Weekly News Bulletin - 13/12/2021

Savings

Zopa to exit peer-to-peer lending

Zopa has announced it will close its peer-to-peer lending operations in the new year. The original peer-to-peer lender has been in business since 2005, but it now says it plans to focus on its growing bank and credit card business. Zopa gained a full banking licence last year and now offers savings accounts and credit cards, as well as offering energy and broadband switching. Zopa CEO Jaidev Janardana announced the news in a blog post: “After 16 years of peer-to-peer (P2P) investments at Zopa, we have taken the decision to close our retail investing business. This has been a tough decision, and not one we have taken lightly. “We deliberated several options for how to close the P2P side of our business in a way that delivers the best outcome for our customers. After careful consideration, we have decided that the best way forward is the sale of all retail investor portfolios at full value. This will lock in the interest earned by investors so far and ensure the timely return of their money. “To make this as smooth as possible, Zopa Bank will be buying the P2P loan portfolio and P2P customers will receive their investment balances back by the end of January.” YourMoney.com

You could be £760 a year better off under Rishi Sunak’s proposed income tax cut

Rishi Sunak is reportedly planning to cut income tax by 2p in the pound before the next general election, with the Chancellor also weighing a VAT reduction, having this week urged the public to trust that he would deliver tax cuts before they go to the polls in 2024. Mr Sunak has reportedly asked that officials draw up ten options for reducing taxes, with it said that the Chancellor’s preferred option would be cutting income tax over the next three years. While the list of possible tax cuts outlines ten options, sources say those focused on income tax, VAT and inheritance tax are being assessed in more detail. It has been suggested that the tax cut could come in stages, with basic rate tax thresholds dropping from 20% now to 19% in 2023 and 18% by 2024. If basic rate tax charges drop to 18%, someone earning the average salary would save £356 a year in income tax, while anyone earning £50,270 or more could save £760 a year. Asked for comment on the potential tax cuts first reported in Saturday’s Times, a Treasury spokesperson said: “We keep the tax system under constant review. And as the Chancellor made clear at the Budget, by the end of this parliament we want taxes to be going down not up.” City A.M. Sunday Express The Independent The Mail on Sunday The Sun

Pensions

Over 1m workers do not plan to retire

A study by Canada Life has found that 6% of UK workers, equivalent to over a million people, believe they will never retire. The research also found 44% of workers, equivalent to 17.1m people, think that they will work beyond state pension age. Of those expecting to work beyond state pension age, 43% believed that their pension would not be sufficient to retire fully and will need to continue earning money. Meanwhile, 22% said they would continue to work as they were unsure how long their retirement savings would last, while 10% felt prepared but were concerned that they current lifestyle meant it would be too expensive for them to retire. Pensions Age

Rishi Sunak’s ‘scary’ 55% pension tax raid set to ‘bite’ - what to do if you’re at risk

The Pensions Lifetime Allowance (LTA) may not be an issue many people give much thought to, but it could be devastating. It is set as the maximum a person can hold in personal and workplace pensions over their lifetime. While previous versions of the LTA were held at around £1.8million, cuts have seen the sum drop to £1,073,100. If this sum is breached, then a person could incur a 55 percent tax bill. Clare Munro, senior tax adviser at Weatherbys Private Bank shared a number of options Britons have if their pension is close to the limit. She said “The charge does not bite the instant you hit the LTA, however. Funds are tested when you start to take benefits and there’s only a charge when the benefits taken aren’t covered by the remaining LTA." People might be able to look into the idea of single premium offshore investment bonds, as these allow tax-free roll ups of the fund during the Bond’s life. Income tax is due on the growth at maturity. The expert also pointed towards other courses of action, and said: “Venture capital trusts, enterprise investment schemes and seed enterprise investment schemes also offer an alternative route for savings.” Daily Express

Property

Property market poised to be busiest since 2006

Figures from UK Finance show that 2021 is on course to be the strongest year for UK home-buying activity since 2006. The trade body said that while the first few months of the pandemic led to predictions that sales would stagnate, the reality was very different, with “Covid-era activity set to eclipse everything since the credit crunch”. The figures come hard on the heels of forecasts from the property website Zoopla and other commentators that 2021 would be the UK's busiest year for the housing market since 2007. While official figures have shown that the number of house sales tumbled in the weeks immediately after the end of the stamp duty holiday, which finished on 30 September, this followed a record surge in activity during the latter half of 2020 and earlier this year. In its latest household finance review, covering the period July to September this year, UK Finance said: “Barring a complete reversal of the current picture, purchase transactions in 2021 will reach their highest level seen since the peak in 2006, just before the global financial crisis [of 2007–08].” The Guardian

Home movers panic buy in ‘property hotspots’ they have never visited

Some buyers only viewed a property on video before purchasing. Home movers are panic buying in property hotspots because of an "agonising" shortage of homes for sale, defying predictions the market would cool in the run up to Christmas. Estate agents have reported a fall in new homes for sale for the eighth month in a row, according to a survey by the Royal Institution of Chartered Surveyors, a trade body. Simon Hollis, a chartered surveyor in Yorkshire, said the number of properties on the market had halved in the space of six weeks. Tracey Bullen, a chartered surveyor in Cornwall, which overtook London as the most searched-for location by buyers earlier this year, said house hunters were bidding without even viewing the property in person. "Potential purchasers are viewing homes from videos and putting in offers above the asking price to secure a move to the county," she said. The Daily Telegraph

Inheritance tax

Inheritance tax update as HMRC issues new guidance on gifting

With just two weeks to go until Christmas, the Government has issued new guidance on how much Britons can gift before incurring inheritance tax. HMRC says the following gifts are exempt from inheritance tax: Assets passed to a spouse or civil partner. Gifts to qualifying charities, housing associations, and other exempt organisations. Potentially exempt transfers (gifts made seven years before the person died) Gifts of £3,000 or less in any tax year. Small gifts of £250 or less. Wedding and civil partnership gifts. Regular gifts or payments that are part of your normal expenditure and made out of income. Daily Express

Economy

Economic growth stutters before impact of Omicron

The UK economy grew by just 0.1% in October, official figures show, despite a strong performance by the health sector and second-hand car sales. A fall in people dining out in restaurants and reductions in oil extraction and gas use meant growth came in lower than expected. Growth was stalling even before the emergence of the Omicron variant. One economist said the figures showed the "steam has well and truly been taken out of the UK economic recovery". Maike Currie, investment director at Fidelity International, warned October might be the "closest the economy gets to reaching 'normal levels' until deep into 2022". "Supply chain issues, worker shortages and surging inflation put the dampeners on growth in October," she said. Ms Currie added there was a "creeping sense of déjà vu" over the impact Covid was having on the economy, with the government reintroducing some coronavirus restrictions in a bid to limit the spread of the new variant. "Workers are heading back to their kitchen tables and the big festive season that retailers and the hospitality sector had their hopes pinned on - while starting on a high during Black Friday - might not have as much sparkle as hoped," she said. BBC News