Private trustees run risk of falling foul of new HMRC rules
Private trustees – so called ‘mum and dad’ trustees – are being warned to register with HMRC ahead of rules changes set to take effect on 1 September this year.
The ruling affects all trusts, but concerns are rising that those created by families, for a myriad of reasons, could be more likely to fall foul of the new rules.
While exact figures are difficult to obtain, around one million trusts are thought to be required to register.
The changes are being implemented by the Government in order to fight money laundering.
What are trusts?
Trusts are a legal structure designed to remove an individual or organisation from ownership of specific assets.
When it comes to private trusts, typically these are created by parents or grandparents to hold assets such as stocks for children or grandchildren who are, not as of yet, able to make their own financial decisions.
Trusts are also commonly used as a part of estate and inheritance planning, combined with life assurance policies. They can be used to provide financially for children or vulnerable adults, pay school fees or protect assets against divorce or bankruptcy.
I am a trustee – what do I need to do?
While the legitimacy and status of these trusts is not at risk, HMRC now wants all trustees to register their trusts with the tax collector by 1 September. All trustees are responsible for signing up to the register.
Trustees can register their trusts on the Government website. While HMRC says there will not be any financial penalties for not registering at this stage, it says trustees will begin to receive official requests to register if not done by 1 September.
There are exclusions for some trusts from these rules, however. This includes trusts for pensions, bank accounts held on behalf of minors, non-taxable charitable trusts and life insurance trusts that only pay out due to death, serious illness or disability.
Trusts which hold investments for minors are not exempt, however.
The process itself runs to around 100 pages of administration to register depending on the trust. Information required includes details about trustees, beneficiaries and settlors. This includes basic information such as passport details, addresses and National Insurance numbers.
Registering a trust can however be tricky, especially for those not well-versed with the process and rules.
Particular problems arise where for instance a trust has been in existence since 6 October 2020, when the new registration regime began, but has already been wound up. Although such a trust no longer ‘exists,’ HMRC still requires the former trustees to register.
Broadly speaking then it is a good idea to speak to professional financial, tax or legal advisers for help, especially if the trustee is unclear on any aspect of the process.
It is essential to register as soon as possible, especially in consideration of financial advice. Unregistered trusts will be barred from receiving financial advice, tax planning, legal advice or accountancy help from the date of the deadline.
If you have a trust you would like to discuss, or for any other issues or concerns raised in this article, don’t hesitate to get in touch.
Have you had your £150 Council Tax rebate? If not, here’s what to do
Households in Council Tax band A-D are expecting a £150 Council Tax rebate from the Government, as the cost-of-living crisis deepens.
But the actual deployment of the rebate is done on a council-by-council basis – leaving some households in the lurch waiting for the extra cash.
The cash is being given out in the main due to soaring energy prices, which have reached astronomic levels thanks to a mixture of increasing demand and reduced supplies.
The war between Ukraine and Russia has made the situation much worse, but is not in fact the only reason why gas prices are so high.
The energy price cap was hiked sharply at the beginning of April – an increase of £694 from £1,277 to £1,971.
However, this does not mean your bills will be exactly £1,971 for the year – the price cap is worked out per unit of energy used, which means you could still pay more – or less – depending on your household usage.
Why a £150 Council Tax rebate?
The Government has not been hugely forthcoming with help for households despite the severity of the cost-of-living crisis, with particular pressure on energy prices for families.
This is because it is concerned if it helps too much, this will undo the work of the Bank of England which is raising interest rates to dampen consumer demand and bring inflation back down.
Chancellor Rishi Sunak announced the rebate ahead of the Spring Statement. Paying it via the council tax system is seen as the easiest way to distribute cash to households. In practice this hasn’t been quite as simple – but there really is no specifically designed mechanism to give households money.
The money is not a loan, nor does it have to be repaid at any time.
How to get the £150
The cash is set to be paid to anyone living in a band A-D property. If you are unsure what band your home is in, the first thing to do is check your most recent Council Tax statement or annual statement. Alternatively, you can look up your band on the Government website.
If you have yet to receive the money but are eligible, do you pay by direct debit? The Government says deployment of the rebate will be fastest via direct debit, as this is the easiest way for it to send the cash out.
If you do pay by direct debit, but haven’t received the rebate yet, then the first place to look is your local council’s website. By now it should have clear information on there over when that money is due to be paid and how.
