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What will leaving the Customs Union mean for my business?

Archive for the ‘Tax planning’ Category

What will leaving the Customs Union mean for my business?

Thursday, May 24th, 2018

When we leave the European Union we will also leave the EU customs union. The question we all want to know the answer to is ‘what does that mean for me?’ Well first, let’s have a quick reminder of what the customs union is. In short, it’s an agreement between European member states that there will be no internal tariffs on goods that move between them. Once goods are within the EU, they can also travel freely. This means that administrative and financial barriers to trade within the EU are massively reduced.

So why would we want to leave? The important factor of the customs union in the Brexit debate has been that while you’re in it, you don’t have the freedom to negotiate your own trade deals on goods from other parts of the world. The government insists that such freedom is integral to the success of Brexit.

There are alternative options to a customs union that are being considered, firstly a customs partnership in which the UK collects the EU’s tariffs on goods from other countries on behalf of the EU. If the UK tariffs were lower, and those goods stayed within the UK, then companies would be able to claim back the difference. This would potentially lead to greater bureaucracy and added costs.

Secondly, the idea of a ‘highly streamlined customs arrangement’ has been proposed. The suggestion is that rather than getting rid of checks altogether, they would be minimised. Trusted trader schemes and new technologies would be used to ensure companies make bulk payments for the duties, rather than each time goods cross a border. Of course we also have the issue of Ireland to address. All involved parties have made a firm commitment to keeping an open border between the Republic of Ireland and Northern Ireland. We’re yet to see a suggestion that offers the perfect solution to this delicate issue.

Leaving the customs union could mean increased border checks and supply chains within industry would be heavily affected. Businesses operating ‘just-in-time’ production, such as those in the automotive industry, have multiple goods coming into the UK from mainland Europe every day. Honda, for example, relies on 350 trucks arriving daily; a 15 minute delay to their factory in Swindon would lead to an estimated cost of £850,000.

We are likely looking at higher tariffs. Switzerland and Norway do experience tariff-free access to the EU from outside the customs union but in return, they allow free movement of works and contribute to the EU budget. With immigration being such a large factor of the Brexit negotiations and the UK looking to restrict the free movement of people, it’s unlikely that we will negotiate a similar agreement.

The financial advantages of saying ‘I do’

Thursday, May 17th, 2018

A marriage or civil partnership can be a beautiful union of minds and hearts, but there’s no reason why it should end there. There can also be financial benefits to being with your partner, and one of these is the Marriage Allowance. In the 2018-19 tax year, the Marriage Allowance lets you transfer up to £1,190 of your Personal Allowance to your partner, meaning a tax reduction of up to £238, as long as you meet a few requirements.

For the couple to benefit, they must be married or in a civil partnership. The lower earner must have an income of £11,850 or less, and the higher earner must sit in the basic rate tax bracket of between £11,850 and £46,350. It’s worth noting that in Scotland, the higher earner’s salary must be less than £43,430 as the thresholds for basic rate payers differ.

Lower earners can transfer their unused tax-free allowances to their spouse, with the higher earning partner receiving a tax credit equal to the amount of Personal Allowance that has been transferred. The good news doesn’t end there either as the Marriage Allowance can be backdated as far as 5th April 2015. This means that, if you are eligible, you could claim 2015-16’s £212 allowance and 2016-17’s allowance of £220 in this tax year, leaving you with some free cash for you and your partner to treat yourselves.

If you’re currently receiving a pension or you live abroad, your application for the Marriage Allowance will not be affected, as long as you receive a Personal Allowance. However, if you or your partner were born before 6 April 1935, applying for the Married Couple’s Allowance might be more beneficial to you (you can’t claim both at once!).

Spring Statement – March 2018 Overview

Wednesday, March 21st, 2018

Introduction

In 2016 Britain voted to leave the EU and new Prime Minister Theresa May invited George Osborne to consider an alternative career and replaced him as Chancellor with Philip Hammond, the MP for Runnymede and Weybridge nicknamed ‘Spreadsheet Phil’ by his Commons colleagues.

Five months later, Hammond stood up to deliver his first Autumn Statement and immediately announced it would be his last. “No other major economy,” he said, “has two financial statements in a year.” Thus the Budget was moved to Autumn and, from 2018, the Spring Budget would become the Spring Statement.

