Contact us: 01799 543222

What does the stamp duty holiday mean for me?

Archive for July, 2020

What does the stamp duty holiday mean for me?

Wednesday, July 29th, 2020

In his 8 July summer statement, Chancellor Rishi Sunak confirmed that the stamp duty threshold will be immediately raised to £500,000 in England and Northern Ireland, in what some have dubbed the ‘stamp duty holiday’. The rise in threshold lasts until 31 March 2021 and will apply to both first-time buyers and previous owners.

Sunak said that the change will affect around 90% of buyers, saving each one an average of £4,500.

Stamp duty is a tax you have to pay if you buy a property or a piece of land in England or Northern Ireland. Buyers in Scotland pay Land and Buildings Transaction Tax (LBTT) and in Wales Land Transaction Tax (LTT) instead of stamp duty. 

The property website Rightmove said traffic to its listings increased by 22% immediately after Sunak’s announcement, an indication that this could be the stimulus for many to come to a decision about moving home.

The move comes in response to the current economic crisis. Many are worried that the housing market will stagnate in the current economic climate. Lockdown measures put sales on hold and prevented work on construction sites. The number of transactions was down by 50% in May. 

Stamp duty will be collected at a rate of 5% on transactions over £500,000. For instance, if you bought a house for £575,000, you would pay 0% on the first £500,000 and 5% on the final £75,000. Overall, you would pay £3,750 in stamp duty.

What about buy-to-let and second homes?

The stamp duty cut will also apply to those buying second homes and buy-to-let properties, allowing investors to make savings. However, the 3% surcharge for buying additional properties will apply to the new stamp duty rates.

So, property investors spending less than £500,000 would only need to pay 3% on top of the purchase, as opposed to the previous 5%.  

The housing market has responded well to the rise in threshold. It frees up larger properties for families, which they previously may not have been able to afford, and it could help first-time buyers onto the property ladder.

It’s widely expected that the stamp duty holiday will have an immediate impact on the volume of sales agreed in the coming weeks. Please get in touch if you’d like to know more about how the ‘stamp duty holiday’ will affect you.

Will Covid-19 hasten the demise of cash?

Wednesday, July 22nd, 2020

The use of cash was already dwindling in recent years, with cards being the preferred method of payment (especially contactless). Since the outbreak of Covid-19, however, the use of physical money has reduced much further, with many shoppers wary of touching it.             

The number of withdrawals from cash machines during lockdown is down by 60%, although people took out larger sums than usual at a time. As there were fewer places for people to go out and spend money, with bars and restaurants closed, it was believed many people were hoarding ‘cash’ at home, just ‘in case’. 

Not surprisingly, card payments increased significantly due to the surge in online shopping, especially for groceries.     

According to a survey of consumers by Link, which is responsible for the UK’s cash machine network, 75% of people were using less cash, and 54% said they were avoiding cash. Just over three quarters of those surveyed said they expected to move to other forms of payment or online shopping in the next six months.

It will be interesting to see whether people continue to change these habits post-lockdown and make a permanent switch to digital payments.  

One of the issues will be that if a significant number of people stop using cash, there will not be enough demand to make ATMs profitable. The infrastructure of delivering cash could completely collapse. 

Electronic banknotes 

Prior to the pandemic, the Bank of England was already considering the introduction of electronic banknotes. This would be a major revolution as the current system of people using central bank money in the form of paper banknotes has been in place for 300 years. 

The idea would be to have a Digital Central Bank Currency, where £10 of the digital currency would be worth the same as a £10 note. You would load up Central Bank Digital Currency, just as you would withdraw banknotes from an ATM, but electronically. The system would be guaranteed by the Bank rather than a commercial enterprise. 

The Bank has stressed this would complement not replace paper banknotes as long as there was still a demand for physical cash.

