Understanding Inheritance Tax Rules

Importance of individuals understanding what is and what is not exempt from inheritance tax highlighted.

Those that are dealing with an estate after a spouse has died or who are planning their own affairs must take note of the nil rate band (N.R.B.). Any amount of money that falls within the limit of the N.R.B. will not incur tax after death. Until at least the 5th of April 2021 people will deal with a N.R.B. of £325,000. Money that over the N.R.B. is taxed at a considerable rate of 40%.

What Will Incur Inheritance Tax?

The value of assets in an estate are valued as a whole, for most people the single largest asset they will pass on will be property. The N.R.B. has historically closely tracked the average house price in the U.K. through successive governments. Any value over this amount will be subject to inheritance tax unless it qualifies for one or more of a number of exemptions.

What Is Exempt From Inheritance Tax?

The first important exemption is when an estate is transferred to a spouse. As long as the spouse is a resident of the U.K. the rule is simple, if they live overseas it is not always as cut and dry.

If the person who has died did so as a result of action whilst in the Armed Forces their estate does not qualify for inheritance tax. This also applies when it can be proven that death was hastened due to their participation in Armed Forces activity.

Gifts can also qualify as inheritance tax exemptions. A gift to a child under the age of 18 and that is for the purpose of that child’s maintenance is exempt. Gifts to charities and even political parties that hold at least one seat in the House of Commons also qualify.

Debbie Day.

Mobile : 07704 311021 Felixstowe Office : 01394 775711

deb.day@hoskinfinancial.co.uk www.debbiedayifa.co.uk

THIS BLOG PROVIDES INFORMATION, IT IS NOT ADVICE. ANY OPINIONS ARE GIVEN IN GOOD FAITH AND MAY BE SUBJECT TO CHANGE WITHOUT NOTICE. OPINIONS AND INFORMATION INCLUDED WITHIN THIS EMAIL DO NOT CONSTITUTE ADVICE. (IF YOU REQUIRE PERSONAL ADVICE BASED ON YOUR CIRCUMSTANCES, PLEASE CONTACT US AT HOSKIN FINANCIAL

Customers Missing Out On Larger Returns By Sticking With Cash I.S.A.s

I.S.A. customers encouraged to move their savings out of cash.

The majority of people with I.S.A.s are actively looking for the best option as The Share Centre’s investment manager Sheridan Admans reports “a 36% increase in the number of trades, as well as a considerable 72% increase in inflows year on year”.

Stocks And Shares I.S.A.s Out Perform Other Options

Just over a quarter of those whose actions were recorded have chosen to keep their investments in cash. Experts including True Potential are however warning that higher inflation could diminish their returns. They highlight the vast disparity between someone placing £20,000 in two I.S.A.s in 2017-18. The cash option would return around £200 in interest whereas a stocks and shares option could return around £2,400.

Ms Admans describes the most appealing stocks and shares investments as “high-yield defensive, large blue chip stocks with a recovery story”.

Looking at those who have not yet invested in stocks and shares I.S.A.s senior partner at True Potential, Mark Henderson points to what he calls “widespread inertia that means many savers remain overly exposed to cash. Everyone needs a rainy day fund but inflation is higher than most cash I.S.A. rates. He goes further to describe cash as “no longer a risk-free return but more like a return-free risk.”

The end of this tax year is viewed as a particularly good time to invest in an I.S.A. with the government’s Lifetime I.S.A. coming into force. Divisional director for development and technical consultancy at St James’s Place, Tony Müdd highlights the virtues of I.S.A.s pointing out “everyone has their own allowance – £15,240 in the current tax year – which means that couples can shelter £30,480 between them.”Financial Advice Suffolk

Senior analyst at AJ Bell, Tom Selby calls on the government to continue raising the personal allowance saying “the last thing we want is for it to be frozen at £20,000 for the next 10 years as many other allowances have been.”

Paul Hoskin MD at Hoskin Financial

Visit Financial Advice Suffolk and Mortgage Protection Ipswich

“Back Door Taxation” To Be Placed On Probate Process

Those dealing with a deceased’s estate to face higher fees.

It was announced via government websites that the fees charged for those going through the process of probate will change in May 2017.

Tiered System

The flat rate fee of £215 which could be reduced to just £155 by employing a solicitor will be replaced by a tiered system that is based on the value of the estate.

Although many are focusing on the increasing cost of those with valuable enough assets, those with lower value estates will have to pay nothing. Only those managing estates worth more than £50,000 will have to pay more. Those dealing with estates in excess of £1m will be charged between £8,000 and £20,000.

“Back Door Taxation”

Chief executive of Step, a company of professional family inheritance and estate planners George Hodgson described the change as “back door taxation.” He also points out that this is a charge that is imposed on families in the moment of grieving. Mortgage Protection Ipswich

Mr Hodgson is among those warning that many people will face higher charges. Financial planning expert at Old Mutual Wealth, Gordon Andrews says that the rise in house prices will push the value of many estates over the thresholds of higher fees. Since all those dealing with estates over £50,000 will be paying, a lot of people will have to face higher charges.

