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Hints that interest rates could rise

Archive for the ‘Commentary’ Category

Hints that interest rates could rise

Wednesday, February 14th, 2018

Figures released at the end of January revealed that the final quarter of 2017 saw the economy expand by 0.5%. The Bank of England has now indicated that the pace of interest rate rises could speed up if the outlook remains positive.

Although Mark Carney and his colleagues voted to keep interest rates on hold at 0.5% at their latest meeting, they did indicate that the rates will need to rise “earlier” and by “a somewhat greater extent” than previously thought. As a result of the Bank’s comments, the value of the pound jumped by about 1% against both the dollar and the euro.

When the Bank put the rates up for the first time in ten years last November, it hinted there could be two more increases of 0.25% over three years, but it now appears there could be a third one and sooner than expected. There is speculation the next rise could come as soon as May.

As well as the growth in the economy, the growing numbers of people in employment have contributed to this belief. 32.2 million people were in work in the three months to November 2017, marking the highest total since 1971 when records began and a joint high record employment rate of 75.3%. Whilst average earnings increased 2.5% in the year to November, the growth of pay was below the rate of inflation for the tenth month in a row. The Bank does now think, however, that wages will start to increase.

If interest rates are increased, this will undoubtedly affect those households who currently have a standard variable rate or tracker rate. Of the 8.1 million households in the UK, approximately 50% are thought to be on this type of mortgage and interest rates would be likely to increase to match the Bank of England rates.

On the plus side, however, an increase rate rise would be welcome for savers as the High Street banks would generally follow suit.

Due to the boost in the UK economy, the Bank has raised its growth forecast 1.7% this year from the previous figure of 1.5%. It is worth noting, however, that this forecast is based on a “smooth” adjustment to Britain’s departure from the European Union. In the meantime, we wait to see what the Bank will actually do regarding interest rates in May.

Who owns your bank?

Wednesday, February 14th, 2018

Following the financial crisis of 2008 when a number of big British banks came close to collapsing, the Financial Services Compensation Scheme (FSCS) was strengthened by the government. As such, the FSCS 100% guarantees the first £85,000 of a person’s cash savings per banking licence in total, including interest. This means that a couple with a joint account holding up to £170,000 will have every penny of this covered.

But what does ‘per banking licence’ mean? Simply put, one banking licence can cover a number of different banks, building societies or brands. It’s important therefore to spread your cash across more than one provider, as it could mean some of your hard-earned money isn’t as safe as you think in the event of a future collapse.

With that in mind, below is a list of the biggest banks and building societies in the UK and all the brands which fall under their banking licence. That means if you hold more than £85,000 across different brands but under the same licence, you could be in a position to lose out should the worst happen.

HBOS (Halifax/Bank of Scotland group):

  • AA
  • Bank of Scotland
  • Birmingham Midshires
  • Halifax
  • Intelligent Finance
  • Saga

Lloyds Banking Group*:

  • Cheltenham and Gloucester
  • Lloyds Bank

*HBOS was acquired by Lloyds Bank, but both HBOS and Lloyds Banking Group have continued to operate under separate banking licences.

TSB:

  • TSB

Barclays:

  • Barclays
  • Barclays Direct (formerly ING Direct)
  • Standard Life
  • Woolwich

HSBC:

  • First Direct
  • HSBC

Royal Bank of Scotland (RBS)**:

  • RBS

NatWest:

  • NatWest

Ulster Bank:

  • Ulster Bank

Coutts & Co:

  • Coutts

**NatWest, Ulster Bank and Coutts are all subsidiaries of RBS, but have their own separate banking licences. As such, someone with accounts in each of these banks would be covered for up to £85,000 in each bank.