This is important as the independent Access to Cash Review revealed that 20% of the population, including the elderly and vulnerable, are still dependent on notes and coins. Assurances have been made that cash won’t completely disappear and legislation was passed in March to ensure that it would be protected for those who need it.        

The Bank of England called for input into their discussion over digital currency up to mid-June so the outcome will be awaited with interest.    


Problems for the Bank of Mum and Dad

Thursday, July 16th, 2020

With many furloughs coming to an end and an increasing number of redundancies being announced, the Bank of Mum and Dad is being asked to step in on a regular basis to help its adult children with their financial commitments. 

Parents are seeing their children’s debt escalate, which is often primarily due to rent payments. Under coronavirus legislation, private landlords have to give their tenants 3 months’ notice to quit but nevertheless the payment is still due. While homeowners can take a mortgage payment holiday and add the debt to the end of the mortgage, tenants have to repay what they owe much more quickly, even if they have agreed a schedule with their landlords. Housing benefit is often unlikely to cover the full rent. With no source of income on the horizon, grown-up children may resort to requesting a parental bailout.      

One hazard in a shared house can be that one of the occupants may decide to ‘disappear’ if they are very behind with the rent, leaving the other housemates to cover the arrears. This is a particular issue if the parents of one the remaining tenants had agreed to act as rental guarantors at the outset.         

Which leads on to the next stage of helping with house purchases. Many parents are keen to help their offspring to get a foot on the property ladder. According to Legal and General, the average contribution by the Bank of Mum and Dad rose by more than £6,000, to £24,100 in 2019. This put it in the top 10 of UK mortgage lenders, with parents having given £6.3 billion collectively. 

In the current climate, especially with many high Loan to Value (LTV) mortgages being withdrawn, parental input is certainly needed. But when parents may be facing financial difficulties of their own, are they going to be as willing to keep on lending and gifting deposits?

Some parents may decide to hold fire in the hope that more properties may come onto the market and prices may drop dramatically. Others may decide that if it’s been a bit of a shock to the system having a grown-up child suddenly back under their roof under lockdown, helping provide the funds for a quick house purchase may be preferable!    

If you do decide to act as the Bank of Mum and Dad, it’s important to make sure you can afford it. If you’re using your pension and savings to help out, consider what impact that will have on your own retirement. 

It’s also important to make sure it’s clear whether the money is a gift or a loan, as this will have different tax implications. If your child is moving in with a partner, you may want a say in how the rights to the property will be held should the relationship break down at some point.     

Do get in touch if you have any queries regarding the issues involved in being part of this well-known financial lending institution.

Summer Statement in brief

Thursday, July 16th, 2020

The Covid-19 pandemic has had a drastic effect on the global economy, with the IMF predicting “the worst economic downturn since the Great Depression.” Social distancing measures, supply chain disruption and economic uncertainty have caused British economic growth to plummet – GDP fell by a record 20.4% in April. 

The government clearly sees increased spending as an essential part of the country’s route out of this crisis and Chancellor Rishi Sunak didn’t shy away from opening the purse strings in his 8 July statement. Speaking to a socially distanced House of Commons, Sunak outlined his spending measures to fire up the British economy. Here are some of his key points:

Housing and stamp duty threshold change

The housing market has been hit hard by the crisis. Sunak said that transactions had fallen by 50% in May. It is understandable, then, that he announced a change to stamp duty threshold, to “give people the confidence to move.”

From 8 July to 31 March next year, stamp duty thresholds were raised from the current £125,000 to £500,000 in England and Northern Ireland. This means that nine out of ten people buying a home will pay no stamp duty, a significant saving for the vast majority of homebuyers. Currently just 16% of buyers avoid paying stamp duty.

Job retention bonus

To date, the furlough scheme has supported the wages of over 9m employees across the country. On Wednesday, the Chancellor announced a further support measure: the Job Retention Bonus.

Available from October when the furlough scheme winds down, the scheme will pay employers a one-off bonus of £1,000 for every previously furloughed employee who returns to full time employment in November. To qualify, employees must earn at least £520 per month until January 2021.

