PENSION FACTS

If you pay into a personal pension, for every £100.00 you put in, the Government adds £25.00. And, if you are a higher rate taxpayer, you will get a further £25.00 off your tax bill. This makes saving by means of pensions a very attractive option – particularly for those paying higher rates of tax. If you are a higher rate taxpayer, however, do be advised that the Government is seriously considering reducing pension tax relief for higher earners.

It would be a good time to look and see about maximising your pension contributions. You can pay up to £40,000 each year into a pension (subject to your earnings) and may also be able to catch up pension payments from the last 3 years if you have not paid the maximum in each of those earlier years.

ATTACKS ON THE BUY-TO-LET MARKET!

Over the past 12 months there has been a deliberate effort by the Government to make buying properties to let less attractive.

First, there was the announcement that the Stamp Duty payable on second properties would be 3.0% more than that payable on residential properties. That is a very significant amount of money. Then there is the progressive reducing of tax advantages on the interest on mortgages on let properties – ultimately dropping from as much as 45% for Additional Rate Taxpayers down to a level of 20% for all. This effectively raises the costs for many landlords who are higher rate taxpayers.

There are further changes. In 2017 we will see the affordability calculations for Buy-To-Let mortgages significantly increased – the bottom line being that the amount of mortgage available based on the monthly rental, will go down from the levels they have been. This could make buying and remortgaging more difficult. Do contact us if you need any remortgage calculations. All in all the

Government may be shooting itself in the foot with these actions as the result could be a stagnant housing market with reduced levels of house building and sales.

LIFETIME ISA (LISA)! YET ANOTHER ISA, BUT PRETTY ATTRACTIVE

From 6 April 2016 there will now be the new Lifetime ISA (Individual Savings Account)available to anyone aged between 18 and 40.

You can put up to £4,000 into it each year. Up to age 50 any amount you put in will have a further 25% bonus added by the Government. For example, if you put in the full £4,000, the Government will add £1,000 at the end of the tax year, so you would have £5,000 in your Lifetime ISA. You can invest the money in cash or in stocks and shares.

This Lifetime ISA is meant to be a tool either for buying a first home or for use to help fund retirement from age 60. You can withdraw money at any time, but if it is withdrawn before age 60 and is not used to buy a first property, it will suffer a 25% penalty – in effect it is the Government taking back its bonus. From age 60 onwards you can take money out as you wish and it is not subject to tax. You can have a Lifetime ISA for up to £4000 per year if you qualify age-wise (18 to 40). It will count towards your total annual ISA allowance from next April of £20,000.

There is an ISA Helpline – 0300 2003312 – for those with questions about the Lifetime ISA or the other ISAs available. It is becoming rather complicated and it is good to have a point of contact to get questions answered.