And here we are… Eighteen months on from Mr. Hammond’s first announcement, the UK continues along its road towards Brexit and the Chancellor – who seems secure in his job for now – continues to be a man who will “choose our course and stick to it” (or words to that effect).

The Economic Background

Expectations for the speech were not high among journalists and commentators: ‘Don’t expect Hammond to pull a rabbit – or even a March hare – out of the hat’ was the general consensus.

Nevertheless, the Chancellor would have some good news on public finances to deliver in his speech. Borrowing has reduced significantly and was expected to be around £45bn for this year as opposed to the forecast £50bn, with day-to-day public spending finally in surplus for the first time since 2002/2003. However, the UK’s total national debt currently stands at £1.8 trillion, equal to 86% of the country’s annual economic output.

Would this mean the Chancellor announcing an end to austerity? After all, some local councils are claiming that they are effectively bankrupt and the NHS has seen spending increase by just 1.1% in real terms since 2010. But the Chancellor will not be changing course: speaking on the BBC’s Andrew Marr Show on the Sunday before the Statement, he said: “This (austerity) isn’t about some ideological issue. It’s about making sure we have the capacity to respond to any future shock in the economy.”

This view was backed up by Liz Truss, Chief Secretary to the Treasury, who wrote in The Times, “There will be no red box, no rabbits out of the hat and no tax changes. Our message is simple. Let’s keep on course, keep our economy strong and focus on the opportunities ahead of us. We want to keep taxes low so that the weekly budget goes further.”

With the OECD predicting that the UK economy would grow at the slowest pace of all the G20 countries this year, what could we look forward to in the speech? The rumours suggested there would be more details of taxing the tech giants such as Facebook and Google, consultations on taxing and discouraging the sale of single-use plastics and even the possibility of a tax on chewing gum to pay for cleaning up the mess it makes.

The Speech

As is now traditional, the Chancellor began his speech with a joke at the expense of Labour Shadow Chancellor, John McDonnell. “I won’t be producing a red book, Mr. Speaker,” he said. “But I can’t speak for the Shadow Chancellor,” – a reference to McDonnell brandishing ‘The Thoughts of Chairman Mao’ in the Commons chamber.

Even more traditionally, he spent the next few minutes outlining what had gone right as the Government, “made solid progress building an economy that works for everyone.” But eventually, the chamber ‘rapport’ was put aside and Philip Hammond turned to what he does best: reading out lists of figures…

The Numbers

The Chancellor began with the forecast growth figures for the UK economy, which the Office for Budget Responsibility (OBR) has increased for this year, now forecasting growth of 1.5% in 2018. That will be followed by growth of 1.3% in 2019 and 2020, then 1.4% in 2021 and 1.5% in 2022. These forecasts are up in the short term and down in the long term, presumably reflecting some uncertainty over the impact of Brexit.

Employment and Inflation

The Chancellor pointed out that the number in work had increased by 3 million since 2010, the equivalent of 1,000 people finding work every day. The unemployment rate is close to a 40 year low and the OBR is predicting that there will be 500,000 more people in work by 2022.

Equally importantly, it is expected that inflation will start to fall over the next 12 months, “closer to the target rate of 2%” which should see most working people start to enjoy real growth in their wages again.

Public Finances

“Borrowing has fallen by three-quarters since 2010,” said the Chancellor and – as we noted in the introduction – this means that the amount the Government spends on servicing the national debt has reduced significantly. The UK now borrows £1 in every £18 it spends, compared to £1 in every £4 in 2010. The Chancellor also confirmed that debt as a percentage of Gross Domestic Product will also fall, from 85.6% of GDP in 2017/2018 to 78.3% in 2021/22.

He confirmed that borrowing would be £45.2bn for this year, £4.7bn lower than had been forecast in the Autumn Budget. “And,” he announced proudly, “£108bn lower than in 2010.” Borrowing would be 2.2% of GDP this year and would gradually fall to 0.9% in 2022/2023.

