Inflation beats savers
According to the Telegraph, there is currently only one savings account that pays a higher rate than inflation. The account, from the little-known Ikano Bank, pays 2.35 per cent for five years compared with the latest inflation rate of 2.3 per cent. There are 739 other savings accounts that pay less. The average easy-access account pays interest of just 0.15 per cent. But there are a few regular saver accounts that pay higher rates on monthly savings.
BTL owners turn to companies
The number of homes owned by companies has hit a record high, says the Telegraph. One in five rented homes are now owned by a company, and the proportion has risen sharply since new rules came into force that restrict the amount of tax relief that can be claimed by individual landlords on mortgage interest. Meanwhile, research shows that rents are falling sharply in central London (down 9.5 per cent) as a result of a wave of new-built property coming on the market.
Wealth skips the boomer generation
Wealth is skipping the boomer generation, says the Telegraph. Instead of leaving wealth to the boomer generation (aged 45-64), older people in their 70s and 80s are leaving capital to their grandchildren, with the aim of giving them a start in life and especially the chance to buy a home. And even if the older generation don’t do so, many boomers now use ‘Deeds of Variation’ to pass money they get from their parents onto their own children, thus helping to minimise inheritance tax bills.
Beware of the pitfalls of LISA
Former pensions minister Ros Altmann used an article in the Mail to warn savers about the drawbacks and risks of the new Lifetime ISA. She said they would usually get bigger returns – often much bigger – from contributing to their employer’s pension scheme, and explained that the early encashment penalties are severe. If you cash in other than for a house purchase or after the age of 60, the penalty is 25 per cent. That is not just the government taking back the original 25 per cent subsidy, because the penalty applies to ALL the money, including growth, in the account. She claims many providers aren’t offering the new plan and won’t do so because they are fearful about possible future claims against them.
More mortgage competition
The pint-sized Atom Bank has opened up a new front in the mortgage price war, says the Mail. It is offering a 5-year fixed rate loan at a rate of just 1.29 per cent, undercutting the previously cheapest deal from First Direct at 1.74 per cent. These offers are for those with 40 per cent deposits but, even for those with just 10 per cent deposits, rates as low as 2.55 per cent fixed for five years are available.
Care home fees and the property trap
Giving a child a share in your home can seem like a good way of passing on capital, but it can backfire badly, says the Sunday Times. This is because if you go into a residential care home and have no assets left apart from your home, it has to be sold to pay the fees unless your spouse is still living there. But if you’ve given a share in the property to your child, they have to agree to the sale. Lawyers say they are seeing more family disputes about such issues.
Software glitches cause tax errors
Thousands of people face demands from HMRC for too much tax for the 2016-17 tax year because of glitches in HMRC software, says the Financial Times. Some categories of people are being asked to complete paper tax returns because the online system generates erroneous figures. Experts said the interaction of extremely complex rules on the taxation of dividends and interest with three different allowances had caused the problem. Probably the largest group includes taxpayers with non-savings income of between £11,000 and £16,000 and a total income of more than £32,000.
Luxury glut hits London property
A glut of newly built luxury houses in London is likely over the next five years, says the Financial Times. Even though fewer homes will be built than the Mayor of London says are needed (64,000 a year), there will be far too few affordable ones and too many expensive ones. Already London rents are falling and new starts of property have dropped sharply, so that completions in 2018 are likely to drop from 46,500 in 2017 to 35,000 per year over the next five years.
As tax year end approaches, there is still time to make use of your available reliefs and allowances.
This tax year end planning checklist covers the main planning opportunities available to UK resident individuals and will hopefully help to inspire action to reduce tax for the 2023/24 tax year and to plan ahead for 2024/25.
As tax rate band thresholds are changing, understanding the impact on high rate taxpayers and the economy is crucial.
It was recently revealed in the media that the amount we need to enjoy a ‘moderate’ retirement has increased by £8,000 per annum, a 38% increase, in just one year.