How does a lifetime ISA work? Reply

Budget 4

The Budget announced that from 6 April 2017 any adult under 40 will be able to open a new Lifetime ISA. They can save up to £4,000 each year and will receive a 25% bonus from the government on every pound they put in.

This is why you should get one!

  1. 25% Bonus – free money is always good
  2. It encourages you to save – building up savings for a house or retirement will definitely be of benefit
  3. The under 40’s will probably see this as better than a pension plan, as you can’t access pensions until you are 55

Personally Pensions are still my favourite…

Lets say you invest £10,000 per year of earned gross income, increasing each year by 3% for inflation and see the effect of tax relief at 40% and 20%, assuming a return on the investment of 7% (which you should get with Commercial Property Investment)

40% Tax Rate 20% Tax Rate
Year Pension No Pension % Diff Year Pension No Pension % Diff
1 £10,700 £6,252 71% 1 £10,700 £8,336 28%
2 £22,470 £12,954 73% 2 £22,470 £17,272 30%
3 £35,395 £20,131 76% 3 £35,395 £26,841 32%
4 £49,564 £27,808 78% 4 £49,564 £37,078 34%
5 £65,077 £36,013 81% 5 £65,077 £48,017 36%
6 £82,036 £44,773 83% 6 £82,036 £59,698 37%
7 £100,555 £54,119 86% 7 £100,555 £72,158 39%
8 £120,754 £64,081 88% 8 £120,754 £85,441 41%
9 £142,761 £74,692 91% 9 £142,761 £99,590 43%
10 £166,715 £85,987 94% 10 £166,715 £114,649 45%
11 £192,765 £98,000 97% 11 £192,765 £130,667 48%
12 £221,070 £110,771 100% 12 £221,070 £147,694 50%
13 £251,801 £124,337 103% 13 £251,801 £165,782 52%
14 £285,140 £138,740 106% 14 £285,140 £184,987 54%
15 £321,285 £154,024 109% 15 £321,285 £205,365 56%
16 £360,445 £170,233 112% 16 £360,445 £226,978 59%
17 £402,846 £187,416 115% 17 £402,846 £249,888 61%
18 £448,731 £205,621 118% 18 £448,731 £274,161 64%
19 £498,358 £224,901 122% 19 £498,358 £299,868 66%
20 £552,006 £245,309 125% 20 £552,006 £327,079 69%

Even when you consider:

  • Your money is locked up till you are 55
  • You pay tax when you take money out of the pension
  • You can get 25% out of the pension tax free

The difference in growth is massive

If you do salary sacrifice you can increase the tax effect by saving national insurance too.

steve@bicknells.net

Home Buyers have saved £657m in SDLT! Reply

One family house for sale

In the 12 months since December 2014 when new SDLT rules came into place home buyers have saved an estimated £657m in Stamp Duty (SDLT).

The Autum Statement 2014 announced the following change to Stamp Duty.

• No stamp duty will be paid on the first £125,000 of a property
• 2% will be paid on the portion up to £250,000
• 5% is paid for the portion up to £925,000
• 10% is paid on the portion up to £1.5m
• 12% is paid on anything above that

HMRC have a handy calculator, here is link

http://www.hmrc.gov.uk/tools/sdlt/land-and-property.htm

New analysis released by HMRC shows that the benefits of this reform have been felt across the country, with homebuyers saving an estimated total of:

  • £24 million in the North East or £900 for the average house
  • £90 million in the North West or £700 for the average house
  • £74 million in the East Midlands or £500 for the average house
  • £131 million the South West or £4,800 for the average house
  • £38 million in Wales or £800 for the average house

steve@bicknells.net

10 ways to pay less income tax Reply

Pay Packet And Banknotes

Income Tax is a tax you pay on your income. You don’t have to pay tax on all types of income.

You pay tax on things like:

  • money you earn from employment
  • profits you make if you’re self-employed – including from services you sell through websites or apps
  • some state benefits
  • most pensions, including state pensions, company and personal pensions and retirement annuities
  • interest on savings and pensioner bonds
  • rental income (unless you’re a live-in landlord and get £4,250 (£7,500 from April 2016) or less)
  • benefits you get from your job
  • income from a trust
  • dividends from company shares

So how can you pay less income tax?

Here are 10 suggestions…

  1. Pension

When you pay into a pension you get income tax relief on your contributions .

