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No tax on savings. Simples!

Archive for March, 2015

No tax on savings. Simples!

Tuesday, March 24th, 2015

ISATax free interest

George Osborne has proposed a measure that would give most savers tax-free interest from April 2016. The idea is that for basic rate taxpayers, the first £1,000 of interest in a year would be free of tax; for higher rate taxpayers, the limit would be £500, so that individuals in each group would benefit by saving the same amount of tax (£200).  The Treasury says 95% of savers, or 17 million people, would not pay any tax on their interest. This is a good idea that could save a vast amount of form filling, tax reclaims and so forth.

The value of tax reliefs depends on your individual circumstances. Tax laws can change. The value of investments can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.

Tax change calendar

Tuesday, March 24th, 2015

CalenderTax changes – when will they actually happen?

In recent years Chancellors have taken to announcing tax changes a year or more in advance, so it’s easy to get confused about what happens when. The Mail usefully reminded readers about key dates coming up. On April 6th, the personal tax allowance rises to £10,600 and the higher rate tax threshold to £42,385; the ISA limit rises to £15,240 and the Junior ISA limit to £4,080. Married couples can transfer up to £1,000 of their personal allowance to a spouse who is a basic rate taxpayer, with up to £200 per year tax saving.  In May, air passenger duty for children aged under 12 is abolished, and in March 2016 it is abolished for children aged under 16.  In September, the new childcare scheme with up to £2,000 per year tax breaks starts up, and so does the new Help to Buy ISA.

The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax advice.

2015 Budget summary

Thursday, March 19th, 2015

ISAOur summary of the key announcements the Chancellor’s 2015 Budget statement has been published and can be opened by clicking here  We hope you will find it useful and interesting.

Unsurprisingly, the imminent General Election was one of the drivers of the 2015 Budget. Many of the proposals will not take effect until later in 2015/16 or the following tax years. If there is a change of government, some of them won’t survive.

Many of the measures were squarely aimed at savers. The new personal savings allowance will be worth up to £200 a year for people with savings income – except for 45% taxpayers. The introduction of a tax relief for peer-to-peer lending losses will please those who are in this rapidly expanding market.

There’s a special new ISA for investors who are first time home buyers and use their savings to purchase a home. The government will top up their savings by up to £3,000 on savings of up to £12,000.

There was good news and bad news for pensions. The lifetime allowance is to be cut yet again; but people will have the freedom to sell their pension annuities if they wish, though whether the protections for such sellers will be adequate is a moot point.

There was a raft of other measures and the usual crop of anti-tax avoidance proposals.

If you have any questions about the summary’s contents or how any aspects of your tax and financial planning may be affected by the Budget, please call us to discuss them.

Justin Urquhart Stewart talks to our clients and colleagues

Thursday, March 19th, 2015

We are very grateful to Justin Urquhart Stewart of Seven Investment Management for again attending our client evening last week and providing his expert insight on world markets and investments in is usual inimitable way.

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We were pleased to also be able to arrange for Justin to talk to local 6th form students at Saffron Walden County High School in the afternoon and grateful to Justin for finding the time to do this.

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A3This year we interspersed Justin’s commentary with wine-tasting from the various areas of the world that Justin covered in his talk. This was hosted by local wine expert Andy McGonagal. Our thanks to Andy for his wisdom.

Thanks as well to Linda Passfield for her superb catering!

 

We would like to thank those clients and local business people who attended and hope that you all enjoyed the evening.

Mike & Richard

 

Thoroughly enjoyed the wine, food, insights and company last night.  A well put together event and much appreciated. Paul – client

Thank you for Thursday night! It was a very entertaining and enjoyable evening…please pass our thanks on to your wife, partners and all the others whose efforts made the whole thing so worthwhile. Good stuff! John – client

Thank you so much for Thursday. Top night. Andy – solicitor

Thank you very much for a most enjoyable financial evening, especially with the wines and Justin Urquhart Stewart. David – estate agent

On behalf of Philip and myself we would like to thank you both for hosting a very enjoyable, entertaining and educational evening. Could you also congratulate your wife on a fabulous spread. Derek – client

Tax avoidance and evasion – do you know the difference?

Friday, March 13th, 2015

taxmanTax avoidance and evasion made the front pages of the press again in February, with the distinction between the two lost on most journalists.   

 Let us make two things clear for a start:

  • Tax avoidance – planning your affairs within the framework of the tax legislation to reduce your tax liability – is legal.
  • Tax evasion – not paying tax due by withholding information from HMRC or other means – is illegal.

Tax avoidance ranges from such simple actions as investing in a fund via an ISA rather than directly to complex schemes designed to exploit loopholes in the tax law. At the benign end of the scale, HMRC will not be interested in what you do. At the aggressive end of the scale, HMRC are likely to deny you tax relief under its recently acquired accelerated payments powers and then leave you (and your fellow scheme users) to challenge their view in the courts.

Denis Healey, a 1970s Labour Chancellor of the Exchequer, famously remarked that “The difference between tax avoidance and tax evasion is the thickness of a prison wall.”  In reality, criminal prosecution for tax evasion is still relatively uncommon: in 2013/14 HMRC undertook 915 prosecutions and secured 716 convictions.

The HSBC Swiss account holders’ list which grabbed so much coverage last month has to date yielded only one prosecution. However, that reflects both the ‘dirty’ nature of the information – it was stolen data – and exemptions available under HMRC’s own Lichtenstein Disclosure Facility. More relevant from the Treasury’s viewpoint, if not that of the editorial columnists’, is that the HSBC list added £135m in tax, interest and penalties to the government’s coffers. Collecting cash is generally more important for the Exchequer and HMRC than battling in the criminal courts.

