Weekly News Bulletin - 15/11/2021

Tax Free Savings

Chance of relief for doctors hit by LTA charges

Research by Quilter has found that over 400 doctors could still benefit from Lifetime Allowance (LTA) protection despite already falling foul of tax charges. FOI data showed 413 doctors paid over £11m in LTA charges that could still be recouped by retrospectively applying for Individual Protection 2016 (IP16). This rule enables individuals to protect their LTA from £1,000,000 up to a maximum of £1,250,000, based on the value of pension benefits at April 5, 2016. Although the protection should have been applied for before retiring, Quilter said the NHS Business Services Authority has agreed to implement a solution to help the impacted members. The Express

Pensions

State pension recipients to get a bonus next month - how much will you get?

The £10 Christmas bonus is automatically given to those on certain benefits but anyone claiming disability or state pension could be eligible for an extra financial boost. The payment will be marked on their bank statements as ‘DWP XB’. As Christmas falls on a Saturday this year, those expecting benefits payments and bonuses after the 25th will be receiving them on Friday December 24. The DWP has announced that the Christmas payments will commence and those eligible for the automatic payment will be receiving a letter informing them of when their bonus should be paid. Other benefits that are eligible for the bonus include: Armed Forces Independence Payment, Attendance Allowance, Carer’s Allowance, Child Disability Payment and Constant Attendance Allowance which are paid under the Industrial Injuries or War Pension schemes. Incapacity Benefit, Industrial Death Benefit, Unemployability Supplement or Allowance, Widowed Mother’s Allowance and Widowed Parent’s Allowance are also eligible. Daily Express

Govt closes pension age protection window without prior notice

The Government has closed the opportunity for people to transfer to a pension scheme that would offer pension age protection ahead of its planned minimum pension age hike. In its Finance Bill 2021/22 - published yesterday, the government announced savers will be stopped from switching to a new scheme with a protected pension access age of 55. The bill includes a clause to increase the normal minimum pension age from 55 to 57 from 6 April 2028 as confirmed last February. Economic Secretary John Glen said the change was not announced at the Autumn Budget, as it ordinarily would be, because prior notice of the shorter window “could have led to unnecessary turbulence in the pensions market and led to some consumer detriment.” He added that some pension savers could find themselves "with poorer outcomes, or even be the victim of a pension scam, if they were rushed by rogue advisers to make a quick transfer in the short time period before the window closed". FT Adviser

How to make your pension last 20 years – and pay less tax

A single pensioner needs on average £10,200 a year to live a "minimum level" lifestyle in retirement, according to the Pensions and Lifetime Savings Association. To reach a "moderate" standard of living, a pensioner will need on average £20,200 each year. Traditionally, those looking to secure a safe income in retirement would buy an annuity, but these schemes have fallen in popularity. Rates have dropped to such a level that most buyers are unlikely to receive even their initial investment back. Opting for drawdown can provide a higher level of retirement income, while using Isas and taking advantage of allowances can minimise the amount of tax paid. When you move into drawdown, you will have the option of taking 25pc as tax-free cash. The most tax-effective way to make a £355,000 pension pot last for two decades is to use a combination of this tax-free cash and taxable income to keep the amount drawn within the personal tax allowance, eliminating the need to pay income tax. As this is pension income, it will not be subject to National Insurance or the new Health and Social Care levy. At the age of 65, before the saver is eligible for state pension, they could take £7,630 tax-free and £12,570 of taxable income, the maximum allowed within the personal allowance and therefore not subject to income tax, according to Aviva. The Telegraph

Is my state pension being underpaid? How to check if yours is correct

The state pension is at the core of retirees’ income but hundreds of thousands of women have not been receiving the amount they are due every week, it has emerged. Many have been underpaid tens of thousands of pounds over years and have been needlessly living on a reduced stipend due to a major error made by the Government. The Department for Work and Pensions has promised to track down and reimburse 200,000 women, which will cost an estimated £2.9bn to put right. But it could take as long as five years for some to receive their money back, with the average windfall expected to be £13,789. In total, 74,000 married women are due to receive an average cash lump sum of £19,202 over the next five years. Many married women have missed out on a one-off increase in payments as the process of claiming an additional amount of state pension based on a husband’s records was only made automatic in 2008. Prior to this date women had to apply for the uplift. This means those who were unaware they could boost the state pension missed out. Anyone who suspects they have been receiving less state pension than they should have been entitled to should contact the Pensions Service directly at 0800 731 0469. The Telegraph

Britons urged to make use of 'breaks' as taxes rise - how to boost your returns

With Income Tax, National Insurance (NI), Capital Gains Tax (CGT), Inheritance Tax (IHT), dividend tax and the pensions lifetime allowance all getting more punitive, the tax bills people will pay £3,000 more on average as a result, think-tank the Resolution Foundation has calculated. Express.co.uk spoke exclusively with wealth manager Christine Ross about the most tax efficient ways to save, and how to boost returns. She said: “The most commonly claimed tax relief is that on pension contributions. Pension savings also grow tax free, and the accumulated fund does not form part of the estate for inheritance tax purposes. Pensions are probably the most efficient form of saving from a pure tax perspective." Additionally, Ms Ross mentioned Individual Savings Accounts (ISAs) as “simple and efficient” saving schemes. ISAs allow investment returns on contributions of up to £20,000 each year to be sheltered from tax. “A basic rate taxpayer is also entitled to a savings allowance of £1,000 each year, whilst for a higher rate taxpayer this is £500. There is also a dividend allowance of £2,000 each year that shelters income earned from shares up to this amount. “The capital gains tax (CGT) annual exemption allows profits on investments of up to £12,300 each year to be realised free of tax. She said: “Just by making full use of allowances (and ignoring pension tax relief or tax free returns from ISAs) a basic rate taxpayer can receive income and gains totalling almost £28,000 each year. Express

Property

House prices hit new high

The average house price topped £270,000 for the first time in October, according to the Halifax house price index. The introduction of the stamp duty relief last year helped to boost the market, and since then we’ve seen a shortage of building supplies and the rapid sale of new builds add to price pressures. “Developers can’t build quickly enough to sell into the strong market, particularly for family housing with outdoor space,” Jan Crosby, UK head of infrastructure, building and construction at KPMG, said. “There are some tentative signs that sourcing building materials is becoming more straightforward, but lead times can still be very long. Labour availability and wage inflation is now also on the sector’s radar.” Russell Galley, Halifax managing director, said expectations of an increase in interest rates could cause transaction numbers to ease. “With the Bank of England expected to react to building inflation risks by raising rates as soon as next month, and further such rises predicted over the next 12 months, we do expect house buying demand to cool in the months ahead as borrowing costs increase,” he said. The Times

Inheritance Tax 

Common mistake Britons are making with inheritance

Some people may choose to give some of their estate to charity, and this could bring various tax benefits. If you leave 10 percent of your estate to charity the rate of Inheritance Tax you pay on the rest of your estate is reduced. That gift to charity from your estate is free of Inheritance Tax too and the rate on the rest of the estate, after gifts and allowances, is reduced from 40 percent to 36 percent. Laura Suter, head of personal finance at AJ Bell discussed some of the key perks of leaving something for charity. “Depending on the size of the estate, the tax saving on offer can be more than half the amount of the charitable donation, meaning that the cost of giving to charity is vastly reduced. “For example, someone with a £900,000 estate would need to donate £90,000 to charity to be eligible for the reduction in IHT. The IHT bill with no charitable donation would be £230,000 but after the donation it would be £174,000 – saving £55,400. Express