t included – so this includes ISA interest and Premium Bond ‘winnings’. Interest from these will still be paid tax-free, it just won’t count toward your PSA limit. So, if you get £500 in ISA interest, and you’re a basic-rate taxpayer, you’ll still have £1,000 of PSA to cover other interest.

Can my savings within the personal savings allowance push me into a higher income tax band?

Man supporting tax burdenSimply, yes. However, the tricky question comes if your non-savings income, which would generally be income from work (whether employed or self-employed), is below the higher-rate threshold but your savings income would take you above it.

So do you get the £1,000 for basic-rate taxpayers or do you get the £500 for higher-rate taxpayers?

To work this out you first must add up your income from work and income from earned savings interest to get your total income. If that total income puts you in the higher-rate band (starts at £43,000 in 2016/17) then you are a higher-rate taxpayer and you only get the £500 of personal savings allowance (similarly for those at the additional-rate threshold – you wouldn’t get the personal savings allowance at all).

Let’s do an example…

The higher rate of tax starts on income above £43,000 (in the 2016/17 tax year). You earn £42,999 plus have £1,000 in savings interest. As your total income including interest is above the higher-rate threshold you’ll only get the £500 personal savings allowance. So, £500 of your interest would be tax-free, while the remaining £500 would be taxed at the higher rate.

For a more detailed exploration of this, see Martin’s blog on how the new personal savings allowance means some will be better off earning LESS interest.

How will I pay savings tax if I owe it?

HM Revenue & Customs has confirmed that any tax owing will be paid through changes to your tax code. So you’ll get a lower personal allowance for income tax to pay any tax due on savings interest. Those who self-assess will continue to pay through that system (though a new digital system is replacing the annual tax return).

Your bank or building society will pay all savings interest due to you gross (without tax taken off the amount).

When will my tax code change?

Piles of coins with tax lettering on topHMRC has now finished sending out 2016/17 tax codes. Some will have seen their tax code is lower than the standard 1100L, as HMRC already expects they will earn more in savings interest than their personal savings allowance covers.

If this has happened to you, and you won’t earn more than £1,000 in savings interest (£500 for higher-rate taxpayers), contact HMRC as they will need to adjust your 2016/17 tax code to be correct. You can call it on 0300 200 3300 or use its 2016/17 tax-code query form.

Is there no point in saving in an ISA then?

Even after all these huge changes, cash ISAs aren’t finished…

Martin Lewis says…For most people the personal savings allowance will mean all of their savings are tax-free, and therefore when choosing a product, the basic question is simply ‘What pays the highest rate?’

And for most people with under around £20,000 of total savings, cash ISAs won’t be a winner.  For example the Santander 123 current account pays 3% on £3,000 to £20,000, around double the top easy access ISA.  In fact all ISAs are easily beaten for most people by both top bank account savings where you get a high rate as part of your current account, and regular savings accounts.

Piggy bank with coinsHowever if you don’t want to switch bank, actually often the top easy access cash ISA pays more than the top easy access savings; in which case even if there’s no tax gain, if the rate is higher, use the ISA. Plus the top fixed ISAs allow you to access your cash early for a small interest penalty while the top fixed savings don’t – so there can be other reasons ISAs win; for really nerdy detail on this, see my Is the cash ISA dead? guide.

For bigger savers and higher earners a cash ISA is still a winner

The most important thing to note is that cash ISA interest doesn’t count towards your PSA, so you can earn it tax free – and still have your full £1,000 (or £500) PSA allowance. Therefore for top-rate taxpayers or bigger savers who’ve used up the PSA, there are big tax advantages of savings in a cash ISA.

  • Basic-rate taxpayers over the PSA limit. For every £100 interest you earn in normal savings you only get £80, whereas in an ISA you get all the £100. Therefore the normal savings rate would have to be 25% higher for it to beat a cash ISA.
  • Higher-rate taxpayers over the PSA limit. For every £100 interest you earn in normal savings you only get £60, whereas in an ISA you get all the £100. Therefore the normal savings rate would have to 66% higher for it to beat a cash ISA.
  • Top-rate taxpayers. For every £100 interest you earn in normal savings you only get £55, whereas in an ISA you get all the £100. Therefore the normal savings rate would have to 82% higher for it to beat a cash ISA.

So cash ISAs can be winners even with lower rates.

Also it’s worth remembering that while £1,000 a year interest seems a lot now with our current pitiful interest rates, if interest rates rise then more people will need to pay tax.  So saving into an ISA now could protect you from future tax.
For more on this read the full Why the cash ISA isn’t dead guide.

Martin Lewis
MSE founder & editor

Is this allowance the same as my personal allowance?

Man with calculatorThis new personal savings allowance is a radical departure for savings, creating it as a new tax bracket in its own right – within the income tax system.

You will get your savings personal allowance. It is completely separate from the personal allowance all taxpayers get on their standard income, where most can currently earn £11,000 before any tax is charged.

However, as we mention above, if you do owe tax on savings interest, your personal allowance will be lowered from £11,000 so you pay the right amount of tax.

To see your current take home pay, use our income tax calculator.

Do the rules change if I’m a pensioner?

Quite simply the answer is no. The same rules apply.

What if I have a fixed-rate bond this year that matures in July?

We’ve been asked this a lot. The key about whether this is covered by the personal savings allowance or not is the ability to access the interest accruing on your account.

Almost all fixed-rate accounts don’t let you touch either capital or interest during the term. So, if it’s a one-year fixed-rate bond, which only pays interest when it matures in July, then interest would be covered by the personal savings allowance as the interest only became accessible to you after this April’s introduction of the PSA.

I’m a basic-rate taxpayer and my partner’s higher rate. What personal savings allowance applies to our joint account?

In this scenario, the interest earned is assumed to be split down the middle.

You will get £1,000 of personal savings allowance, and your partner will get £500. So, if we assume interest earned on the joint account is £1,000, your remaining personal allowance will be £500 and your partner’s will be used up. If they have other savings, they’ll need to pay tax on any further interest.