Progress since the Autumn Budget of 2017

Despite it only being five months since the Autumn Budget, the Chancellor was keen to summarise a list of achievements. There was nothing new in this section: rather it was a re-statement of the commitments made in the Autumn and a confirmation – at least in the Chancellor’s eyes – that the country is on track.

The Autumn Budget contained a pledge to increase the supply of homes to 300,000 a year by the mid-2020s, via an investment programme of £44bn over 5 years and the Chancellor confirmed that the Government was working with 44 areas throughout the UK to bring this about. In addition, London will receive a further £1.67bn to start building 27,000 affordable homes by 2021/22 and the Housing Growth Partnership, which provides additional finance for small builders, was more than doubled to £220 million.

To loud cheers from the backbenches behind him, Philip Hammond announced that an estimated 60,000 first time buyers had already benefited from the abolition of stamp duty announced in the Autumn Budget.

To some muted jeers, though – quite possibly from some of his own Eurosceptic backbenchers – the Chancellor said that “substantial progress” had been made in the Brexit talks. He looked forward to “another step forward” at the forthcoming EU summit and confirmed that the Treasury would be publishing information about how the initial £1.5bn of the £3bn set aside for Brexit planning would be allocated to Government departments.

Wages and Taxation

In the lead up to the speech, the Chancellor had worked hard to set expectations that there would be little by way of new tax or policy announcements. As it turned out, the Chancellor did mention some previously announced changes, but he was also true to his word when it came to brand new announcements or significant new initiatives.

What The National Living Wage will rise to £7.83 per hour
When From April 2018
Comment All the other minimum rates will rise in line with the increase in the headline rate, with the youth rate seeing the largest increase for 10 years. In total, around 2 million people are expected to benefit from the increases.
What The tax free personal allowance will increase to £11,850
When From April 2018
Comment This will mean that a typical taxpayer will be paying £1,075 less income tax than in 2010/11. The threshold for higher rate tax will also increase to £46,350 from April (or £43,431 in Scotland).

Business

What The next revaluation of business rates will be brought forward
When Moved forward to 2021, instead of next being revisited in 2022
Comment This will be welcomed by businesses, especially those in retail and catering/hospitality which have been hit hard by the high level of business rates. Revaluations will also now take place three yearly rather than five yearly, meaning that there will now be reviews in 2021 and 2024.

Other business measures

In the Autumn Budget, £1.7bn was announced for measures to improve transport in English cities. Half of this was given to cities with mayors, but bids are now being invited from other cities across the UK for the remaining £840m.

Hand in hand with this went the Government’s commitment to improve digital connectivity across the UK. In total, £190m was allocated to this and we will now see the first wave of funding, with £95m allocated to 13 areas across the UK.

There will also be £50m made available to help employers prepare for the new T-levels, the technical qualification the Government is introducing.

The Chancellor also discussed three consultations that may impact businesses, though the detail behind these was missing from the summary published on the government website.

Productivity

A long-standing topic in the Chancellor’s speeches (and his predecessor’s), productivity made it on to the formal agenda again, with the Chancellor promising “to understand how best we can help the UK’s least productive businesses to learn from, and catch up with, the most productive.”

Late payments

The Chancellor also promised, if not action, then at least the promise of action, on what he called “the continuing scourge of late payments”. Small businesses everywhere will doubtless be very keen to see what the Chancellor comes up with on this topic.

“Human capital”

A slightly odd choice of phrase, but the Chancellor surmised that the government and business currently know more about measuring the value of investing in infrastructure than they do about measuring investments in “human capital”. For this reason, he said, he had “asked the ONS to work with us on developing a more sophisticated measure.”

There was then a further consultation announced via the treasury website on the same day as the Chancellor’s speech, though Mr Hammond did not refer to it directly.

Enterprise Investment Scheme

Aimed at the current range of venture capital schemes (including the Enterprise Investment Scheme, Seed Enterprise Investment Scheme and Venture Capital Trusts), this consultation is ultimately aimed at attracting more investment into innovative firms. The consultation is considering “additional incentives to attract investment” but, as with many other announcements from the Spring Statement, we will have to wait to see whether that promise comes to fruition.

What might we see in the future?

