Finance in the News

Don’t fall for the ‘Pay in £’ card trick
When you’re abroad, you’ll often be offered the option of paying in sterling or in local currency with your credit or debit card. But, warns the Financial Times, paying in £ rather than local currency can mean you pay 10 per cent more. This is because the ‘dynamic currency conversion’ used by card providers has much less favourable exchange rates. The FT suggests you get a fee-free card such as Nationwide or Halifax Clarity or use a pre-loaded card such as FairFX or Monzo to make your holiday money go further.

More investors back start-ups
The number of investors putting small sums into tax-favoured Enterprise Investment Schemes rose to 10,000 last year, and the total raised by EIS companies was just short of £2 billion. HMRC says that crowdfunding platforms are now playing a bigger role in financing start-up businesses. Scheme providers don’t think that tax relief will be altered in the forthcoming Budget but that the qualifying period for the tax breaks may be lengthened.

Slump forecast in BTL
Estate agents Savills have predicted that the number of properties purchased by buy-to-let investors using a mortgage will fall by more than a quarter over the next five years, says the Telegraph. Higher stamp duty, tougher mortgage regulation and restricted tax relief on interest payments will all help to reduce profit margins for BTL owners. But the number of cash purchases of BTL properties are predicted to rise.

Too much pension tax
Hundreds of thousands of people have paid too much tax on the withdrawals they have taken from their pension funds, says the Telegraph. In the three months to September, HMRC repaid £37 million of overpayments and since 2015 it has repaid a total of £262 million. HMRC’s system for taxing pension income assumes the first payment you take is a monthly amount, so it bases the tax due on a withdrawal of 12 times that amount over a year. Depending on your status, you must use one of three different forms to make a reclaim.

Rumours of pension tax raid
There are rumours that Chancellor Philip Hammond will raid pension funds in his Budget on 22nd November in order to fund handouts for hard-pressed younger workers. The £38 billion of tax breaks used by pensions go mainly to older people, and reducing such reliefs might seem politically attractive. But experts said the complexity of the system meant redistributing tax reliefs would be highly problematic and unlikely to succeed.

When I’m 94
Has retirement ended? asks the Telegraph. It reports that back in 1984, only 56 per cent of people over age 50 were working; by last year, that had risen to 71 per cent. Today, 10 per cent of men and 8 per cent of women are still working after the age of 70 and the proportion is expected to keep on rising. Academics say that if you assume a 100-year lifespan and a savings rate of 10 per cent of earnings every working year, a couple would not be able to retire on an income of half their earnings until their mid-80s. Many older people will want part-time work as life expectancy increases, but the Telegraph questions whether there will be enough jobs of this kind for everyone who needs one.

Residence Nil Rate Band too convoluted
A tax expert described the new Residence Nil Rate Band (RNRB) for Inheritance Tax as “a case study in how not to enact new tax law”, reports the Telegraph. The way it is being phased in from 2017 to 2021 adds to the already formidable complexity of the rules, which HMRC admits it cannot fully explain in simple terms. The ‘downsizing’ rules, intended to ensure that those who sell a large property in retirement don’t lose the new allowance, are particularly convoluted.

Crackdown threat on self-employment
The Treasury is considering extending a crackdown on self-employment from the public to the private sector, says the Financial Times. In April, it changed the rules that define self-employment for the public sector, with the result that 90,000 extra public-sector workers are now taxed as employees rather than self-employed. In the private sector, people can still benefit from lower tax rates by using personal service companies, but perhaps not for much longer. Experts said the government would need to give business at least a year to prepare for any change.

Inheritance claims beyond the grave
The decision earlier this year to exhume the remains of Salvador Dali to determine an inheritance claim are an extreme example of a growing trend where potential beneficiaries challenge the division of an estate, says the Financial Times. In Dali’s case, the claimant said she was his daughter, but DNA taken from Dali’s remains proved that she was not and she lost her claim for a quarter of his multi-million estate. In the UK, more inheritance claims are being heard by the High Court, and recent decisions have made it clear that a child will often succeed in a claim for part of an estate unless very specific reasons are given for excluding them.