With over 9m people on furlough, the scheme could cost the treasury up to £9.4bn.

Kickstart scheme

Young people have borne the brunt of the current economic downturn. They are more likely to be employed in the badly affected hospitality and retail sectors, and youth unemployment is predicted to soar by 640,000 this year.

From this Autumn, the scheme will directly pay employers to create jobs for young people, aged 16-24, who are on Universal Credit. The scheme will cover six months of wages as well as the associated National Insurance contributions. To apply, jobs must pay at least the minimum wage for 25 hours a week. The Chancellor has initially made £2.1bn available to the scheme, with no cap on places.

Green Homes Grant

The Chancellor announced the Green Homes Scheme, which will give homeowners and landlords vouchers worth up to £10,000 to make their homes more energy efficient. The aim of the scheme is to enable homeowners to upgrade their homes with energy saving features like insulation or double glazing in order to reduce energy usage. 

The scheme kills an impressive three birds with one stone: reducing people’s energy expenditure at a time when many may be hard up, supporting job creation and helping the country meet its emissions targets.

Treasury estimates say the scheme could save people who upgrade an average of £300 per year and support 140,000 local jobs. The scheme hopes to upgrade approximately 600,000 homes across the UK and will also apply to landlords.

Support for the hospitality and tourism sectors

The hospitality sector has been hit hard by social distancing measures, with many businesses struggling to stay afloat. 

The government announced a temporary VAT cut for the hospitality and tourism sectors. Standard VAT is 20%, but the government has said it will cut VAT on food, accommodation and attractions to 5% for businesses in the hospitality sector.

 However, those of you hoping for a discounted pint or gin and tonic will be disappointed. While the lower rate applies to non-alcoholic drinks, it doesn’t apply to alcoholic ones.

The scheme could mean consumers save on meals and hotels for the next six months. 

However, there is a big “but”.  It remains to be seen whether businesses pass on the VAT savings to customers or pocket the difference themselves. 

The VAT cut wasn’t the only support for the hospitality sector. Sunak unveiled his “eat out to help out” scheme, a deal meaning people can get up to £10 off per head if they eat out Monday to Wednesday during August. 

Businesses can register for the scheme on a government website and Rishi Sunak gave some detail on how businesses can reclaim the cost. He said: “Each week in August, businesses can then claim the money back, with the funds in their bank account within five working days.”

What’s your money personality?

Monday, July 13th, 2020

We all have a different relationship with money. Recognising your money personality can help you better understand yours. Although no member of each group has exactly the same attitude towards their finances, researchers have identified four common attitudes towards money: Money Worship, Money Avoidance, Money Vigilance and Money Status. 

Psychologists think that our internal beliefs around money were formed by our childhood experiences, the community we grew up in and the spending habits of our family. Here is a description of the four money personalities:

Money Worship

If you’re a money worshipper, you might think that money could solve all your problems and that you can never reach a point when you’ll have enough. People who fit into this category are most likely to overspend on themselves or others and rack up credit card debts.  According to research by Creighton University, this is the most common money personality among Americans.

People who fit into this personality type might have to put some measures in place to control their spending habits. They could make a monthly budget and remind themselves to regularly check their bank balance to keep a tab on their spending.

Money Avoidance 

Money avoiders believe that they don’t deserve the money they have and try to avoid thinking about their finances. If you’re a money avoider, you might try to shift your money onto others, rather than take responsibility for making financial decisions. 

Money avoiders can benefit from setting up automatic contributions to savings accounts or speaking to a financial adviser to remove some of the responsibility around their finances.

Money Vigilance

If you’re extremely frugal and firmly believe saving for the future is the best use of money, chances are you’re money vigilant. People who fit in this category tend to derive more satisfaction from reading the interest rate on their bank statement than from buying something new. What’s more, they’re likely to prefer a conservative investment strategy and avoid financial risk.