Santander UK:

  • Cahoot
  • Santander

The Co-operative Bank:

  • Britannia BS
  • Smile
  • The Co-operative Bank

Bank of Ireland UK:

  • Bank of Ireland UK
  • Post Office

Clydesdale Bank PLC:

  • Clydesdale Bank
  • Yorkshire Bank

Sainsbury’s Bank:

  • Sainsbury’s Bank

Tesco Bank:

  • Tesco Bank

Virgin Money:

  • Virgin Money

Nationwide BS:

  • Cheshire BS
  • Derbyshire BS
  • Dunfermline BS
  • Nationwide BS

Yorkshire BS:

  • Barnsley BS
  • Chelsea BS
  • Egg
  • Norwich and Peterborough BS
  • Yorkshire BS

Coventry BS:

  • Coventry BS
  • Stroud and Swindon BS

Skipton BS:

  • Chesham BS (renamed Skipton BS)
  • Scarborough BS (renamed Skipton BS)
  • Skipton BS

So, what about banks outside the UK? Whilst most banks which accept British savings are not covered by the FSCS, some within the European Economic Area are covered by their home country’s compensation scheme through the ‘savings passport’ scheme. One of the most prominent examples is Triodos Bank in the Netherlands, which is covered by the Dutch equivalent of the FSCS up to €100,000 per person. There are also some international banks which are covered by the FSCS, including:

  • Axis Bank UK
  • ICICI Bank UK
  • State Bank of India UK

National Savings & Investments (NS&I) is also covered by the FSCS – but as it’s owned by the government, the expectation is that all deposits into NS&I (both up to and over £85,000) would be covered apart from in the most extreme financial circumstances.

The Harley Owners Group VAT battle

Thursday, February 8th, 2018

The new year has brought with it reports of another victory for taxpayers in a mixed supply case. The case involves the VAT liable on membership fees paid to Harley-Davidson Europe Ltd by members of the Harley Owners Group (HOG).

HOG was not a conventional distinct legal entity, society or club, but rather a business unit of Harley-Davidson Europe Ltd. For the £55 annual subscription for full membership of HOG, members received a membership card; a hard copy magazine four times a year; a leather wallet; a touring map, including a guide to events; access to a number of websites, including the ability to publish photos; and opportunities for discounts at hotels and other businesses. The £55 payment was wholly standard rated as a supply of membership according to HMRC. However, the taxpayer argued that each specific benefit should be considered for individual VAT liability. For example, as printed matter, the magazines members received should be zero-rated.

Whilst cases such as these continue to be a grey area for VAT, each mixed supply case has four questions which need to be addressed:

  • Firstly, is each benefit or supply distinct and independent from the others?
  • Secondly, what does the typical customer consider he/she is buying?
  • Thirdly, is there a main supply, with other benefits being supplemental to this principal element?
  • Fourthly, are some supplies a way of enhancing the enjoyment of the main supply, or is each supply an aim in itself?

A good example to understand what this means is to compare a cheap flight during which the passengers are given complimentary tea or coffee, with a four course meal with wine on the Orient Express. The hot drinks are a way of helping passengers to enjoy their zero-rated flight, rather than a supply of standard rated catering. In contrast, a customer would rightfully complain if they didn’t receive their food and drink on the train journey, as they expect to experience both the journey and fine dining experience. As such, the flight and beverages are a single supply, whereas the Orient Express excursion and meal are clearly a mixed supply.

In the case of the HOG membership fee, the tribunal concluded that ‘the typical member… places real value on the tangible items’, meaning that the individual items received were more important than the esteem of the link to the Harley Davidson name. Additionally, the company carried out a survey of its members where 89% described the quarterly magazine as ‘somewhat or very important’, backing up the conclusion of the tribunal.

It’s also worth noting that, had Harley-Davidson Europe Ltc been a ‘not for profit’ organisation, the case would not have reached the tribunal as the magazine could have been zero-rated without issue. This is because of a concession which exists for splitting different VAT rates for benefits packages for members of such organisations, which include charities and members’ golf clubs.

4 tips for keeping your books in order in 2018

Thursday, February 8th, 2018

Whether you’re someone who prides themselves on having their accounts in order every year, or you’ve just had yet another last-minute scramble to submit your tax return before the deadline at the end of January, the start of a new calendar year is a great time to review your books and ensure they’re all in order for the twelve months ahead. Here are our top four tips for 2018 in terms of your accounts, ensuring your bottom line is secure and most likely giving it a bit of a boost too.

