Weekly News Bulletin - 21/02/2022
TAX FREE SAVINGS
ISA season: Rising inflation bolsters case for IFISAs
As we approach ISA season, investors have been urged to make the most of their tax-free allowance by using wrappers such as the Innovative Finance ISA (IFISA). With soaring inflation eroding the value of savings and cash ISAs, the case for investing in inflation-busting products such as peer-to-peer loans and stocks and shares has never been greater. Current rules mean that investors can only opt for one type of ISA a year, although they can transfer old ISA money into a new wrapper. P2P Finance News
How to make the most of your tax allowances
With the end of the tax year looming, many are concerned about whether they are using their tax allowances to the best of their advantage. Pensions - For 2021/22, the annual allowance is £40,000 which means that you only start paying tax on your pension once you go above this amount. Savings and investments - The current ISA allowance is £20,000 for 2021/22, which means any sums up to that amount are exempt from income tax on cash interest payments. Dividend income - Taxpayers are given a £2,000 allowance for dividend income on top of the personal income tax allowance of £12,570. Capital gains - Tax is charged on the increase in the value of the asset only and the personal allowance is £12,300 at present. Assets which are owned jointly with another person's allowances can be combined, meaning up to £24,600 of any gain is tax-free this year. Salary sacrifice - Some companies run schemes which allow employees to give up their gross income in return of a benefit or product, these schemes reduce your taxable income. Other tax-efficient investments - There are more specialist and higher-risk tax-efficient investments, such as venture capital trusts (VCTs) and enterprise investment schemes (EIS), which offer generous tax breaks to encourage investment into smaller, newer companies. Yahoo Finance
SAVINGS
Money tips: The £3 energy saving hack to save over £370 on your bills
Taking action to reduce energy bills needn't break the bank. Norton Finance has ranked six money saving tips. The research shows how mid-terrace households could save nearly £5,500 on fuel bills within five years. 1. Draught-proofing. This is one of the “cheapest and most effective ways” to save energy and money. DIY (Do it yourself) draught-proofing starts at just over £3 for a roll of self-adhesive draught-excluding tape. 2. Roof insulation. The loft of a mid-terrace house costs around £285 to insulate with 270mm insulation, saving over £1,100 on bills after five years. 3. Wall insulation. Insulating the walls of an average mid-terrace house costs under £400, with savings of over £900 after five years. 4. Upgrade your boiler. If someone needed to replace their boiler, a new model could cost around £2,500, but they could save almost £1,600 on bills within five years if they are in a mid-terrace house. 5. Double glazing. 6. Install solar panels. Daily Express
5 ways to save money for a house - without giving up coffee or Netflix
1. Make use of your ISA allowance. 2. Track and identify how much you’re spending on non-essentials - Curb non-essential spending by sitting down with your bank statements and analysing where your pay goes each month. 3. Follow the 80/10/10 saving hack - Gordon D’Silva from Gordon’s Knight Ltd said: “Live to the 80/10/10 rule, where you learn (and plan) to spend up to 80 percent of what you earn, save 10 percent for emergencies and 10 percent for a long-term goal. 4. Learn to invest - While all investments come with a risk, learning to invest your savings safely could have a rewarding pay-off. 5. Freeze your cards - If you are guilty of over-spending, set physical restraints on your bank account by limiting your ability to spend more than you can afford each week. Daily Express
PENSIONS
How to reduce tax on your pension and why you might hit the lifetime allowance limit sooner than you think
The LTA is the limit on how much can be saved into pension benefits over a lifetime before taxes are levied. It has changed a lot over the past decade but most recently Chancellor Rishi Sunak froze the LTA at its current level of £1,073,100 until April 2026. This means more people than ever face costly bills, as any pension benefits valued above the limit will be subject to lifetime allowance charges. If consumers choose to take their pensions as a lump sum, they will be subject to a 55 per cent tax charge – or 25 per cent if they take it as income. How can you reduce the risk of hitting the LTA? Use ISAs instead of contributing to a defined contribution pension, which will be shielded from the charges. Redirect your contributions into your spouse’s pension instead of your own. Check if you have any protections. When the Government reduced the LTA before, it offered some protections to allow certain people to keep the older, higher LTA. Apply for Fixed Protection 2016 if you have not made any pension savings since 5 April 2016, and you will get an LTA of £1.25m. iNews.co.uk
‘Very useful!’ Britons urged to trace lost pensions and recover thousands
An estimated £50billion is languishing in lost pensions, old bank accounts, pensions, investments and perhaps insurance policies. Kaya Marchant, Pensions Specialist at MoneyHelper commented: “Lost pensions are not unusual. “Research shows that because you’re likely to change jobs on average 11 times you could end up with several pension pots during your working life, all of which could be very useful when you retire. “So, through job moves, moving house and the demands of modern life, it is surprisingly easy to lose the details of your pension scheme. The average lost pot holds £13,000 - but some people throw away a lot more than that. "The Government have a really useful pension saving service tool on the Gov.uk website. People just need to search ‘trace a pension’." Even if someone’s employer has gone bust, pensions are still protected. Pensions are held completely separate from employer assets, she said. Daily Express
INHERITANCE TAX
Inheritance tax warning as families lose millions in IHT due to simple error
Over 6,000 estates paid inheritance tax on life insurance policies according to the latest data from HM Revenue and Customs (HMRC). NFU Mutual is letting the public know they could have escaped paying an expensive IHT bill if their policy was written into trust. Out of the 22,100 estates that paid inheritance tax in 2018/19, over a quarter of them included life insurance policies. Said life insurance policies came to a total of £709million all together. This means more than £280million of IHT may have paid out on them. However, if these insurance policies were written into trust, they would not normally be a part of the deceased’s estate, NFU Mutual warned.“Putting life insurance policies into trust is relatively straightforward. If you have life insurance and it isn’t in trust, phone your provider and ask for a trust form. “Provided you’re in good health when you put it into trust, there are normally no inheritance tax implications, as in most cases the policy has no value. Daily Express
PROPERTY
Listing for bungalow on sale for £350,000 makes no mention of the giant pylon in the front garden
This bungalow in Nursling, Southampton, has a lot going for it. It’s got two bedrooms, a roomy lounge, and a separate conservatory, along with a garage, a bathroom (but no tub, sorry), and an entrance hall. The listing describes the property as ‘well presented’ and notes its location in a ‘popular area close to the golf course’. But one thing it doesn’t mention is the rather attention-grabbing feature in the front garden. Right by the front door, next to a nice path leading you out of the garage, is a pylon. Not a cute, mini pylon. But a massive metal structure that rather obstructs your view. Metro
Fastest rent rise in five years adds to concerns over UK cost of living crisis
Private rents in the UK are rising at the fastest rate in five years, ratcheting up the cost of living burden on millions of households. The average cost of renting for UK tenants rose by 2% in 2021 – the largest annual increase since 2017, figures from the Office for National Statistics show. Soaring rental prices, coupled with inflation hitting 5.5% in January, will pile further pressure on the government to increase support for vulnerable families. The east Midlands had the biggest increase in average rental prices, with tenants paying 3.6% more than a year earlier, while London had the smallest, 0.1%, as demand for city flats dwindled during lockdown and people favoured working remotely outside the capital. The Guardian
All the facts and figures presented are accurate at the time of posting.
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