The pundits had speculated that the Chancellor would only speak for 20 minutes or so. 20 minutes came and went and MPs who had planned on a decent lunch started looking nervously at their watches. But in some senses, this last section of the speech was the most interesting, as it gave a clear indication of the measures we might see in future Budgets, depending on the outcome of various consultations.

The plastic tax

This has been widely trailed – it is also referred to as the ‘litter levy’ – and the Government will use the tax system to ‘encourage the responsible use of plastic throughout the supply chain.’ This will include items such as coffee cups, plastic cutlery and foam takeaway trays. The Chancellor did not mention chewing gum specifically but the rumours are that it will also be included in the measures. “Some of the money raised from any tax changes,” for which you can read, ‘there will be tax changes’ – will be used to encourage the creation of newer, greener products, while £20m will also be given to businesses and universities to fund research into ways of reducing the impact of plastic on the environment.

Taxing the tech giants

What would a Budget speech – or a Spring Statement – be without an attack on the tech giants who are “not paying their fair share of tax?” The Government will once again be considering ways in which to tighten up on Facebook, Amazon, Google and friends: looking 10 years down the line it may also need to consider the impact of the Chinese tech giants such as Alibaba, Tencent and JD.com.

White van man goes green?

At the moment there is tax relief given for agricultural diesel but the Chancellor said he would “call for evidence” on whether this is contributing to air pollution. And in the days when every delivery from Amazon arrives in a white van, he announced that he would consult on tax cuts for low-emissions vans.

Giving people the skills they need

Clearly, improving skills benefits not just the individuals concerned but the wider UK economy, and the Chancellor gave a clear hint that he will offer tax relief to both employees and the self-employed who fund their own training.

Goodbye to cash?

Far more of us now use digital payments rather than cash – although the UK has some way to go to catch up with some countries (such as Sweden) where cash has all but disappeared. The Chancellor is ‘seeking views’ on encouraging business who want to use digital payments. And why wouldn’t he? Digital payments can be tracked and taxed and would represent a way to strike back at the black economy.

Conclusion

The Chancellor’s final point may have read as something of a warning to those up and down the country who currently deal heavily in cash (think hairdressers and window cleaners), but he was determined to finish on a high for all, repeating a message that his party has long promoted. He was keeping the UK on course to be, “an outward-looking, free-trading nation, confident that its best days lie ahead.”

The detail of exactly how he plans to make that happen, though, may well have to wait until the Autumn Budget, where many of the Chancellor’s plans will be made clearer.
For now, however, the new, slimmed down Spring Statement acted as a useful summary of our current economic outlook and an interesting trailer of both things to come and plans being made.

Four things to look out for in the new tax year

Wednesday, March 21st, 2018

With a new tax year come changes to tax and benefits. But just as it’s important to know what changes are being made, it’s equally, if not more important, to actually understand how the change affect you or your business, or if it even has an impact on you at all. Here are four of the key changes to look out for at the start of the 2018/19 tax year and how to work out whether or not you need to do anything.

  1. Employer pension contributions – It’s likely that you’ll have heard about the increase for employer pension contributions through auto-enrolment, but you might not be so clear on exactly what your business will have to do to meet the new minimum contribution. If, in April 2018, an employer already contributes the minimum 2% or more, and the total contribution of both the employer and the employee is 5% or more, the employer doesn’t need to change anything. If the employer or total contribution is under the respective figure, an increase will be needed. It’s also worth remembering that from April 2019, the minimum employer contribution goes up to 3% and the total contribution to 8%.
  2. Salary sacrifice and P11D – Whilst the law still states that a P11D needs to be provided for certain benefits provided under an optional remuneration arrangement, usually known as a salary sacrifice, HMRC has conceded that this won’t be the case for particular instances. This is due to PAYE regulations not being updated to accommodate the ‘relevant amount’ which is the new taxable value. In such cases, as long as the correct relevant amount has been payrolled by the employer, a P11D won’t be needed for 2017/18.
  3. National minimum wage increase – The increase applies to the first pay period beginning on or after 1st April 2018. If the change falls in the middle of an employee’s pay period, it’s not necessary to adjust the old and new national minimum wage rates; the increased wage should simply be implemented for the first pay period after 1st April.
  4. Childcare vouchers – it was proposed that new entrants would not be admitted to employer-provided childcare voucher schemes from 6th April 2018. Following a Commons debate, the deadline has been extended to October 2018.although this still means it is one to watch out for in the 2018/2019 tax year.