  1. Get the tax man on your side – okay, maybe you’re unlikely to be inviting ‘the tax man’ to the pub on a Friday night, but it’s a good idea to keep HMRC on side for your business. The HMRC website is the best way to get up to speed with everything you need to know and all the latest accountancy developments for your business. And, if you’re in doubt about anything, get in touch with the tax authorities sooner rather than later and find out the answer. Forewarned is forearmed, as they say.
  2. Make your accountant’s life as easy as possible – your accountant’s job shouldn’t be to make sense of your business’s incomplete and poorly kept books. Not only does keeping your records in a reasonable order for them keep your costs low and reduce the likelihood of any unexpected fines coming back to haunt you, but it also frees up the time you’re paying your accountant for – to offer advice and save your business money over time. So, with that in mind…
  3. … When it comes to finances, keep everything – all your receipts and invoices need to be logged and traceable. Digital technology makes this easier now than ever, as paperwork can often be provided electronically and anything that can’t, can be scanned and linked to your records. As long as you keep your records up to date, you shouldn’t find yourself turning your business upside down for that one vital receipt you can’t find come the next tax deadline.
  4. Simplicity is key – Keeping financial records doesn’t have to be complicated; in fact, the simpler you can make your system, the better. That way you’re not having to decipher your own labyrinthine puzzle to understand your own business accounts. This will also make it far less likely that you’ll miss any unpaid invoices and have to chase them several months down the line. If your records have got out of control, the new year is a great time to start afresh with a modern system that works for you and your accountant.

The collapse of Carillion – lessons for businesses

Thursday, February 8th, 2018

The collapse of Carillion in January 2018 has already triggered disruption throughout the construction industry. Businesses subcontracted by Carillion will soon feel the effects of the liquidation of the second largest construction company in the UK, with smaller private companies likely to be hit the hardest. The domino effect of the collapse of such a massive company is unfortunately unavoidable at this stage. But what lessons could businesses learn from the fallout of Carillion’s demise?

  1. A robust and strategic business plan – Carillion saw its debts double in only a few years thanks to a few big contracts being far less profitable than expected. This put the company in a position where it needed money quickly to maintain cash-flow and pay suppliers, but banks were refusing its loan applications. As such, bids were put in for contracts for impractically low profit margins. Without any room for manoeuvre through cash reserves or contingency plans in case of overruns or complications, it only took three or four unprofitable contracts out of around 450 in total to push Carillion into insolvency. Of the many cautionary tales being told here, perhaps the key one is that businesses should never allow lenders or suppliers to hold sway over their business strategy.
  2. Never underestimate the importance of cash – the primary indicator of Carillion’s cash-flow crisis was the company extending its supplier payment terms to 120 days, double the accepted industry standard. Following Carillion’s profit warnings in July last year, more stringent terms would have been demanded by many of its subcontractors, which only made the flow of cash out of the company even worse. With the usual sources of finance run dry, Carillion was forced to ask banks to settle invoices worth £350 million so that essential contracts could continue, spiralling the company into further debt.
  3. If things aren’t working, don’t ignore it – the construction market is volatile, so if Carillion had admitted things weren’t going well and asked for help and advice earlier, the company may not have entered liquidation as it has. Other companies in the sector, such as Balfour Beatty and Serco, spent considerable time and money restructuring their businesses in the UK and avoided collapse. Simply put, realism not optimism should always be employed when considering the profitability of work. If restructuring is necessary, it should be done sooner rather than later – leaving things to the last moment won’t fix anything.

Lasting Power of Attorney – claim a fee refund

Wednesday, February 7th, 2018

If you paid to register a Power of Attorney in England or Wales between 1 April 2013 and 31 March 2017, you’re owed a refund of up to £54.

When you register a Power of Attorney, you’re charged an application fee, set by the Ministry of Justice and paid to the Office of the Public Guardian.