Anecdotally, many councils seem to be lining up payments for mid-May, so it might be a case of just waiting for now. If you do pay by direct debit but receive nothing by June, it would be wise to investigate if there is a reason why.
If you don’t pay by direct debit, then the process of getting the rebate is more complicated. Again, check the local council’s website where it should provide instructions on how to apply or register for the cash. However, not all councils are so organised, so a phone call could be necessary.
However, many councils are saying they are overwhelmed by phone calls about the rebate at the moment, so you may have to be patient for now.
Be wary of anyone who calls you out of the blue about the rebate as your council won’t try and contact you proactively. It is most likely that any sort of unsolicited contact about it will be scammers attempting to grift your financial details.
However, some councils are writing to households that don’t pay by direct debit, so you might get a letter in the post about how to receive your rebate.
Prices are rising – but insurance costs are one of the best ways to cut back
The cost-of-living crisis is squeezing household budgets and making it increasingly difficult to avoid, even for the best-off households.
This is because costs such as energy to power our homes and fuel to make our cars go are essentially unavoidable. A few scrimps here and there can be made, but ultimately, we have to use electricity and have to drive to work, or kids to school.
There is one area of personal finance however where you can still make some significant cost savings – insurance.
Insurance is an important aspect of our personal finances because it enables us to carry out tasks, activities and life in general, safe in the knowledge we’re protected from loss.
But making sure you’ve got a good deal, and the right cover, from your insurance provider is essential – with many people paying well over the odds for their policies.
There are some basic tenets to insurance that you should always have in mind to cut your costs:
- Shop around at renewal time. When you get your renewal letter or email through, don’t just take the price at face value. Although ‘loyalty penalties’ – where insurers hike your premiums year-on-year are now largely forbidden, you could still get better prices elsewhere.
You should also shop around if buying for the first time and not just accept the first quote you see. Price comparison websites are a great starting place, but going direct to different well-known companies is a good idea too.
- Don’t pay for insurance you don’t need. It might seem like a good idea to get mobile phone insurance when you rake out a contract on a glossy new iPhone, but do you really need it? Most home insurance policies will cover such items, just check your cover levels and adjust accordingly. The same goes for expensive extended warranties.
Travel and mobile insurance are frequently offered as part of current account packages too, making buying it separately unnecessary. You might even consider switching your account to save the money on a policy.
- Provide the right information. This is a crucial issue when it comes to insurance. If you’ve got an expensive camera, laptop or other item which might not be covered under standard home insurance amounts, then make sure it is stipulated on the policy.
Likewise with car insurance, making sure the information about you such as job title and years driving are right, can make a significant difference. Insurers will treat some job titles very differently from a risk perspective. This isn’t to say you should lie for a ‘better’ job title, but be honest and careful.
When it comes to policies such as life, health and protection insurance it is also really important to be honest with your disclosures. Getting something wrong or being flexible with the truth could diminish pay-outs and even invalidate a policy completely.
- Invest to bring your premiums down. This tip is somewhat counterintuitive and shouldn’t be considered as a ‘quick’ cost cutting measure, but insurance on the whole is a financial expression of risk and the potential cost of loss. You can reduce the cost of this risk by reducing the actual risk itself.
But what does that mean in practice? When it comes to home insurance, it means getting better quality locks, installing a burglar alarm or other home security networks. This will bring your premiums down, but requires an outlay. It should however pay for itself over time.
The same is true in other areas. For life insurance, health insurance and income protection, living a better lifestyle will bring your premiums down. This includes losing weight, exercising more and quitting habits such as smoking. Fortunately this can be done for free but it requires time, and sometimes emotional investment.
And for something such as car insurance, having a policy which includes a ‘black box’ tracker or telematics can bring your premiums down significantly. The investment here being a commitment to driving in the most responsible way possible!
Rishi Sunak’s Spring Statement: how it affects your money
Rishi Sunak delivered his Spring Statement at the end of March, with an update on the current state of the UK economy and future expectations for the nation.
The Chancellor also announced some tax changes that will affect people’s budgets in the months and years ahead.
Here are some of the top changes, and how they may affect your money.
- National Insurance threshold increase
The National Insurance (NI) threshold has been increased from £9,880 to £12,570 a year to help low-income workers take more of their pay home.
This means that from this July workers will not make NI contributions until they earn £12,570 a year.
According to Blick Rothenberg, the maximum that tax bills will be cut by as a result of the change in the NI threshold will be about £330.