Lets say you invest £10,000 per year of earned gross income, increasing each year by 3% for inflation and see the effect of tax relief at 40% and 20%, assuming a return on the investment of 7% (which you should get with Commercial Property Investment)

40% Tax Rate 20% Tax Rate
Year Pension No Pension % Diff Year Pension No Pension % Diff
1 £10,700 £6,252 71% 1 £10,700 £8,336 28%
2 £22,470 £12,954 73% 2 £22,470 £17,272 30%
3 £35,395 £20,131 76% 3 £35,395 £26,841 32%
4 £49,564 £27,808 78% 4 £49,564 £37,078 34%
5 £65,077 £36,013 81% 5 £65,077 £48,017 36%
6 £82,036 £44,773 83% 6 £82,036 £59,698 37%
7 £100,555 £54,119 86% 7 £100,555 £72,158 39%
8 £120,754 £64,081 88% 8 £120,754 £85,441 41%
9 £142,761 £74,692 91% 9 £142,761 £99,590 43%
10 £166,715 £85,987 94% 10 £166,715 £114,649 45%
11 £192,765 £98,000 97% 11 £192,765 £130,667 48%
12 £221,070 £110,771 100% 12 £221,070 £147,694 50%
13 £251,801 £124,337 103% 13 £251,801 £165,782 52%
14 £285,140 £138,740 106% 14 £285,140 £184,987 54%
15 £321,285 £154,024 109% 15 £321,285 £205,365 56%
16 £360,445 £170,233 112% 16 £360,445 £226,978 59%
17 £402,846 £187,416 115% 17 £402,846 £249,888 61%
18 £448,731 £205,621 118% 18 £448,731 £274,161 64%
19 £498,358 £224,901 122% 19 £498,358 £299,868 66%
20 £552,006 £245,309 125% 20 £552,006 £327,079 69%

Even when you consider:

  • Your money is locked up till you are 55
  • You pay tax when you take money out of the pension
  • You can get 25% out of the pension tax free

The difference in growth is massive

If you do salary sacrifice you can increase the tax effect by saving national insurance too.

2. ISA

Individual Savings Accounts have been around for a few years and very soon the Help to Buy ISA will be launched

Help to Buy ISA

Top 10 facts and rules…

  1. Its only available to ‘First Time Buyers’
  2. ‘First Time Buyers’ can only have one Help to Buy ISA with one provider
  3. You can pay in £1,000 when you open the account and then save a maximum of £200 per month
  4. The maximum government bonus is £3,000 (but you can lower amounts of bonus if you have less than £12,000)
  5. The scheme will run for 4 years from the date it opens (Autumn 2015)
  6. Couples can have a Help to Buy ISA each which means if they don’t want to wait 4 years could save £12,000 in 25 months where as a single saver would need 55 months
  7. Unlike ISA’s where you open one per year, the Help to Buy ISA will continue for 4 years
  8. You can withdraw funds but if its not to buy a home then you won’t get the bonus
  9. More than 100,000 homes have now been bought with government backed schemes
  10. You will be able to get them at banks and building societies

3. Salary Sacrifice

Salary Sacrifice is a very tax efficient way to give your employees benefits and the most popular benefits are Pensions and Childcare. I wrote a blog back in 2011 which explained how it can save 45.8% in tax and NI

HMRC decided on 9th April 2013 that it was time to “clarify”  in their Manuals what are successful and unsuccessful salary sacrifice schemes and have added some further guidance. Their Staff are instructed not to approve schemes (Employment Income Manual EIM42772)….

You (HMRC) may get requests for advice:

  • on how to set up a salary sacrifice arrangement, or
  • on whether draft documentation will achieve a successful salary sacrifice.

You (HMRC) should not comment on either of these areas. Salary sacrifice is a matter of employment law, not tax law. The nature of an employee’s contract of employment is a matter for the employer and employee.

The specific updates are:

EIM42750 – Salary Sacrifice – updated – this contains the examples of schemes

EIM42777 – Contractual arrangements – this has interesting comments on childcare and pensions

4. Employment Expenses

As an employee you can claim tax relief for expenses incurred in doing your job, for example business mileage, cycling on business, hotels, meals, business phone calls, in fact anything as long as its business related

If your claim is less than £2500 you can make your claim using Form P87 http://www.hmrc.gov.uk/forms/p87.pdf if its more than £2500 you will need to complete a Self Assessment Return (you need to phone HMRC to request a Self Assessment Return – contact details below), if you know your UTR number you can register and file your Self Assessment Return on line.

5. Dividends

When you take dividends has never been more critical due to changes in the Summer Budget 2015, so if you have distributable reserves you might want to take more dividends this tax year, try the Dividend Calculator above to see how much difference it could make.

Dividend Calculator 2

6. Tax break for Couples

A new tax break as launched this week from 6 April 2015, which will be eligible to more than 4 million married couples and 15,000 civil partnerships.