Between 2013 and 2017, the operating costs of the Office of the Public Guardian decreased, but the application fee stayed the same, at £110. As the fee is supposed to simply cover operating costs, the Government’s now repaying the difference between what applicants paid and what they should have paid, plus interest.

On 1 April 2017, the application fee for registering a Power of Attorney was reduced from £110 to £82. If you applied after that date, you can’t reclaim.

How much you get depends on when you paid the fees. You’ll also get 0.5% interest.  You can still claim a refund even if you don’t know when you paid the fees.

When you paid the fee Refund for each power of attorney
April to September 2013 £54
October 2013 to March 2014 £34
April 2014 to March 2015 £37
April 2015 to March 2016 £38
April 2016 to March 2017 £45

You’ll get half the refund if you paid a reduced fee (‘remission’).

To apply, you can either claim a refund online or phone the Office of the Public Guardian’s helpline on 0300 456 0300 and select option six. You don’t need the Power of Attorney document itself, but you will need:

  • The donor’s name, address and date of birth
  • Their UK bank account number and sort code
  • The name of one of the attorneys on the Power of Attorney

January market commentary

Thursday, January 4th, 2018

Another year seems to have flown by in the space of about five months. December, in particular, seemed to go past in a blur.

It was, however, the month when some progress was – finally – made in the Brexit negotiations. It was also the month when Scotland used its tax-raising powers to increase income tax, when Germany worried about Chinese spies using fake LinkedIn profiles and when yet more sanctions were heaped on the North Korean regime – which were predictably condemned as an ‘act of war’.

Half of the major stock markets we cover in this commentary rose in the month and overall 2017 was a good year for world markets: the Hong Kong market led the way with a rise of 36% and only the Russian index fell significantly during the year.

UK
The month didn’t get off to the best of starts in the UK as once again UK retail was facing problems. RBS announced that it would close one in four of its branches – totalling 259 and inevitably having an effect on the national high street – and Toys R Us narrowly avoided having to close its UK branches as it reached an 11th hour agreement with creditors and the Pension Protection Fund.

There was, however, plenty of good news for the UK in December, although wages continue to lag behind inflation, a situation which looks set to continue throughout 2018.

UK factory activity grew at its fastest pace for more than four years in November, with the Purchasing Managers’ Index hitting 58.2 – its best level for 51 months. Separate official data for 2016 showed that inward investment into the UK had also hit a record $145bn, although this was boosted by some large takeover deals. UK manufacturing also expanded for the sixth month in a row, helped by record car production.

Unemployment was down again, falling by 26,000 to 1.43m, with the jobless rate remaining unchanged at 4.3%. In addition, the UK economy was shown to have grown at a faster rate than had previously been thought. Revised figures from the Office for National Statistics showed that the economy had grown by 1.7% in the third quarter, compared to the original estimate of 1.5%.

To cap a good month for those whose glass is half full, the UK was named the best place in the world for business by the US media group Forbes. In the annual ranking the UK leapt from fifth to first, scoring especially well on technological readiness and the education of its workforce.

How did all this translate onto the stock market? The FTSE-100 index of leading shares started the year at 7,143 and ended it up 8% at a new record high of 7,688. The market was up 5% in December, fuelled by the now-traditional ‘Santa rally.’ The pound also enjoyed a good year: it was largely unchanged against the dollar in December but rose 9% over the course of the year to $1.3504.

Brexit
As we noted in the introduction, December was the month when some progress finally appeared to have been made on the Brexit negotiations as the UK’s ‘divorce bill’ seemed to have been agreed. You don’t have to look far to find a high ranking official (on both sides) who will ominously mutter, ‘Nothing is agreed until everything is agreed,’ but – to use Churchill’s phrase – while this may not be the beginning of the end, it may just be the end of the beginning.

By the end of this year the UK will – in theory – be just 88 days away from leaving the EU. But over the course of the next 12 months there will unquestionably be plenty of twists, turns and bumps in the road for this section of the commentary to report on.

Europe
As we mentioned in the introduction, December was the month when Germany voiced its concerns over possible Chinese spying using the social/business network LinkedIn. The German intelligence agency BfV is worried about the Chinese using fake profiles to target up to 10,000 German politicians, business leaders and officials. China – which has denied similar accusations in the past – did not respond to the German allegations.