Until July, however, previous decisions on National Insurance will have already come into effect from the 2021 Autumn Budget. This means that employees, businesses, and the self-employed will pay 1.25p extra in tax for every pound they earn.
For lower earners the change this July will cancel out the NI surcharge, but higher earners will still be worse off overall.
- Fuel tax cut
The Chancellor announced a 5p a litre reduction in fuel duty for the next year, which will take out some of the burden of rising fuel prices.
The move would theoretically knock £3.30 off the cost of filling a typical 55 litre family car, according to motoring organisation The RAC.
The change came into effect on the same day as the Spring Statement, but has taken time to feed through to prices as suppliers buy fuel wholesale, which means the ‘cheaper’ fuel takes time to reach petrol stations.
Whether it has really helped family budgets remains unclear too. As a result of the war in Ukraine, the price of fuel has been fluctuating significantly at the moment, meaning the tax cut can be amplified or nullified one day to the next.
- Future income tax cut
An income tax cut will take effect in April 2024. At that point, the Basic Rate of Income Tax will be reduced from 20% to 19%. The Statement said it would be worth an average of £175 a year to 30 million people.
But for the 2022-23 tax year the Basic Rate Income Tax rate will remain at 20% on earnings between £12,570 and £50,270. This means that most people will start to pay the higher 40% rate when they have income of £50,270 or more.
These income tax thresholds were frozen by Sunak at a previous Budget. As they are not rising with inflation, more people will be tipped into higher tax brackets as their earnings increase – in effect a stealth tax.
The future 1p cut for Income Tax has implications for pensions too. Cutting the basic rate by a penny will mean that pension savers receive less relief on their contributions at that level.
Savers have been warned that in order to keep on track with their long-term goals, they will have to save more into their pensions as a result.
- Help on energy bills
Millions of households are facing a 54% increase in the cost of annual electricity and bill prices as the Ofgem energy price cap rose on 1 April. On average, this could mean that households will pay £693 more per year, up to nearly £2,000 annually for their bills, depending on the size and energy efficiency of their home.
The Chancellor has announced extra help for struggling families but did this ahead of the Spring Statement.
This includes a £150 council tax rebate for 80% of households (those in Council Tax bands A-D), followed by a £200 discount on bills in October which will need to be repaid, and an expansion to a support scheme for vulnerable people.
Sunak also cut the 5% VAT charge on energy efficiency measures such as solar panels and heat pumps, in order to encourage more households to upgrade their homes to run more cheaply and environmentally-friendly.
- Rising benefits and State Pension
State pension and benefits are rising by 3.1% in April. However, with inflation currently running at around 7.0% this is well below the rising cost of living, with many charities now calling on the Chancellor to go further.
The Triple Lock has been suspended for the State Pension, but is due to be reinstated next year, which will give pensioners a much healthier increase, currently forecasted at around 7.5%. This means the State Pension could go above £200 a week for the first time.
Local councils will be given another £500m in the Household Support Fund, which supports vulnerable people with payments and grants such as vouchers to help pay their bills.
Is long-term wealth building at risk from inflation and interest rate rises?
The wealth landscape has not been this tough for many years. Inflation is perhaps the trickiest issue for wealth growth right now, but interest rates have an effect too. Plus, the radical risk of geopolitical trouble has the effect of compounding both of these problems.
Inflation
Inflation is a problem we’ve not had to deal with in more than a decade. Since the financial crisis of 2008-2009 levels of inflation have, in historical terms, been extremely low.
But it has bounced back with a vengeance in the wake of the pandemic. At the time of writing CPI inflation is at 7.0% – its highest level in 30 years.
The effect of inflation on wealth is simple – if your assets are growing more slowly than the rate of inflation, then in real terms they are diminishing in value.
While it is recommendable to keep a certain amount of wealth in cash for rainy day emergencies, particularly in light of the rising cost of living, anything beyond that should be working harder elsewhere.
Savings rates in cash accounts are rising but are still well below inflation. The current top easy access account comes from Chase Bank at 1.5%.
While inflation is currently high on paper, averaged over many years, the level looks a lot more manageable. In the past 30 years inflation has averaged 2.8%, according to the Bank of England.
With this in mind, the goal of beating inflation over time seems far less unwieldly, through careful investments.
Interest rates
Interest rates have two key impacts on long-term wealth. The first is on debts.