Mr Andrews says that “it is disappointing the government plans to press ahead with the new fee structure for grants of probates despite wide-scale concern from the industry.” The opposition comes partly from the fact that it is unclear that the value of somebodies estate directly determines the time and work it takes the courts to go through the probate process. Mr Andrews also argues that “these proposed changes will add further complexity to estate planning.”

Debbie Day.

Mobile : 07704 311021 Felixstowe Office : 01394 775711

deb.day@hoskinfinancial.co.uk www.debbiedayifa.co.uk

THIS BLOG PROVIDES INFORMATION, IT IS NOT ADVICE. ANY OPINIONS ARE GIVEN IN GOOD FAITH AND MAY BE SUBJECT TO CHANGE WITHOUT NOTICE. OPINIONS AND INFORMATION INCLUDED WITHIN THIS EMAIL DO NOT CONSTITUTE ADVICE. (IF YOU REQUIRE PERSONAL ADVICE BASED ON YOUR CIRCUMSTANCES, PLEASE CONTACT US AT HOSKIN FINANCIAL

Read Mortgage Protection Ipswich & Financial Services Ipswich

Citizens Advice Highlight Lack Of Pension Provision For Multiple Job Holders

More than 100,000 British workers are not earning enough to qualify for auto enrolment pensions.

Workers in the U.K. qualify for auto enrolment pensions once they achieve earnings of £10,000 from a single job. It is the fact that multiple sources are needed to reach this trigger point that prevents many from benefiting from the law.

Citizens Advice found that almost 106,000 people fell into the category of earning too little from a single employer. The charity came to this conclusion after analysing figures from the Office of National Statistics’ Labour Force Survey.

Women Disproportionately Affected

72,000 of those affected are women. The reasons given for this include the idea that women disproportionately have to find jobs that fit around family commitments. Chief executive at Citizens Advice, Gillian Guy states that “many people – particularly women – work several part-time jobs, which helps them manage commitments like childcare or study.”

Auto enrolment into pension schemes began in 2012 in order to prevent a looming crisis of private under funding of old age expenses and on the whole are viewed as successful. Around 90% of those eligible have decided not to opt out meaning by 2018, 10 million people are projected to be saving in to a pension fund directly because of the measure.

Multiple job holders and the self-employed have not been provided for as of yet. The Government is aware of this and have announced a review of the scheme which will look into any perceived shortcomings.

Ms Guy calls on the Government to “seize the opportunity of this year’s auto-enrolment review and use it to pave the way for helping more people get on track with pension savings.”

Citizens Advice have also recently surveyed managers finding that of the over 1,100 questioned, only 18% cited auto enrolment responsibilities as a key concern going forward. Far more, 44% are most worried about hiring the right staff and 36% about retaining them.

Paul Hoskin MD at Hoskin Financial

THIS BLOG PROVIDES INFORMATION, IT IS NOT ADVICE. ANY OPINIONS ARE GIVEN IN GOOD FAITH AND MAY BE SUBJECT TO CHANGE WITHOUT NOTICE. OPINIONS AND INFORMATION INCLUDED WITHIN THIS EMAIL DO NOT CONSTITUTE ADVICE. (IF YOU REQUIRE PERSONAL ADVICE BASED ON YOUR CIRCUMSTANCES, PLEASE CONTACT US AT HOSKIN FINANCIAL

Top Tips to Spot a Second Charge Customer

1. Interest only mortgage customers.
For some consumers, staying on their existing interest – only mortgage is the best option for them. However many believe that the only way to obtain further credit is if their current mortgage arrangement is switched to a repayment option. For many this will make their monthly repayments rise dramatically, making it unaffordable. A second charge mortgage will allow the customer to borrow additional money without interfering with their existing mortgage.

2. Lifetime tracker customers.
With interest rates at a historical low of 0.5% and speculation about a rate rise now common, some customers will want to move to a fixed rate. However, a fixed rate mortgage will almost always carry early redemption charges that can cost customers thousands of pounds in fees if they choose to opt out before the initial product term has ended. Plus some may find it difficult to remortgage to equivalent or lower rates. For these customers a second charge loan should be considered as it will sit behind the customers existing first charge mortgage, with minimal exit fees or changes to terms and conditions.

3. Customers who want to consolidate credit.
Many customers will owe money on more than one credit card or have several different credit agreements or loans in place.
This can make keeping track of them all very difficult and could lead to serious consequences if missed.
Consolidating debts can take the difficulty out of managing a client’s money. It has become increasingly difficult to source consolidation loans, particularly if over £30,000.00 on the high street, as these lenders prefer simpler cases.
Second charge loans not only allow the customer to consolidate debts over a longer term than an unsecured loan, but also give then the flexibility to have a shorter term than their first charge mortgage whilst reducing their monthly outgoings.