If there is any lesson to be drawn from the HSBC saga, it is that tax evaders can no longer rely on secrecy. Driven in part by US legislation (the Foreign Account Tax Compliance Act – FATCA) disclosure of information between countries is becoming the norm, even for the traditional tax havens such as Monaco. Within a couple of years, the only countries still adhering to secrecy will be those where you would think twice about leaving you money.

Meanwhile, as the tax year end approaches, have you yet sorted out your legitimate tax avoidance through ISA and pension contributions?

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances. The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax advice.

Pensioner Bonds get an extended lease of life

Wednesday, March 11th, 2015

key-stages-imgThe Chancellor has announced increased availability for Pensioner Bonds.

When National Savings & Investments (NS&I) finally launched the Pensioners’ Bond on
15 January 2015, there was a very predictable surge of interest. The sheer weight of applications brought problems to NS&I’s administration systems, despite its Chief Executive saying “We expect these Bonds to be on sale for months not weeks and would like to reassure savers that there is no need to rush to invest”.

It turns out she was rather optimistic, as by 8 February £7.5bn of the bonds had been sold out of an initial £10bn offering. This prompted the Chancellor to announce (on the Andrew Marr Show) that the bonds would remain on sale until 15 May “so that everyone who wants to invest can do so.” The government is now expecting to raise £15bn, most of it probably transferred out of existing bank and building society accounts.

Some commentators were scathing about Mr Osborne’s move. The new deadline looked driven by a desire to avoid unwelcome “pensioners-miss-the-boat” press coverage in the run up to polling day (7 May). From the viewpoint of government finances all the talk about “help(ing) hardworking people secure their financial futures” was, at best, hot air. The under-65 working population are effectively subsiding the 65+ part of the population through the sale of Pensioners Bonds. Based on current government bond yields, the government can borrow wholesale money for a year at an interest rate of about 0.4% and for three years at around 0.8%. Instead it is paying 2.8% and 4.0% respectively for retail money – little wonder the Treasury says the bonds are “hugely popular”!

If you are eligible to invest (i.e. at least age 65) and have not done so because you expected the offer to close very quickly, it could be worth taking advantage of the extended availability period. However, we would strongly advise that you talk to us before taking any action. While the interest rates are unbeatable, the bonds do have their drawbacks and other investments could be better suited to your circumstances.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.

Back to square one for the FTSE 100

Tuesday, March 10th, 2015

The FTSE 100 index has finally surpassed its previous peak.

gRAPH ftse

Where were you on Friday 30 December 1999?

The chances are that, if you remember, you were preparing for a millennium party due the following day. It is most unlikely that you noticed the closing level of the FTSE 100 (Footsie) on that Friday, which in any case was a shortened trading day on the London Stock Exchange. Yet the day’s, year’s and for that matter decade’s final Footsie reading of 6930.2 marked an all-time high for the index which was only topped on 24 February 2015.

The 15+ years it has taken for the Footsie to regain its millennial peak prompted plenty of comment, some of which suggested the performance highlighted what poor returns investing in shares offered. Alas, not all of the coverage has been well informed:

  • The FTSE 100 index does not measure total investment returns, only capital returns. If you allow for reinvested dividends (received net for basic rate taxpayers), an investor in the end-1999 Footsie would, by 24 February 2015, be showing an overall return of about 67%. 
  • In terms of dividend income, this would have increased by a virtually identical amount: at the end of 1999 the Footsie had a yield of 2.04%, whereas on 24 February its yield was 3.39%.
  • The notion that inflation had trounced investment in the Footsie is wrong, because it ignores that all-important dividend income. Price inflation between December 1999 and January 2015 (the latest available figure) totalled 52.7% based on the Retail Prices Index and 36.7%, based on the Consumer Prices Index, both below the overall total Footsie return.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.

 

 

 

Auto-enrolment: the penalties begin

Monday, March 9th, 2015

pension-clock-red-text-31707942The latest report from the Pensions Regulator (TPR) on pension auto-enrolment carries important warnings.

TPR issues quarterly reports on the progress of pension automatic enrolment.  These have generally been unexciting affairs until the latest edition, covering the final quarter of 2014. Suddenly, it seems that things are not running quite as smoothly.

In the last three months of 2014:

  • TPR issued 1,139 compliance notices demanding that an employer “remedy a contravention” of at least one duty under the auto-enrolment provisions. From October 2012, when auto-enrolment started, to September 2014 the regulator had issued just 177 compliance notices.
  • In response to those who ignored earlier compliance notices, TPR also sent out 166 Fixed Penalty Notices (£400 fines). In the previous two years it had issued just three such notices.
  • Seven “Unpaid Contributions Notices” were sent to employers who had either paid pension contributions late or not paid them at all. Only one had been issued in the previous eight quarters.

The sudden jump in non-compliance is almost certainly the result of the fact that the auto-enrolment process is now working its way down through the employer list to medium-sized employers. These do not have the human resources departments of their large counterparts, which were the early targets of auto-enrolment.

When issuing the latest data, TPR reiterated its advice that “we recommend you start your automatic enrolment planning and preparation 12 months before staging [auto-enrolment start date].” The regulator also emphasised that employers should not wait to be prompted before meeting their auto-enrolment responsibilities.

If you have not yet thought about how your business will plan for auto-enrolment, now is the time to do so.  Delay could be costly, not only in terms of fines, but also reputational damage and employee relationships.

The value of investments can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.