Taxes set to rise for baby boomers?

Wednesday, March 14th, 2018

Recent research has suggested that those in the baby-boomer generation should be prepared to pay higher wealth taxes in order to pay for healthcare costs likely to climb steeply in the near future. According to think tank the Resolution Foundation, this could signal the end of the tax cuts in Britain, a development which may have less impact on those of you at or approaching retirement, but significant impact on your children’s generation.

According to the research, by 2030, health, education and social security spending are predicted to rise by £20 billion a year in today’s money, climbing to £60 billion a year by 2040. Thanks to spending cuts for a number of departments, the UK government’s budget deficit has gradually been brought down since it stood at 10% of economic output in 2010.

However, as the number of easy cuts able to be made runs out, the government is coming under increasing pressure to raise funds through increased taxation. Whilst the chancellor, Philip Hammond, has managed to cut the country’s financial deficit faster than had been forecast over the past financial year, the Resolution Foundation’s report suggests that increased public spending in the coming years will give the government no other option but to raise taxes.

“The time has come when we boomers are going to have to reach into our own pockets,” said the chair of the Resolution Foundation and former Conservative government minister, David Willetts, in response to the report. “The alternative could be an extra 15 pence on the basic rate of tax, paid largely by our kids.”

Aside from the rising cost of healthcare, the think tank also highlighted another key reason why baby-boomers will need to take on more of the tax burden in the future: later generations will simply not be able to afford to do so. Millennials, born between 1981 and 2000, are spending more of their income on housing costs than any other generation of the twentieth century.

Despite this, the level of home ownership has decreased significantly in the UK over the past two decades as young adults have felt the effects of increased pension payments and poor wage growth following the financial crisis. This has further and further skewed wealth towards the older generations.

Willetts feels that there may now be no other choice than to increase wealth taxation. “Unless we act, at some point we will face a choice between changing our approach to taxation, or cutting access to the NHS and letting social care get into an even deeper crisis,” he warns. “We can’t delay that debate any longer.”

The ISA deadline approaches

Thursday, March 8th, 2018

It may seem as though the year has barely begun, yet the month of March is already upon us. That means that spring is just around the corner. It also means that the ISA deadline of 6th April is rapidly approaching.

Individual Savings Accounts (ISAs) are tax-free savings accounts open to anyone over the age of 16 to deposit their savings each year. With attractive savings allowances, ISAs have become very popular with people across the UK intent on building a nest egg for their future.

As of the end of the 2017/2018 tax year, the maximum amount you can deposit in an ISA in one financial year is £20,000 per annum, up from £15,240 in the previous tax year.

This limit will remain unchanged into the 2018/2019 tax year. However, as those in the know will tell you, any tax savings are dependent on the amount you deposit into your ISA over the course of the tax year. Deposits cannot roll over from one tax year’s allowance to the next, meaning that you can’t ‘top up’ your savings in 2018/2019 using any unused portion of this tax year’s allowance. When it’s gone, it’s gone!

Maximising your ISA allowance is therefore a great way to save for your future. This is further highlighted by the fact that ISA allowances can be split across different financial products, including cash ISAs, stocks and shares ISAs, innovative finance ISAs and lifetime ISAs (LISAS).

Lifetime ISAs, for example, were first launched in April 2017 to help first-time buyers under the age of 40 buy their first home and/or savers to build a nest egg to use in retirement once they reach the age of 60. Borne of research into economic and behavioural psychology, the Lifetime ISA tackles two problems simultaneously: that many people between the age of 18 and 40 are not saving for a home and nor are they contributing a significant portion of their earnings to a pension.

Making use of an ISA allowance is typically one of the features of sound financial planning. ISAs, though, are just one of many ‘tax-wrappers’ available – meaning investors can ‘wrap’ their investment, sheltering them from paying tax on all, or a portion, of their assets. Your adviser will likely talk to you often about the wrappers you are using, how to maximise them and which are the most appropriate for your current circumstances. If you have any questions around this topic, please feel free to get in touch with us directly.

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.

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.