4. Self-certification mortgage customers
Self-certification mortgages, known for being popular with those who had irregular earnings, were banned in 2014 following the mortgage market review. However , nearly half of all mortgages taken out between 2007 and the beginning of 2010 were advanced on this basis , leaving many consumers as ‘mortgage prisoners’ trapped on very high interest rates and unable to borrow as lenders continue to tighten their lending criteria . These customers won’t be able to get any more funding on a self-certification based.

5. Self-employed customers
If a customer has become self-employed in the last couple of years, he or she is likely to have a mortgage application rejected due to lenders needing extensive proof of income. They may however be eligible for a second charge loan as lenders will take into account all income, including buy to let rental yield and foster care along with many other benefits.

6. Adverse Credit
Customers who have experienced difficulties with their finance and who may have historical credit problems.

For more help and advice please do noy hesitate to contact me.

Ian Chambers Hoskin Home Loans

Mobile: 07962 152776 Office: 01621 876030

Estate Planning Sorely Lacking For Many British People

An annual survey conducted by Canada Life has found many Brits poorly positioned to pass their wealth on.

There is worrying evidence that many people that own substantial estates are not getting the expert advice they need to manage money. Some are wilfully ignoring estate management and paying more tax than they necessarily have to. Currently only 27% of those with assets over £325,000 and who are aged over 45 have sought professional advice for planning ahead.

Passing money on after death is an area people in general have not prepared for. 27% of wealthy individuals have not even written a will. Just 1 in 5 people have thought ahead enough to gift money whilst still alive. The inheritance tax that will be imposed on those who receive the money will be far higher than if they had prepared and sought proper advice.

There is concern over the lack of awareness of the importance of professional financial advice when it comes to estate planning. Worrying responses were received in the survey such as 46% of those questioned saying they would never take out life insurance.

Misconceptions Preventing People From Seeking Advice

After life insurance the second most popular method of passing on money was to set up a fund. However, 40% said they did not intend to utilise them themselves. A significant number (19%) gave the reason that doing so seemed too time consuming and difficult. In fact the process is simple and highly worthwhile and with so many unaware of this there have been those that question the financial literacy of the population.

The survey indicates that seeking professional advice would save a great number of people from unnecessary payments of inheritance tax. Although it is an individual’s right to decide what they do with their finances the current situation is set to see the beneficiaries pay unneeded charges.

Debbie Day.

Mobile : 07704 311021 Felixstowe Office : 01394 775711

deb.day@hoskinfinancial.co.uk www.debbiedayifa.co.uk

THIS BLOG PROVIDES INFORMATION, IT IS NOT ADVICE. ANY OPINIONS ARE GIVEN IN GOOD FAITH AND MAY BE SUBJECT TO CHANGE WITHOUT NOTICE. OPINIONS AND INFORMATION INCLUDED WITHIN THIS EMAIL DO NOT CONSTITUTE ADVICE. (IF YOU REQUIRE PERSONAL ADVICE BASED ON YOUR CIRCUMSTANCES, PLEASE CONTACT US AT HOSKIN FINANCIAL

Inflation Starting To Devalue Cash Savings

Inflation Starting To Devalue Cash Savings

As prices rise globally, the value of cash is starting to fall.

Those who hold cash savings are being warned that relative to the goods they can buy, their money is becoming worth less.

Customers are starting to feel the effects of global inflation through what they buy on the high street. At present, the U.K.’s inflation rate stands at 1.2% but it is predicted to rise to 2.4% next year.

Savers have already been hit hard by the tough environment of extremely low interest rates. Based off 3-month sterling Libor rates, £100,000 deposited into a bank in 2007 would have seen an extra £6,000 generated. The same scenario in 2015 would see just £575 generated. This figure has not yet even accounted for inflation lowering the real return value.

Those With Cash Urged To Invest In Equities

In an environment of inflation, equities bring about the best returns. Share prices as well as corporate revenues and earnings grow with inflation rather than being damaged by it.

This becomes clear when we look at inflation-adjusted figures showing the return on investment. Over the last 118 years, £1 saved in the form of cash would have brought in £3. £1 invested in Gilts would have earned twice this amount, £6. However, if the money had been placed in equities, namely the F.T.S.E. 100, the return would be a far greater £340.

The option advised for the highest possible returns is clearly equities. The obvious caveat is the increased risk. Many people are put off by the fact that they could actually lose money but the data suggests the risks of volatility are more short term. History has shown that over longer periods of time, investing in stocks has provided far and away the best returns.

Debbie Day.

Mobile : 07704 311021   Felixstowe Office : 01394 775711

deb.day@hoskinfinancial.co.uk  www.debbiedayifa.co.uk

THIS BLOG PROVIDES INFORMATION, IT IS NOT ADVICE. ANY OPINIONS ARE GIVEN IN GOOD FAITH AND MAY BE SUBJECT TO CHANGE WITHOUT NOTICE. OPINIONS AND INFORMATION INCLUDED WITHIN THIS EMAIL DO NOT CONSTITUTE ADVICE. (IF YOU REQUIRE PERSONAL ADVICE BASED ON YOUR CIRCUMSTANCES, PLEASE CONTACT US AT HOSKIN FINANCIAL