If you fit into this personality type, you should be careful not to allow secrecy to stand in the way of better money habits. 

Money Status

People who fit into this personality type equate money with status. As a result, they may be driven to earn more money than their peers purely for the sake of earning more money. Although people who hold their net-worth in such high regard are likely to be high earners, they can be liable to make risky decisions and buy expensive things that reflect their wealth. 

If you tend to focus on “money status”, it’s a good idea to stop and think before making an expensive purchase as you could be at risk of buying things on impulse.

What is the value of advice?

Monday, July 13th, 2020

You’re not going to be surprised that, as advisers, our firm belief is that an advised client will get a better financial outcome than a non-advised client. How to prove, though, that we’re not just biased? What is the actual value of that advice? How can it be quantified?   

Most importantly, the value of advice is not simply tied to fund picking or performance.

A good example of this was when the FTSE 100 fell by over 26% in early March due to panic over the coronavirus outbreak and some advisers chose to move their clients’ investments out of equities into assets, traditionally viewed as ‘safe havens’. Although they may have moved them back into more equity-dominated funds in April, the FTSE 100 actually made its biggest recovery between 23 and 26 March so their clients’ money would have been out of the market at the optimum time. This is a clear sign that adding value by trying to ‘time the market’ does not work.

Advice, in our view, goes much further. It can cover: 

  • Behavioural coaching
  • Spending strategies
  • Portfolio rebalancing 
  • Tax-smart recommendations
  • Financial planning  

It’s all part of building a long-term relationship where the adviser really gets to know the client and understands their objectives for life.    

Behavioural coaching, in particular, can be useful in helping an investor to ignore market noise and to keep their emotions at bay so that they avoid expensive mistakes and stick to their long term goals. 

Research over a number of years by the International Longevity Centre (ILC) showed that using a financial adviser led to better financial outcomes in the following ways:

  • Taking advice added £2.5bn to people’s savings and investments,
  • The pensions of clients who received ongoing advice were worth 50% more than those who took one off advice. 
  • Those who took advice were likely to be richer in retirement.
  • The benefits of advice outweighed any costs associated with it 

In addition, the University of Montreal estimated that clients with an adviser would have a 2.73 times larger savings pot over a 15-year period than clients who hadn’t seen an adviser. If that time frame was reduced to five years, the savings pot would still be 1.58 times greater. 

Different investment companies quote different figures but on balance agree that advisers can generate between 3% and 4.4% per annum net returns for their clients.      

Set against this backdrop, it would seem financial advice does have a real value to offer.   

July markets in brief

Thursday, July 9th, 2020

As much of the West continues to tentatively emerge from months of lockdown measures, June has been an altogether more positive month when it comes to economic news. All the markets we report on rose during the month.

The global Black Lives Matter movement and the new Hong Kong security law usurped Covid-19’s position as the headline item on global media outlets for much of June, a sign that perhaps we are beginning to emerge into a ‘new normal’.

However, recent resurgences of Covid-19 in California, Texas and Florida demonstrate just how tentative this emergence must be.  Meanwhile, the virus continues to ravage much of the developing world, with a recent surge of cases in South Africa and other African countries.


Unsurprisingly, most of the bad news came from the retail sector. Figures published in early June saw sales fall by 5.9%, in spite of the fact that many shops had moved online. Estimates suggest that around £2.15bn of commercial rent was unpaid for the quarter ending in June. Shirtmaker TM Lewin was the high street’s latest casualty, as it moved all sales online at the cost of 700 jobs.

However, there was positive news aplenty. Speaking on 30th June, Bank of England economist Andy Haldane announced that the UK economy was still on course for a quick, V-shaped recovery coming “sooner and faster” than expected. 

On the back of this, at the end of June, Boris Johnson announced his ‘New Deal’ worth £5bn, evoking President Roosevelt’s New Deal of the 1930s, a massive infrastructure spending designed to drag the US out of the Great Depression. Roosevelt’s deal was worth around 40% of the US GDP in 1929. By comparison, £5bn amounts to a more modest 0.2% of current UK GDP – not quite on the same scale.  