Any kind of debt that is unsecured – be it via credit cards or variable rate mortgages – will get more expensive as rates rise. This makes wealth building harder, because you’ll have less money each month to put away.
In that context, credit cards should be paid down as quickly as possible, and variable rate mortgages should be fixed to protect you against further rate hikes.
Interest rates also affect investments. Riskier investments such as stocks tend to start performing less well when rates go up. This is because as rates rise the yield on bonds – Government and company debts – increase and become more attractive to investors.
But this risk is manageable with careful wealth and investment management, which can blend the best approach for the climate.
Wealth building
Ultimately, despite the twin risks of inflation and interest rates rising, it’s still possible to build wealth over the long term. Considerations of course need to be made, but adjustments are part of the process, and sticking to a course over time will still yield significant benefits.
Of course, with geopolitical catastrophes such as the war in Ukraine, things can look pretty bleak in the short term. But it is essential that anyone interested in building their wealth for the future, should focus on the long-term benefits and goals, rather than worry over short-term issues.
If you’d like to discuss any of the issues raised in this article, don’t hesitate to get in touch with your financial adviser.
What you need to know if you decide to work past the State Pension age
It used to be the case that your employer could force you to retire when you hit 65, whether you wanted to finish working or not.
However, the ‘Default Retirement Age’ was scrapped in April 2011, following a campaign by charity Age UK. Now older workers can, in theory, work for as long as they please.
In fact, a new survey from financial services tech consultancy Dunstan Thomas reveals that nearly 40% of Baby Boomers (those aged 58-75) plan to work beyond the current State Pension age of 66 or 67 by 2028.
Working past the State Pension age might be a wise option if you have outstanding debts to pay or you want to continue topping up your pension.
However, you might equally decide you’re just not ready to leave the workplace just yet.
Whatever the reason, there are certain things you need to know before you decide to delay your retirement.
Can everyone work past their State Pension age?
Most people can work past State Pension age, but there are some exceptions to the rules.
For example, your employer can technically ask you to retire if your job requires you to have certain mental or physical capabilities or if your job has an age limit set by law (e.g., the fire service).
However, the thing to remember is that if your employer asks you to retire, they must give a good reason why. And if you feel you have been treated unfairly, you can take your employer to an employment tribunal.
The State Pension
You can claim State Pension between the age of 66 and 68 depending on your date of birth, regardless of whether you are working or not.
However, many people opt to defer their State Pension payments until they stop work altogether.
One of the benefits of delaying your State Pension is that you get a larger weekly payment when you do eventually start taking it.
Your workplace pension
Many older workers opt to delay retirement in order to boost their pension pots. Even working just a few years extra can make a huge difference.
For example, a 65-year-old worker with a £200,000 workplace pension who adds £200 a month to their pot for five years would be left with more than £334,000, assuming 5% a year growth. (Note that compound interest has been added to this calculation using a compound interest calculator).
However, if you decide to carry on working but on reduced hours, bear in mind it’s likely that the amount you put into your pension will also likely fall.
Before making any decisions, it’s therefore a good idea to check with your employer to see how you might be affected.
Taxes
One of the perks of working beyond State Pension age is that you no longer have to pay National Insurance, unless you’re self-employed and pay Class 4 National Insurance Contributions (NICs).
However, you will have to pay income tax, depending on how much you earn.
Bear in mind also that drawing a salary, your workplace pension and your state pension at the same time can change the amount of tax you have to pay.
If you’re unsure about your options or how you might be impacted, then don’t hesitate to get in touch with your financial adviser.
Is it time to get an electric car?
With fuel prices soaring, and the cost of used cars continuing to rise in the wake of the pandemic, you might be wondering if now is the right moment to take the plunge and buy a new electric car.
In 2021 11.6% of new car sales were electric, according to the Society of Motor Manufacturers and Traders (SMMT). Looking at December alone, this number rises to 16.5%, showing a clear upward trend.
Electric vehicle (EV) technology has come on leaps and bounds from the days of the Corbin Sparrow. The Tesla Model 3 was the second best-selling car model in the UK in 2021, of any car, fossil fuel or electric powered.
The Government has also announced a ban on new fossil-fuel powered cars, which is set to take effect in 2030 – so not all that far off.
But there are still a few things to consider before taking the plunge.
Charging
This is one of the most basic considerations when looking at whether an electric car is viable for you.
The kind of house you live in can have a big impact on how easy it is to charge your EV. If you have a private driveway or garage, the process will be a lot easier than if you have on-street parking, particularly if it’s not always straight forward to park outside your house.