The Allowance means a spouse or civil partner who doesn’t pay tax – therefore is not earning at all or is earning below the basic rate threshold (£10,600) – can transfer up to £1,060 of their personal tax-free allowance to a spouse or civil partner – as long as the recipient of the transfer doesn’t pay more than the basic rate of income tax.

7. Tax Free Benefits

Getting tax free benefits will save you lots of tax, here some ideas…

  1. Pensions – Up to £40k can be paid in to you pension scheme by your employer (2015/16)  and you can use carry forward to pay in even more
  2. Childcare – Up to £55 per week but check the rules to makesure your childcare complies (HMRC Leaflet IR115) – these rules are changing soon.
  3. Mobile Phone – One per employee
  4. Lunch – Tax Free Lunch Blog
  5. Cycle Schemes – Cycle to Work Blog
  6. Fitness – Fitness Blog
  7. Parties and Gifts – Christmas Blog
  8. Parking – Parking Blog
  9. Business Mileage Allowance – 45p for the first 10,000 miles then 25p
  10. Long Service Award – A bit restrictive as you need 20 years service, the tax free amount is £50 x the number of years
  11. Eye Tests and Spectacles – The Eye Test must be needed under the Health & Safety at Work Act
  12. Suggestion Schemes – Suggestion Scheme Blog
  13. Insurance such and Death in Service and Income Protection – Medical Insurance Blog
  14. Travel Expenses – Travel Blog
  15. Working From Home – Working from Home Blog

8. Earn less than £100k

Your Personal Allowance goes down by £1 for every £2 that your adjusted net income is above £100,000. This means your allowance is zero if your income is £121,200 or above.

9. Green Company Car

A calculator is available here: http://www.hmrc.gov.uk/calcs/cars.htm and rates are shown in the table below for zero emission vehicles and some of the lower CO2 vehicles.

BIK CO2

10. Check your P800

The P800’s are likely to contain errors because:

  1. Large amounts of data are manually input
  2. Estimates especially for Bank Interest and Investment Income

So check the following carefully:

  1. P60 – you get this at the end of each tax year
  2. P45 – you get this when you leave a job
  3. PAYE Coding Notice
  4. P11D Expenses and benefits
  5. P9D Expenses payments and income from which tax cannot be deducted
  6. Bank and Building society statements
  7. Pension Tax Deductions

Its expected that around 3 million people will be asked to pay more tax and around 2 million people will have overpaid.

 

steve@bicknells.net

Contact Us

Will automatic planning consent lead to more homes? Reply

Group of construction workers. House renovation.

Housing and home ownership are a top priority in the UK and last week new proposals were announced in the Productivity Plan (see page 11 section 9)

The UK has been incapable of building enough homes to keep up with growing demand. This harms productivity and restricts labour market flexibility, and it frustrates the ambitions of thousands of people who would like to own their own home. The government will:
  • introduce a new zonal system which will effectively give automatic permission on suitable brownfield sites
  • take tougher action to ensure that local authorities are using their powers to get local plans in place and make homes available for local people, intervening to arrange for local plans to be written where necessary
  • bring forward proposals for stronger, fairer compulsory purchase powers, and devolution of major new planning powers to the Mayors of London and Manchester
  • extend the Right to Buy to housing association tenants, and deliver 200,000 Starter Homes for first time buyers
  • restrict tax relief to ensure all individual landlords get the same level of tax relief for their finance costs

Automatic planning consent on Brownfield sites, when approved, follows a number of other important incentives such as the Starter Homes initiative 20% discount.

The 20% discount is achieved by waiving local authority fees for homebuilders of at least £45,000 per dwelling on brownfield sites.

At the heart of the Starter Homes initiative is a change to the planning system. This will allow house builders to develop under-used or unviable brownfield land and free them from planning costs and levies. In return, they will be able to offer homes at a minimum 20% discount exclusively to first time buyers, under the age of forty.  Under the proposals, developers offering Starter Homes would be exempt from those Section 106 charges and Community Infrastructure Levy charges. The homes could then not be re-sold at market value for a fixed period – making sure that the savings are passed onto homebuyers.Gov.uk

To qualify first time buyers must be under the age of 40 and living in England.

Also the Help to Buy ISA for first time buyers where they could qualify for a £3,000 bonus

Help to Buy ISA

There is also the Help to Scheme where home buyers may only need a 5% deposit

With a Help to Buy: equity loan the Government lends you up to 20% of the cost of your new-build home, so you’ll only need a 5% cash deposit and a 75% mortgage to make up the rest.

You won’t be charged loan fees on the 20% loan for the first five years of owning your home.