The FTSE100 rose by a modest 2% during the months closing at 6,170. And the pound was unchanged against the dollar, ending June at $1.2388.


All was relatively quiet on the continent from a news point of view. The European Central Bank (ECB) raised no alarm bells when it cut its growth forecast for the year. It now expects the Eurozone economy to contract by 8.7% this year. 

The ECB was again active in boosting the Eurozone economies, ramping up its quantitative easing programme by €600bn to a whopping €1.35tn, extending the programme to June 2021, six months later than originally planned.

Unsurprisingly given the economic turmoil, there were significant job losses. Airbus announced that it planned to cut 15,000 jobs across Europe, only to be expected in a year that has been the worst on record for the aviation industry.

Both major European stock markets we report on had strong months. The German DAX index rose by 6% to 12,311 while the French stock market was up 5% to 4,936. 


The US’s unemployment crisis continued in June. Despite the good news that the US economy had added jobs in May as measures were released in many states, a further 1.5 million people had filed for unemployment benefit. There are now 44.1 million Americans claiming unemployment support.

Like every other major economy, the US is now officially in recession. This means the end of a decade-long period of economic expansion. The Fed duly reminded US banks to ‘stay prudent’ as it warned that they could suffer losses of up to $700bn if the pandemic led to a sustained economic crisis.

As in the UK, the American retail sector suffered. Gap posted a $923m loss for the three months to May, compared to a $227m profit for the same period last. 

Despite a spike in virus cases towards the end of the month, the Dow Jones ended the month up 2% at 25,813. From this month forward, we will also report on the more broadly based S&P index, which closed June at 3,100.

Far East

June ended with China passing the controversial Hong Kong security law. The law gives Beijing wide ranging powers over Hong Kong. The law states that anyone who conspires with foreigners to provoke “hatred” of the Chinese government could have committed a criminal offence. Many are worried that this law could make criticism of the Chinese government ilegal. 

The security law wasn’t the only point of controversy from China during the month. There was escalating tension between India and China and there were clashes in a Himalayan border region, with reports suggesting that up to 20 Indian troops had been killed. A rise in tensions between the world’s two most populous countries is a real cause for concern.

And if this wasn’t enough disruption, Australian Prime Minister Scott Morrison said that the country had been the victim of a “sophisticated state-based cyber hack” and many commentators quickly pointed the finger at China.

On a more positive note, the UK opened trade talks with Japan. The region’s markets seemed to respond as if improving bilateral relations were the trend across the region, when in reality the opposite was true.

China’s Shanghai Composite index rose 5% to 2,985 and the Hong Kong market did even better, climbing 6% to 24,427. The South Korean market was up 4% to 2,108 and Japan’s Nikkei Dow index gained 2% at 22,288. 

Emerging Markets

As we write this, on 2nd July, Vladimir Putin has just won a controversial vote to amend the constitution. Importantly, the vote means that Putin’s term limits have been reset, potentially allowing him to rule as president until 2036.  

The Indian economy seems to be rebounding rapidly in the wake of its lockdown which was released on 1st June. Figures suggest that goods movement is close to pre-lockdown levels.

On the other side of the Pacific, Brazil became the second country to reach 1 million cases of Covid-19, and experts have said that Brazil could ultimately become the country worst hit by the pandemic.

Both the Indian and Brazilian markets enjoyed excellent months. The Indian stock market rose 8% to end June at 34,916, while Brazil went one better, gaining 9% to 95,056. In contrast, Russia, the other major emerging market on which we report, had a subdued month and rose just eight points to 2,743. 

Whether you’ll be enjoying that first refreshing pint in a pub or having a much needed haircut, we hope that you have a great July. Please get in touch if you have any further questions around this commentary.