The New Fiver was unveiled at Blenheim Palace on 2 June and will be shown to the public at a number of events across the UK this summer.
The New Fiver will enter circulation on 13 September. It will then take a few weeks for the notes to spread across the country to shops, businesses and banks.
In May 2017 paper £5 notes will cease to be legal tender and will no longer be accepted by shops and banks.
Other notes and coins
The three Scottish banks are also printing their next £5 and £10 notes on polymer. Clydesdale Bank will be issuing a polymer £5 on 15 September, the Bank of Scotland on 4 October and RBS in November 2016. The Royal Mint will be issuing a new £1 coin in March 2017.
Future banknotes
The New Fiver is the first of the Bank of England’s new series of polymer notes, with the £10 and £20 notes to be replaced with polymer designs over the coming years.
New ten pound note
The new polymer £10 note featuring Jane Austen will enter circulation in summer 2017.
New twenty pound note
The new polymer £20 note featuring JMW Turner will enter circulation by 2020.
There are currently no plans to replace the £50 note featuring Boulton and Watt and we will announce the material for future £50 notes in due course.
The New Fiver has a number of security features which make it even harder to counterfeit. These include the see-through window and the foil Elizabeth Tower which is gold on the front of the note and silver on the back. You can learn more about these security features and how to check your notes here. Only a tiny proportion of notes are counterfeit – 0.0075% in 2015 – but we want to stay one step ahead of the counterfeiters and these new security features help us do this.
Last week the Bank of England turned up the heat on Landlords.
The Bank of England expressed concerns about Buy-to-Let Investment and lending levels. New rules have been proposed that aim to tighten requirements for landlords involved in investment properties and limit the amount that can be borrowed for these types of endeavours.
This reaction comes from recent suggestions that mass buy-to-let property management could have a destabilising effect on the UK economy.
The rules put a spotlight on lenders, encouraging them to require more extensive financial information from the potential landlord before granting a mortgage.
The requirements go beyond ensuring the rental income of the property is significantly higher than the mortgage payments (the income coverage ratio), to also considering an individual’s overall financial situation.
The Prudential Regulation Authority (PRA) – an arm of the Bank – has recommended that banks and building societies take account of:
all the costs a landlord might have to pay when renting out a property
any tax liability associated with the property
a landlord’s personal tax liabilities, “essential expenditure” and living costs.
a landlord’s additional income – where this is being used to support the borrowing. This income should be “verified”.
If adopted, the new rules could reduce lending to landlords by up to 20% over the next three years.
A 3% surcharge on stamp duty when some buy-to-let properties and second homes are bought will be levied from April 2016.
This means it will add £5,520 of tax to be paid when buying the average £184,000 buy-to-let property. The new charge would have hit 160,000 buyers if it had applied last year.
But, commercial property investors, with more than 15 properties, will be exempt from the new charges.
Stamp Duty on Selling Shares is 0.5% so why aren’t more investors buying property into companies and then selling the shares in the company!
Mortgage Interest
Mortgage Interest offset against property income will be restricted
2017/18
75% of the interest can be claimed in full and 25% will get relief at 20%
2018/19
50% of the interest can be claimed in full and 50% will get relief at 20%
2019/20
25% of the interest can be claimed in full and 75% will get relief at 20%
2020/21
100% will get only 20% relief
For a 20% tax payer that’s fine but for higher rate taxpayer it’s a disaster that will lead to them paying a lot more tax
These rules will not apply to Companies, Companies will continue to claim full relief.
Capital Gains
From April 2016, the higher rate of Capital Gains Tax will be cut from 28% to 20% and the basic rate from 18% to 10%.
There will be an additional 8% surcharge to be paid on residential property.
Capital Gains Tax on residential property does not apply to your main home, only to additional properties (for example a flat that you let out).
Wear & Tear
Landlords have been used to claiming 10% of rental income as a tax deductible wear and tear allowance, but that will change in April 2016.
The Wear and Tear Allowance for fully furnished properties will be replaced with a relief that enables all landlords of residential dwelling houses to deduct the costs they actually incur on replacing furnishings, appliances and kitchenware in the property.
The relief given will be for the cost of a like-for-like, or nearest modern equivalent, replacement asset, plus any costs incurred in disposing of, or less any proceeds received for, the asset being replaced.
What could a Property Investor do to reduce the impact of these changes?
Incorporation – could you save money by incorporating your residential investments, would you qualify for incorporation tax relief
Pension Contributions – Pension Contributions currently receive tax relief at your rate of tax – 20% to 45% – so if you are a 40% tax payer you would need pay half the value of your 20% restricted interest into your pension to mitigate the extra tax
Change of Use – would your Buy to Let be able to be converted to a Furnished Holiday Let? or another type of commercial property on which the interest restriction won’t apply
Increasing the Rent – Could you charge more to cover the extra taxes?
Spouse Income Tax Elections – If the property is jointly held HMRC assume a 50/50 split of the income but you can change that using Form 17 this might be useful if one of you is a basic rate taxpayer and the other a higher rate taxpayer
Tax Deductible Expenses – Many landlords overlook expenses at the moment but they could become a lot more important, for example, use of your home, motor expenses, computers, travel and subsistence, phone costs etc
The Bank of England and HM Treasury have announced a two-year extension to the Funding for Lending Scheme.
The Bank and HM Treasury launched the Funding for Lending Scheme (FLS) on 13 July 2012. The FLS is designed to incentivise banks and building societies to boost their lending to the UK real economy. It does this by providing funding to banks and building societies for an extended period, with both the price and quantity of funding provided linked to their lending performance.
The FLS allows participants to borrow UK Treasury Bills in exchange for eligible collateral, which consists of all collateral eligible in the Bank’s Discount Window Facility.
The Bank and HM Treasury announced an extension to the FLS on 24 April 2013, which was amended on 28 November 2013, on 2 December 2014 and on 30 November 2015. This allows participants to borrow from the FLS until January 2018, with incentives to boost lending skewed towards small and medium sized enterprises (SMEs).
Andy Haldane (Executive Director for Financial Stability at the Bank of England and nominee for Governor) has been working with Long Finance/ACCA/CISI on a new method of accounting – Confidence Accounting.
In a world of Confidence Accounting, the end results of audits would be presentations of distributions for major entries in the profit and loss, balance sheet and cash flow statements. Accountants would present uncertainties as ranges to investors and managers, rather than as discrete numbers: ‘the balance sheet of Company X is worth £Y, plus or minus £Z, and we are 95% confident that it falls within this range’. Auditors would verify these ranges. This would move auditing towards ‘measurement science’, in line with the way most laboratories report measurements. Audited accounts would be presented in a probabilistic manner, showing ranges. Over time, investors could evaluate an audit firm on the basis of how closely historic accounts fell within the stated ranges. Such evaluations might conclude that firms were too lax or too strict. Clients would be able to make their own decisions about audit quality on the basis of historic evidence rather than having to rely on assertions of quality.
This sounds like a good approach to me, especially for larger businesses where lots of assumptions are taken in preparing the accounts.
Economic prosperity requires businesses to be financially robust and that requires sound financial reporting, this could definitely play a key role in achieving that.