If you’re lucky enough to have private parking, you’ll need to think about whether you want to install an EV charger. It’s possible to charge an EV out of the mains electricity of your house, but it’ll typically take all night to get a full charge.
Bespoke EV units, which can typically be installed on the outside of the house or in a garage, will charge your vehicle much more quickly with much less hassle. You’ll need to decide whether you want a 3kW or 7kW charger – the former is cheaper, between £250-£500, while the latter will set you back up to £800.
Beyond your home, you’ll need to consider what the charging infrastructure is like in your local area, plus any other parts of the country you routinely visit.
Cities such as London have good infrastructure but in rural areas public chargers can be harder to find. Sometimes you’ll arrive at a station to find someone else’s vehicle there, or even a non-functioning spot.
Tools such as Zap Map are really helpful for finding charging points, and you can download the app to your phone too.
Range
Range is still unfortunately a big issue for EVs. While top-of-the-range EVs will come with stated ranged over 300 miles, this is still well short of a top-performing efficient diesel car that can routinely manage up to 600 miles on a tank. Plus, manufacturer claims about range tend to be optimistic at best, so the real range is often a fair bit shorter.
If you’re making routine long-distance journeys, it therefore might not be practical to have an EV as you’ll find yourself spending a lot of time at motorway charging stations.
As stated above, anecdotally, charging points in public places do often suffer from unreliability. Range anxiety is a real issue, making EVs a more sensible choice for families that tend to make shorter journeys and stay within a relative short distance of a reliable charger.
Cost
Cost is a huge factor for considering an EV. And it’s unfortunately quite complicated. It’s also been made less clear by the recent energy price hikes, as until recently, charging at home would have been an extremely cost-effective way to power up an EV.
That being said, petrol and diesel prices have also soared in 2022, meaning the running costs are still attractive. As an example, charging your car at Tesco Pod Points currently costs 24p/KwH. This equates to around £6-£7 for around 100 miles of charge. This is still much, much cheaper than fossil fuels.
While EVs also tend to be more expensive to buy upfront than a typical fuel car, the maintenance costs tend to be much lower. This is because EVs have considerably less moving parts compared to a combustion engine.
However, battery replacement can be a very costly exercise. Batteries are generally rated to around 100,000 miles use or eight years. At the end of this period, you’ll likely have to spend a significant sum to replace the battery with a new one. A Tesla Model Y costs £6,670 to replace and for a Nissan Leaf it is £4,900. However, these prices will likely rise in the future.
As for taxes and other municipal costs, EVs are currently favourable as they attract no taxes, and in regions such as London, you don’t have to worry about congestion or ULEZ charges. However, this may change in the future.
The Government recognises that as more cars on the road switch to EVs, their tax receipts are already falling due to people buying less fuel and not having to tax their cars annually. There is discussion, although none of it is confirmed for now, that the Government may have to introduce new forms of road taxes that include EVs in future to make up for this shortfall, including ‘pay per mile’ and other new taxes.
EVs also used to benefit from big subsidy incentives, but these have been cut back in recent years. Now when buying an EV you can expect a £1,500 discount on a new EV if it’s worth less than £32,000 new.
Finally, you’ll also need to take lead times into consideration. With global supply chain shortages, customers currently find themselves waiting up to six months for a new car. While this is also true for some fossil fuel new cars too, the used car market still has plenty to offer.
Of course, with such long lead times, the prices of used cars have skyrocketed too, making it an expensive time to buy a car either way, and definitely worth considering whether the car you’ve got right now can be repaired and cared for until prices come back down to earth.
Get your finances in shape before the end of the tax year
The end of the tax year is just around the corner. This year’s deadline is 5 April – and there’s no better time to prepare for it than now.
There’s often a rush to get one’s finances in shape in March. For most people, the end of the tax year is nothing to worry about, but it’s still always good to check your allowances – you may be able to find more tax relief on your savings and investments.
With less than a month to go, here is everything you need to do before the deadline.
- Top up your ISA allowance
You have a limit of £20,000 for your savings and investments to be put securely in an ISA account, which is a tax-free wrapper.
Crucially, if you haven’t already used your annual ISA allowance by the end of the tax year, the remaining allowance doesn’t roll over – you lose it forever.
With stocks and shares ISAs and the Lifetime ISA (LISA), there is no tax to pay on income or capital gains from your investments. With a cash ISA, the interest is tax-free.