But there was better news of other EU/Far East relationships as a trade deal was tied up between the EU and Japan which will – subject to ratification by EU members – create the world’s largest open economic area. The agreement is seen as a challenge to the protectionism of Donald Trump, with a joint statement saying that the EU and Japan are “committed to keeping the world economy working on the basis of free, open and fair markets … fighting the temptation of protectionism”.

…And in a bid to track down those people who have been protecting their money from the taxman, the EU published its first blacklist of tax havens, naming 17 territories including St. Lucia, Barbados and South Korea.

What of European stock markets in December and 2017 as a whole? Both the German and French indices drifted down 1% in the month, but overall they enjoyed a good year. The German DAX index was up 13% in 2017 to end the year at 12,918 while the French stock market rose 9% to 5,313. An honourable mention also goes to Greece: the debt-ridden country staggered through another year and the Athens stock market duly rose 25% in 2017 to close at 802.

US
There were two major pieces of news in the United States, with the Federal Reserve once again raising interest rates and a programme of major tax cuts being passed by Congress.

The Fed raised rates by a further 0.25% – the third rise in 2017 – as it projected growth of 2.5% for 2017 and 2018, expecting the US economy to be stimulated by the President’s tax cuts. At the moment the Fed is targeting a range of 1.25% to 1.5% for US interest rates, but further rises are expected next year, with most forecasters expecting a base rate of around 2%.

The tax cuts – agreed by both houses of Congress – have been described as the biggest overhaul of the US tax system for 30 years, with corporation tax falling from 35% to 21% and the highest rate of individual income tax coming down from 39.6% to 37%. Democrats have argued that the cuts will only favour the rich, while the Joint Committee on Taxation has suggested they will add $1.4tn to the $20tn US national debt over the next 10 years. But right now what the President wants the President gets, and he wanted swingeing tax cuts…

There was also good news for the US economy, with the November jobs figures showing 228,000 jobs created against expectations of 200,000. The unemployment rate held steady at 4.1% as firms appeared to hire seasonal workers earlier than usual.

On Wall Street, 2017 was a good year for the Dow Jones index. Having started the year at 19,763, it finished up 25% at 24,719 having risen 2% in December.

Far East
For once, the month in the Far East wasn’t dominated by stories of North Korean rockets. That is not to say that tension in the area will disappear in 2018: North Korea may be sending a team to the Winter Olympics in South Korea, but in his Christmas message Kim Jong-un stressed the fact that the nuclear button “is always on my desk”.

In China, there was a small rise in bank base rates following the rise in the US, but for once it was Japan that was really making the news in the region. The country is enjoying its longest period of sustained economic growth since 1994 – admittedly, thanks to four years of economic stimulus from Prime Minister Shinzo Abe – and growth for the three months to September was revised upwards to 2.5%, well ahead of initial estimates of 1.4%.

In another sign of what we can look forward to in the near future, Nissan announced that it would start trialling driverless taxis from March next year. The plan is that passengers will be able to summon the cars using an app, with free trials due to take place in Yokohama.

There was more turbulence for crypto-currency Bitcoin as the South Korean authorities – worried about Bitcoin being used for money laundering – announced a crackdown on anonymous trading accounts and said they would close exchanges if necessary.

On exchanges that were very much open, 2017 was an excellent year for all the major Far Eastern stock markets. China was virtually unchanged in December but ended the year up 7% at 3,307. Similarly both the Japanese and South Korean markets were quiet in December, but closed 2017 up 19% and 22% respectively, with the Japanese Nikkei Dow closing at 22,765 and the South Korean market at 2,467. Pride of place though, went to Hong Kong, the best performing market of those we cover in this commentary. The stock market there rose 3% in December to end the month at 29,919 – up 36% for the year as a whole.