– See more at: http://www.helptobuy.org.uk/equity-loan/equity-loans#sthash.Vna08ZpX.dpuf

steve@bicknells.net

How do Help to Buy ISA’s work? 3

Help to Buy ISA

 

Top 10 facts and rules…

  1. Its only available to ‘First Time Buyers’
  2. ‘First Time Buyers’ can only have one Help to Buy ISA with one provider
  3. You can pay in £1,000 when you open the account and then save a maximum of £200 per month
  4. The maximum government bonus is £3,000 (but you can lower amounts of bonus if you have less than £12,000)
  5. The scheme will run for 4 years from the date it opens (Autumn 2015)
  6. Couples can have a Help to Buy ISA each which means if they don’t want to wait 4 years could save £12,000 in 25 months where as a single saver would need 55 months
  7. Unlike ISA’s where you open one per year, the Help to Buy ISA will continue for 4 years
  8. You can withdraw funds but if its not to buy a home then you won’t get the bonus
  9. More than 100,000 homes have now been bought with government backed schemes
  10. You will be able to get them at banks and building societies

Money Saving Expert has some useful Q&A including this one….

A first-time buyer is someone who does not and has never owned an interest in a residential property, either inside or outside the UK.

Many people have said “I owned a property previously but now rent”, “I have a shared ownership property” or “I have inherited a property” can I still open a Help to Buy ISA? And the answer is NO – you have to be a first-time buyer to open one.

steve@bicknells.net

New ‘Starter Homes’ scheme gives 20% discount! Reply

Group of construction workers. House renovation.

The 20% discount is achieved by waiving local authority fees for homebuilders of at least £45,000 per dwelling on brownfield sites.

At the heart of the Starter Homes initiative is a change to the planning system. This will allow house builders to develop under-used or unviable brownfield land and free them from planning costs and levies. In return, they will be able to offer homes at a minimum 20% discount exclusively to first time buyers, under the age of forty.  Under the proposals, developers offering Starter Homes would be exempt from those Section 106 charges and Community Infrastructure Levy charges. The homes could then not be re-sold at market value for a fixed period – making sure that the savings are passed onto homebuyers.Gov.uk

To qualify first time buyers must be under the age of 40 and living in England.

 

steve@bicknells.net

Will property prices go up because of changes to stamp duty? Reply

4880157508_dd2f144a45_m

The big news in the Autum Statement was the change to Stamp Duty.

• No stamp duty will be paid on the first £125,000 of a property
• 2% will be paid on the portion up to £250,000
• 5% is paid for the portion up to £925,000
• 10% is paid on the portion up to £1.5m
• 12% is paid on anything above that

HMRC have a handy new calculator, here is link

http://www.hmrc.gov.uk/tools/sdlt/land-and-property.htm

There are also more details at https://www.gov.uk/government/publications/rates-and-allowances-stamp-duty-land-tax/rates-and-allowances-stamp-duty-land-tax

98% of all buyers will pay less tax under the new system

Will this lead to big increases in property values?

steve@bicknells.net

Will new mortgage rules slow down the property market? 1

Mosaïque de logements

From May 2014 getting a mortgage will be a little bit harder.

The changes, brought in by the Financial Conduct Authority (FCA), mean lenders must ensure borrowers only get a mortgage they can afford.

The changes are:

  1. You will be asked to set out your financial commitments in more detail
  2. The application process will take up to 4 times longer (according to Money Saving Expert)
  3. New Borrowers will be stress tested for affordability
  4. Remortgages will become harder to obtain because of the stress tests

You can get further details from the FCA

Money Saving Expert have a useful Mortgage Calculator

Will this slow down the housing market?

steve@bicknells.net

Will ‘Help to Buy’ cause a housing market boom? 2

Home Office

Help to Buy was due to start in January 2014 but it’s been brought forward to start this week.

Here is a link to the 2013 Budget Info Graphic explaining how it works (the rules have been changed a little but it’s a good outline) – HM Treasury

Here is David Cameron announcing the scheme on the BBC on Sunday 29th September

A Help to Buy mortgage guarantee lets you buy a newly built home or an existing property with a deposit of only 5% of the purchase price.

Help-to-Buy will initially be available under the Nat West, RBS and Halifax brands.

Help to Buy mortgage guarantees will be open for loans not only to first time buyers but also to existing homeowners, and be available on new and existing houses with a value of up to £600,000. Buyers must have a 5% deposit.

The Government will guarantee the next 15% of the loan for a fee.

The Help to Buy mortgage guarantee will increase the supply of high loan-to-value mortgages.

The plan has drawn criticism from the International Monetary Fund and Business Secretary Vince Cable, who say it may spark a property bubble.

What do you think?

steve@bicknells.net