Also, don’t forget about investing in a Lifetime ISA if you’re looking to invest in a property or in your pension. People aged 18 to 40 can invest money in a Lifetime ISA, which benefits from a 25% government bonus. For example, a maximum saving of £4,000 a year into a LISA will become £5,000 with the bonus.
- Use your pension allowance
It may be useful to consider topping up your pension to increase your savings for retirement.
You can claim income tax relief on pension contributions up to a limit of £40,000 a year according to HMRC, but the exact amount depends on your personal circumstances.
You can also claim unused allowances from three previous years if you were a member of a registered pension scheme during that time.
- Capital gains allowance – for 2021/2022
The Capital Gains Tax (CGT) allowance , or ‘Annual Exempt Amount’, is £12,300 in the 2021/22 tax year. This means you won’t be taxed on profits below £12,300 if you sell your assets such as property or stocks and shares.
It’s worthwhile considering using as much of this allowance as possible each year if you have a large portfolio of shares outside an ISA, for example, by selling assets that have risen in value, or you could be storing up a large exposure to capital gains tax for the future.
- Inheritance tax planning
Don’t leave inheritance tax planning until it’s too late – it’s always good to have your finances in check in preparation for life’s unfortunate events.
Inheritance tax planning is not just for elders. Families should focus on not letting excess income build up in their accounts if they don’t need it.
The money can be gifted to dependents or through a trust. You can give away £3,000 each year or as many gifts of up to £250 per person as you like without being subject to IHT. Parents can also give £5,000 to each of their children as a wedding gift, while grandparents can give £2,500.
- Dividends
If you own investments that pay a dividend, you will be exempt from paying tax on those dividends up to the level of the income tax personal allowance, which is currently £12,570. This could however be eaten up by salaried income if you are still in work.
Beyond this, taxpayers can reduce their dividend allowance by using tax efficient wrappers and tax allowances. For example, basic-rate taxpayers can gain interest of up to £1,000 in their savings allowance while not paying income tax. Taxpayers on a higher rate can earn up to £100 interest tax-free.
Be wary that dividend tax is also set to rise from 6 April. The higher rate of dividend tax will go from 32.5% to 33.75%. This will mean that for every £1,000 dividend received, an extra £12.50 will need to be paid.
- Think about the children
If you have children, a good idea is to start saving money as soon as possible. This way, by the time they turn 18, the children can enjoy a larger pot of money to accomplish their next objectives, whether that be heading off to university or even saving up for a deposit on a property.
Parents and guardians can open a Junior ISA (JISA) on behalf of their children, and they can only access the money after they turn 18.
The returns on money made within a Junior ISA are free of UK tax. However, there’s a limit to how much you can put into a JISA of only £9000 per year in 2021/22.
Does ‘Isa season’ still matter?
ISA season is the period just before the end of each tax year when time is running out to use up tax-free allowances.
Each year, much is made of the final few weeks before the deadline, which this year is 5 April. But how do the various benefits stack up in the current high-inflation climate, and which allowances are most effective?
Allowances
ISA allowances have changed in the past, but in the last few years they have been set at one level both for normal cash and for stocks and shares ISAs.
Unlike other types of account such as the Lifetime ISA (discussed below), the limit is pretty generous, relative to the average working income.
Anyone looking to save into one of these accounts has an annual allowance of £20,000. Prior to this, the limit was £11,800 before it rose to £15,000 in July 2014. It was then boosted to the £20,000 level three years later.
This means that the level hasn’t changed since 2017, which some critics describe as a form of stealth tax. As with income tax rates, if the bands don’t rise with inflation, then effectively the Government is benefitting at the top end from any money an individual can’t put into the allowance.
And with inflation currently above 5%, this effect will be stronger now than at any time under the current allowance.
Achievable?
That being said, the major criticism levelled at ‘ISA season’ is that actually, although the allowance hasn’t moved for a few years, realistically it isn’t relevant because most people won’t be able to fill it each year anyway.
Were you to meet your allowance each year by making monthly contributions, you’d have to put away around £1,667 a month. This is indeed unlikely to be met by most people, when average wages are still around £31,000 a year before tax, according to the Office for National Statistics.
Nevertheless, it remains relevant for anyone dealing with larger sums, which may occur through work bonuses, inheritances, or other such windfalls.
