Weekly News Bulletin - 27/09/2021
ISA's
Rising inflation shifts spotlight to IFISAs
While rising inflation means cash savers are set to lose out on thousands of pounds, Innovative Finance ISAs (IFISAs) continue to allow investors to achieve inflation-beating returns. P2P Finance News notes that on 31 July the rate of inflation was 3.2%, while the average interest rate on a cash ISA is just 0.31%. At these rates, if a saver allocated £20,000 in a cash ISA today, over the next five years it would lose 17% of its value in real terms. However, IFISAs have maintained average returns above 8%per annum for the past four years, P2P Finance News adds. For the 2020/21 tax year, the average target return being offered across 32 IFISA accounts was 8.72%. P2P Finance News
Cash ISAs face inflation hit
The rise in inflation means cash ISAs are set to lose thousands in real terms over the next five years. With the average interest rate on a cash ISA currently 0.31%, £20,000 in a cash ISA will gain £312 in interest over the next five years whereas it would gain £3,465 if it kept pace with inflation, which has hit 3.2%. Charles Incledon of Bowmore Asset Management, said banks continue to offer rock-bottom interest rates on their cash ISAs as the Bank of England base rate remains at a historic low of 0.1%. He commented: “The interest rates on ISAs are so low that leaving money in one today will just mean watching inflation whittle it away.” City A.M.
Property
Number of new homebuyers soars
The number of new house buyers has soared, with analysis showing that around 24% more people registered with agent Knight Frank as prospective new buyers in August than the five-year average. The number of offers made in the month was almost a third higher than normal levels, even though ministers cut back the savings on offer from the stamp duty holiday in June. It took only an average of 111 days for an offer to be agreed after a property was listed in the first eight months of 2021 – down from 128 in the same period of 2019. Daily Telegraph
Typical under-30s have saved nearly £10k for house deposit
A typical under-30 has saved nearly £10,000 for a deposit on their first home, new research has revealed - but three-quarters worry that house prices are rising so fast that their salary increases cannot keep pace. Some 55% of the 2,000 18-29 year-olds polled by Shared Ownership Week would be happy to move to a less desirable location if it meant they could own their own property. And 76% feel the government should be creating more incentives to help young adults get on the property ladder. Overall, the average under-30 has saved £9,300 towards their first property. The Sun
Most unaware they may be eligible for UK Government mortgage scheme
Just 15% of working age people believe that the UK Government’s 95% mortgage guarantee scheme could apply to them, a new poll of 1,222 UK adults aged between 18 and 54 reveals. The study for independent price comparison website NerdWallet also found that only 22% of people under 25-years-old believe that the scheme could be relevant to them. It also reveals that 78% of working age people feel they do not have a good grasp of the full support available to help them get on the property ladder. Daily Record
Millionaire homeowners release cash to their kids before the taxman grabs it
Figures from Legal & General Home Finance show there was a 66% rise in the number of people using equity release on homes worth more than £1m in the first half of this year compared with the first six months of 2020. The evidence indicates more older people are using their property’s rising value to pass wealth on to younger generations and cut inheritance tax bills. Money owed on equity release is taken into consideration when assessing potential care costs. The Times
Inheritance Tax
How to beat inheritance tax by rewriting your will
Britons paid £5.4bn in death duties last year, with the state haul from the duty forecast to hit a record £6bn this year. In light of this, Harry Brennan in the Telegraph explains how beneficiareies might make use of a deed of variation (DOV) - a legal document that allows the beneficiaries of an estate - children, for example – to make changes to a will, in the name of the deceased, after their death. Brennan adds: "This means that, if someone has not written their will in the most tax-efficient way, if they have inadvertently left someone out of their will, or if they have not written a will at all, the beneficiaries are able to redirect the money they stand to inherit to other parties." The Daily Telegraph
Capital Gains Tax
CGT could hit 45% if aligned with income tax
Analysts have warned that the capital gains tax rate could rise to 45% if the Prime Minister and Chancellor opt to action a plan that would see the levy aligned with income tax. Tom Selby, an analyst at AJ Bell, says it is "very possible" that the rates could be aligned, noting that an Office for Tax Simplification proposal “edged towards aligning the two taxes”. The impact of such a move, he adds, “would be someone disposing of an asset would pay significantly more tax than they do at the moment.” Noting that CGT is charged at 10% or 20% depending on whether the individual is a lower rate or higher rate taxpayer, he says aligning the charge with income tax could see the rate climb to 20%, 40% or even 45%. Daily Express