Financial News Roundup August 2015
Financial News Roundup 12/08/2015
Buyers win from lower stamp duty.
The Financial Times reported data from Nationwide showing that 235,000 property buyers saved over £275 million in stamp duty on purchases since December 2014 when the stamp duty rates changed. While 85% of transactions in London and the South East benefited from the changes, only 55% of those in the North and North West did because of lower prices in those regions.
Landlords complain about jail threat
Associations representing landlords are irate about the threat of jail sentences for those who let property to illegal immigrants, says the Financial Times. Fines and possible jail sentences for landlords who repeatedly break the rules by letting to illegal immigrants are part of a set of government measures to crack down on illegals. Major letting agencies claim that ‘right to rent’ checks already enable them to avoid the problem.
Fine threat for drawing pensions
Employees who continue to contribute to one pension scheme after withdrawing money from another face fines of up to £300 from HMRC, says the Financial Times. The rules require them to tell the scheme into which they are paying that they have withdrawn cash from another scheme, but many of the 250,000 people who have withdrawn money since the pension rules changed in April have not done so. Pension providers say they send letters telling people what they are supposed to do, but they fear most people are ignoring them.
Who gets the new inheritance tax break?
The additional inheritance tax allowance (on top of the current £325,000 per person) for ‘the family home’ announced in the summer budget has prompted many questions, said the Telegraph and it tried to answer them. The allowance starts at £100,000 in 2017, rising to £175,000 by 2020, at which point a married couple will have a total inheritance allowance of £1 million. But will they? Experts point out that they will get the extra allowance only if they are married, only if they have children to whom they leave the house, only if the house is owned in joint names, and the house has to be worth more than the extra allowance. There are further complications if the couple own a house but downsize after July 2015.
Fortunately there are a further two years in which to work out all the wrinkles in this absurdly complicated tax break.
Affordability better than 1997
According to leading estate agents Hamptons, house price affordability is better than it was in 1997, reports the Telegraph. The agents’ ‘Ability to Buy’ index includes house prices, inflation, wages and interest rates, and low inflation and interest rates have outweighed house price gains in parts of the country. Affordability is better than 1997 in the North, North West, Midlands and Wales, but is worse in London, the South-East and South-West. The index improved in the first quarter of 2015 partly thanks to increases in average earnings.
Make your Will watertight
The Mail advised readers to take steps to make their Wills watertight after a woman won a case contesting her mother’s Will in the Court of Appeal. She got £164,000 of the £500,000 her mother left to three animal charities, cutting her daughter out completely. Experts said people should appoint a trusted executor, explain clearly the reasons for their actions if these were at all contentious, and use expert advice. The Co-op, one of the biggest providers of legal services, said eight out of ten DIY Wills resulted in problems of one sort or another.
Fix now before rates rise
The Bank of England has signalled that a rise in its base rate is likely before the end of the year, says the Mail, and that it should ‘normalise’ at around 2% as compared with its current 0.5%. So people with mortgages should be moving to fixed rates now to avoid the threat of higher repayments. Lenders say most new buyers are taking fixed rates, but many homeowners still have variable rate loans. Current best-buy 2-year fixed-rate offers are under 2% at a 60% Loan-to-Value ratio and under 3% at a 75% LTV.
Families face Child Benefit fines
Two and a half years after the child benefit rules changed, thousands of families with high earners face fines and tax clawbacks, says the Times. Contrary to HMRC’s expectations, less than half of those affected by the change chose to opt out of receiving the benefit, but many have not completed self-assessment returns and paid the extra tax due if you earn over £50,000. Tax experts say the problems result from the flawed nature of the charge, since it involves taking tax from someone other than the person receiving the benefit.
Pay up for pension freedom
Some two million employees will have to leave their low-cost company pension schemes to get access to the pension freedoms that came in in April 2015, says the Times. Only one in ten employer schemes will offer ‘drawdown’, which gives flexible access to cash and a range of investment options under the new rules. Employees in other schemes will have to move their pension pots to an independent scheme provider and will probably pay higher charges.
Big payoffs from SAYE
Hundreds of thousands of employees in Save as You earn schemes can expect big payouts on 3-year schemes maturing now, says the Financial Times. It cites the example of someone who had saved £100 per month with the Easyjet SAYE, which will pay out £14,250 or four times the amount paid in over the past three years. Other FTSE companies where gains have been substantial are BT (share price up from £1.75 to £4.65 over three years) and Pearson (£9.09 to £12.03). The scheme is no-risk since if the share price is lower than the starting price, savers get their cash back. Despite this, only a third of qualifying employees participate in SAYE schemes.