Rates
There is also evidence that cash ISA rates do increase in the run up to the end of the tax year, according to Moneyfacts.
This means that if you’re looking to take advantage of a cash account then it could be the best time to start shopping around.
Even so, cash ISA rates are extremely low at the moment – much below levels of inflation. This means that generally speaking, unless you’re looking to put money in an easy-access account for rainy-day reserves, then it is generally better off invested for the long term in stocks, bonds and other investments.
Lifetime ISA
There is, however, one account where ISA season really does matter. That is in the Lifetime ISA (LISA).
Unlike typical ISAs, the LISA has a limit of just £4,000 per year for you to contribute. Anyone between the ages of 18 and 39 can open one and it comes with an extremely generous 25% bonus from the Government.
This means that if you put the maximum of £4,000 in, you’ll get a bonus of £1,000. That is on top of any interest you accrue through a cash LISA or a stocks and shares LISA.
There is an important caveat with the LISA, though: you have to use the money for a deposit on a house, strictly as a first-time buyer; otherwise, the money must stay in the account until you turn 60 – on pain of a hefty withdrawal penalty, similar to a pension.
If you’re considering which accounts might be best, or whether you should try to top up your ISAs before the end of the tax year, don’t hesitate to get in touch with your financial adviser.
Storm Eunice has shown the importance of robust insurance protection
At a time when finances are strained and climate-related events threaten to make things worse, not having the right insurance cover could lead to major setbacks.
Storm Eunice was a timely reminder for us all that we need insurance cover to help protect us against a range of aspects we encounter in our daily lives. Being financially resilient is more important than ever, and insurance plays a key role in helping us build that resilience.
Here are a few key areas to consider.
Home and buildings
Not only is having buildings and contents insurance typically a condition of most UK mortgage offers, but it is also absolutely critical to protect your home against a range of possible risks.
These include extreme weather events such as Eunice, but even more everyday issues such as burst pipes, burglary, or fires.
Really basic issues can invalidate your home insurance, so it is important to keep on top of your policy. Leaving a home unoccupied for a length of time (often around 30 days), not updating your provider when you make alterations to the property, or not using an intruder alarm are all things which can invalidate your cover.
Another major one, which has become more prevalent during the pandemic, is using your home for business purposes. ‘Working from home’ if you have an office job is typically not a problem, but it can become an issue for occupations which involve selling products online from your house, or having customers come to your property for any reason.
The value of your contents should also be scrupulously accounted for. Overestimating the value of the content of your home can lead to policies being invalidated. Items of specific high value such as collectibles, jewellery or electronic equipment should be explicitly accounted for.
Travel
Storm Eunice caused the cancellation of hundreds of flights in the UK, underpinning the importance of travel insurance.
But the need for it to protect your holidays is much broader than just foul weather, and the pandemic has made getting the right policy more important than ever. With travel ramping back up in the wake of government restrictions being lifted, it is essential to ensure you’re fully covered from the moment you leave your house, to stepping off the plane in your destination and back again.
The most important thing to be mindful of is travel advice warnings. During the pandemic major issues arose for travellers where the Foreign, Commonwealth & Development Office (FCDO) would issue travel warnings for certain countries, but flights would still be operating to those regions.
If the FCDO advises against all but essential travel to a region and you still go – it can invalidate your insurance. But if the airline is still operating the flight you’re booked on and you don’t have insurance – they are under no obligation to refund you.
Many airlines improved their booking and flight change policies as a result of the pandemic, but some are now returning to their less flexible pre-pandemic state.
Life and illness
Life and serious illness protection is a major policy that many people unfortunately forget.
Life insurance is essential when you have dependents such as children, or co-own property and have a mortgage in place. Were something to happen to you, without cover in place, your partner would be liable to cover the mortgage payments despite losing your income.
Some workplaces offer types of cover as a part of employment contracts, but this is not always guaranteed. Life and serious illness cover is therefore essential to protect against the most tragic of unexpected events.
Because these kinds of policies typically deal with such high levels of pay-outs, insurance firms can be extremely particular about the details of policies and information.
Failure to disclose information such as pre-existing medical conditions, missing premium payments, trying to claim too soon, and some types of death are reasons why an insurer may refuse to pay out.
The most common issue however is failing to purchase cover far enough in advance. Not only will you get a better premium the younger you are, but also the longer you hold a policy for, the less likely it will be turned down in the event of a serious, terminal illness or for other pre-existing conditions that might lead to your death.