Emerging Markets
As we have already seen, December was a volatile month for Bitcoin, but this didn’t stop crisis-hit Venezuela from grasping at a virtual straw as President Nicolas Maduro announced the creation of a new currency in a bid to ease the country’s economic crisis. A new virtual currency – the Petro – will apparently be backed by Venezuela’s oil, gas and diamond reserves. Opposition leaders poured scorn on the plan, pointing out that the President had already mortgaged the reserves several times over. It seems a fairly safe prediction that the country with the largest oil reserves in the world will continue to lurch from crisis to crisis in the coming year.

A country emphatically not lurching from crisis to crisis is India, with forecasts suggesting that it will overtake the UK and France to become the 5th largest economy in the world in 2018. According to World Bank data for 2016 India’s GDP, at $2.26tn (£1.69tn) was the 7th largest in dollar terms: the forecasts are that 2018 will see it overtake the UK (with GDP of $2.65tn) and France ($2.47tn).

This was reflected on the Indian stock market, up 3% in December (and 28% for the year as a whole) to finish 2017 at 34,057. The Brazilian market also enjoyed an excellent year, rising by 27%: in December it rose 6% to close the month at 76,402. The Russian market was virtually unchanged in December and ended the month at 2,109: this meant that it fell by 6% for 2017 as a whole, with the damage really being done in the first six months of the year.

And finally
2017 was, by any standards, a vintage year for the ‘And Finally’ section of this commentary. In March, we had the ‘Temple of Heaven’ – the public park in Beijing which installed facial recognition software to dispense loo roll because visitors were taking it home with them.

July brought us the Texan maintenance engineer, who on a bright and sunny day set out to change the lock on a Bank of America ATM. Unfortunately, while performing this routine task our hero (understandably he preferred not to be named) trapped himself inside the ATM. He was only rescued when a customer tried to withdraw $100 and instead received a note saying, ‘Please help, I’m stuck in here.’ The customer naturally thought it was a joke, but on failing to spot any TV cameras and hearing a faint voice coming from the hole in the wall, decided to call the police…

So what of December? The month did not let us down…

Counterfeit goods now account for perhaps 4% of the world economy. So there was good news at the beginning of the month for HM Border Force and the Intellectual Property Office as they seized 82,320 pairs of fake Calvin Klein underpants worth a reputed £1.5m.

Along with the fake boxers, they also grabbed Gillette Mach 3 razor blades, Nike Vapormax trainers and 379 Barcelona and Borussia Dortmund football shirts. If that sounds suspiciously like your Christmas presents you may want to have a word with your relatives.

There was also good and bad news for the Royal Navy in December as it took delivery of its new £3.1bn aircraft carrier ‘HMS Queen Elizabeth.’ But the bad news was that she (the boat, not Her Majesty) was leaking and taking in the small matter of 200 litres of sea water every hour. BBC Defence Correspondent Jonathan Beale said the leak was “highly embarrassing” for the Royal Navy, but dismissed rumours that the aircraft carrier would be renamed Leaky McLeakface…

Sources

The Brexit divorce bill

Thursday, December 7th, 2017

Since before the EU referendum result was known at the end of June 2016, the ‘divorce bill’ – the money the UK will need to pay to the EU as a result of Brexit to cover its financial liabilities – has been a hot topic of debate. It continues to be so, with the latest reports of a figure somewhere around €55 billion having been agreed by the government emerging at the end of November. Downing Street have dismissed this figure, but even if we don’t know the exact amount, it seems likely that an agreement on the way the divorce bill will be calculated has been reached, in order to allow other points of negotiation to progress.

Even if the figure of €55 billion eventually proves to be accurate, what will that actually mean for the UK? The response from some leading economists has been to suggest that, in the grand scheme of things, the divorce bill won’t make a major difference to public finances. One argument for this is that a considerable chunk of the bill will be made up of money that the UK would have been paying anyway if it was remaining in the EU.

Another element to consider is the wider impact of Brexit on UK growth in the years to come. The UK’s reduced ability to trade with the EU is predicted to have a far greater impact than the agreed amount of the divorce bill, whatever that may be, thanks to the potentially higher costs generated. If Brexit results in a negative impact on growth, as leading economists widely believe will be the case, then the divorce bill may well be relatively insignificant in comparison to the overall losses experienced by the UK.

