Actually, this isn’t a blog about the Mona Lisa its actually about Lifetime Investment Savings Accounts (LISA).
LISA’s are available from April 2017 and are a retirement saving option.
Save up to £4000 per year
You must be aged between 18 and 40
Anything paid in will be topped up by 25% at the age of 50
Over the age of 60 you can take out all the money tax free
If you take it before 60 you lose the 25% bonus and get a 5% charge
Personally, I don’t think they sound great, if you want to save for retirement why not just save in a pension?
If you want to save in a bank why not just use the Personal Savings Allowance which started in April 2016.
The PSA will apply to all non-ISA cash savings and current accounts, and will allow some savers to receive a generous portion of their interest totally free of tax.
Its expected that 95% of savings will no longer be taxed.
Basic rate taxpayers will receive £1,000 in savings income tax free, higher rate taxpayers get a band of £500 and additional rate tax payers get nothing.
From April 2016 the new Personal Savings Allowance (PSA) will start.
The PSA will apply to all non-ISA cash savings and current accounts, and will allow some savers to receive a generous portion of their interest totally free of tax.
Its expected that 95% of savings will no longer be taxed.
Basic rate taxpayers will receive £1,000 in savings income tax free, higher rate taxpayers get a band of £500 and additional rate tax payers get nothing.
The current TDSI (tax deduction scheme for interest) will stop.
More and more office based workers are now working from home and the employers are focusing on Output rather than hours. For generations work has meant 8 hours per day at your desk but that’s changing.
Switching from office based to home based is best done in stages, starting with a couple of days home based and building up.
Increasing the numbers of UK employees working from home can cut costs by £3 billion a year for UK employers and employees and save over 3 million tonnes of carbon a year, according to a report released in May 2014 by the Carbon Trust.
Advances in technologies such as broadband internet, smart phones and cloud computing mean that many jobs can now be done effectively outside of traditional workplaces. This has resulted in a significant increase in the number of UK employees who work from home, with the total now standing at over 4 million out of a workforce of 30 million.
Investigating the potential environmental benefits of a further shift to homeworking, the new research concluded that, if adopted and encouraged by employers across the country, homeworking could result in annual savings of over 3 million tonnes of carbon and cut costs by £3 billion.
Over 40 per cent of UK jobs are compatible with working from home, but recent research by the Carbon Trust has found that only 35 per cent of companies have a policy allowing their employees to work from home. And where homeworking is offered by companies, between one-third and one-half choose not to accept it.
Homeworking reduces employee commuting, resulting in carbon, money and time savings. If office space is properly rationalised to reflect this, homeworking can also significantly reduce office energy consumption and rental costs.
It is estimated that UK employees save an average of £450 per year if they work from home for 2 days a week.
A UK employer could save around £280 per homeworker per year (according to Indicator).
Ian Foddering, Chief Technology Officer & Technical Director at Cisco UK & Ireland, said:
“By 2018, there will be over 10 billion mobile-connected devices globally, as such, telecommuting will not only become commonplace but is already in the progress of fast becoming the most natural way for people to work and collaborate globally. Cisco has aggressive targets to reduce greenhouse gas emissions from our operations and suppliers worldwide, and telecommuting is helping us to achieve these goals.
“The average Cisco employee telecommutes 2 days a week, and those using our Cisco Virtual Office technology typically work from home 3 days each week. In total, this amounts to avoiding 35 million miles of commuting per year. Not only is this great for the environment, reducing Cisco’s CO2 emissions by 17,000 tonnes annually, but it’s also great for business, with an estimated $333 million per year made in productivity savings.
“Although some organisations may experience cultural barriers in adopting telecommuting, we believe our experience at Cisco demonstrates the real benefits to the environment, the business and the individual employee.”
Employers are also saving £6k by opting for Freelancers…
A survey by PeoplePerHour has shown that the self-employed segment of the labour market in both the UK and USA is growing at a rate of 3.5% per year – faster than any other sector. Should this growth continue for the next five years, researchers predict that half of the working population could be self-employed freelancers by 2020.
The survey also suggests that small businesses that hire freelancers instead of full-time employees could save £6,297.17 per annum. The survey shows that the average waste or spare capacity for each employee in a SMEs is 1.9 hours per day.
The research identifies a number of key drivers behind the shift from employment to self-employment, including “the availability of ubiquitous and inexpensive computing power, sophisticated applications and cloud-based services“. [Lawdonut]
The limits for Junior ISAs and Child Trust Funds have already been increased from £3,700 to £4,000.
From July, restrictions on corporate bonds and gilts will have the 5 year rule removed allowing you to invest in short dated securities such as Retail Bonds.
There are plans to enable Peer-to-Peer loans to be held in NISA’s but that’s still in the consultation stage.
Between now and July the most you can invest in an Cash ISA is £5,940.
Many parents, grandparents and other family members like to save for children but are you paying tax on the interest?
The £100 Rule
HMRC Form R85 is used to claim interest tax free but what you might not realise is that despite your child having a personal tax allowance from birth there is a maximum of £100 per year which can earned tax free in interest and dividends earned on parental/family gifts.
So for 2 parents that’s £200 plus grandparents have the same exemption, but if the interest exceeds the limit even by a small amount, the exemption is lost and whole amount of interest becomes taxable.
Junior ISA
Children can have an ISA in their name, the maximum annual contribution limit is £3,720 (2013/14) in cash or shares but the money will be locked in until the child is 18. The £100 rule doesn’t apply to ISA’s.
Pension
Yes, crazy as it might sound your baby can start a pension plan.
You can receive 20% tax relief even if you don’t pay tax. The maximum you can contribute is £3,600 gross – a payment of £2,880 to which the taxman adds £720. This is the case even for people who don’t pay tax, such as children and non-earning spouses.
I have been looking at the Tax Relief impact on Pension Investments
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.