Finance in The News

Wealthy pay record share of income tax

The Telegraph’s analysis of tax receipts showed that the top 1 per cent of income earners now pay 27 per cent of all income tax collected by the government as compared with just 11 per cent in 1976. The top 10 per cent of income earners account for twice as much tax as they did in the 1970s and their share of total tax paid rose from 35 per cent in 1976 to 59 per cent today. The Telegraph says its poll shows only four in ten voters now consider the Conservatives a ‘low tax’ party.

Boom in pensioner mortgages

There is a boom in the number of retired people with mortgages, says the Telegraph. Back in 2006, a quarter of mortgages were held by people aged over 65: today it is 40 per cent, and the number would be even higher if new affordability rules hadn’t restricted loans to older people. There is huge pent-up demand for loans for people aged 70 or 80, says the Telegraph, and more deals are becoming available, especially lifetime mortgages that give you the choice of whether to pay interest or have it rolled up into the repayment cost of the loan.

Hammond’s Budget U-turn

Less than a week after his Spring Budget, Chancellor Philip Hammond was forced into a ‘screeching U-turn’ on a proposed rise in National Insurance contributions for the self employed. According to the Telegraph, he was told to abandon the increase by Theresa May after a savaging in the media and a surge of complaints by back-bench Tory MPs. The Telegraph says there is now a £2 billion ‘black hole’ in the public finances that the Chancellor will have to fill this Autumn. But the reduction in the dividend allowance from £5,000 to £2,000, which will raise tax bills for business owners, will go ahead in 2018.

Will BREXIT hit property prices?

The Telegraph reckons BREXIT will have little effect on house prices in the UK. It says the number being built is below what is needed, which implies that house prices will continue to rise, though more slowly than in recent years. There has been a drop in the number of transactions but this does not necessarily mean prices will fall.

Nest scheme opens to transfers

Nest, the government-backed pension scheme provider, is to allow employees to transfer old pensions into their Nest accounts, says the Telegraph. Some 4 million people have their ‘auto-enrolment’ pension managed by Nest, and many of them have old pensions from former employers. Nest’s low charges could make transferring to it attractive, but the Telegraph warns that people should always check whether their old contracts incorporate valuable guarantees that would be lost on transfer.

Higher allowances, but bigger NI contributions too

The Times dissects the tax changes coming into effect from April 6th this year, when the personal allowance rises to £11,500 and the higher rate tax threshold goes up from £43,000 to £45,000. These changes will mean lower income tax bills for most, but The Times points out that the rise in the higher rate threshold also means higher NI bills. This is because the normal rate of NI contributions is 12 per cent and this will now be paid on an extra £2,000 of earnings (above the higher rate threshold the rate drops to 2 per cent). The result, it says, is that while for someone earning £25,000 their total tax and NI bill has fallen from 23 per cent in 2010-11 to 20.5 per cent now, the percentage for someone earning £50,000 has remained virtually unchanged at 28.3 per cent.

Protect BTL with a fixed rate

From April, many Buy-To-Let owners will face higher tax bills. The biggest change is that mortgage interest will be offsettable only against basic rate tax at 20 percent and not, as used to be case, against higher rate tax. One way to protect yourself, says the Mail, is to bag a 5-year fixed-rate mortgage deal. The average 5-year rate has come down from 4.09 per cent a year ago to 3.77 per cent today, but the Mail cites available 5-year deals at rates as low as 2.5 per cent for those with 40 percent equity in their properties.

Pension tax relief under threat

The Chancellor’s U-turn on National Insurance contributions for the self-employed leaves him £2 billion short, and even worse he has now promised not to raise NI until after the next election, says the Times. That means he needs to generate extra revenue from somewhere and the obvious place is tax relief on pension contributions, which costs the Treasury a whopping £47 billion a year. Changing to a flat-rate relief system could generate billions a year in extra revenue for the government.