Whatever the final deal with the EU turns out to be come the end of March 2019 when Brexit becomes a reality, it’s highly likely that the UK will be paying for the decision to vote leave for years, if not decades, into the future. The hope is that agreeing the divorce bill, whenever that might happen, will allow Britain to move on to working out how to use its exit from the EU in a positive way, creating new opportunities to balance out the financial obligations the country has agreed to honour.

5 financial resolutions for 2018

Thursday, December 7th, 2017

Whether or not you’re the kind of person who sees the start of January as the time to set yourself resolutions and stick to them, the period after the excesses of Christmas and New Year is arguably one of the best times to actively get your finances into shape. Here are five great money-related resolutions it’s definitely worth committing to in order to make 2018 the year you take control of your money.

  1. Start a budget – The secret to financial security isn’t making lots of money, but sensibly managing the money you have. A budget is the best way to start doing this, ensuring you know where your money is going and sticking to the plan you lay out for yourself. It can feel intimidating at first if you’ve never budgeted before, but it will undoubtedly help you to cut out overspending and reduce your money worries.
  2. Manage your debt – Getting out of debt can seem a long way off if you don’t make plans for how you’re going to become debt-free. There are no shortcuts – it takes both time and sacrifice – but once you do manage to clear your debts completely, it’s a liberating feeling and opens up many more opportunities to help you grow some savings.
  3. Start saving regularly – Once you’ve got your debts and spending under control, building your savings is essential. You should aim to save at least 10% of what you earn every month. Again, you may have to make a couple of sacrifices here and there in order to do this, but when you have those savings earning you money in your nest egg, missing the occasional night out or frivolous treat will feel completely worthwhile.
  4. Increase your financial knowledge – This can be as simple as finding a book, magazine or reputable website and dedicating a little time each week to increasing your money know-how. Anyone who has financial security hasn’t done it through luck, but through understanding what to do with their money, so the more you learn the more secure your finances are likely to be.
  5. Start investing – Making some sound investments is often the crucial step from financial security to prosperity and success. However, you should only invest when you’re ready (i.e. once you’ve achieved the previous four goals). It’s worth getting good independent financial advice as well to ensure you make the right investments for your personal circumstances.

One for the kids? Switching to a Lifetime ISA could boost savings.

Thursday, December 7th, 2017

If you’re saving for a home through a Help To Buy ISA or know someone who is, it’s worth being aware of a planning opportunity which could boost your savings by an additional £1,100. But anyone hoping to take advantage of this opportunity needs to be quick, as it will only be available for just under four months more.

Any savings in a Help To Buy ISA which are transferred to the new Lifetime ISA before 5th April 2018 will benefit from a top up of 25% from the government. The opportunity has arisen thanks to the Help To Buy ISA small print relating to the transfer of money saved before the launch of the Lifetime ISA on 6th April 2017.

Lifetime ISAs have an annual limit of £4,000, which includes money transferred from another savings account. However, money transferred from a Help To Buy ISA within the first twelve months of Lifetime ISAs becoming available does not count towards the contribution limit for the 2017-2018 tax year. As such, any money transferred into the Lifetime ISA from the Help To Buy ISA will be boosted by the government top-up, potentially resulting in hundreds of pounds being added to your savings.

For example, someone who had saved the £4,400 maximum amount into a Help To Buy ISA before April 2017 could transfer this into a Lifetime ISA before 5th April 2018. As this wouldn’t contribute to their limit, they could then save a further £4,000 into the Lifetime ISA for a total of £8,400. The 25% bonus would then be added to the entire £8,400 in April next year, giving an additional £2,100. In any other year, the maximum top-up which could be earned from the Lifetime ISA would be £1,000.

So If you know anyone using a Help To Buy ISA to save towards a first home, transferring money to a Lifetime ISA to enjoy an additional top-up of up to £1,100 in April next year could make collecting the keys to their own place happen a little bit sooner.