PENSION FREEDOM – UNLIMITED ACCESS TO YOUR PENSION FUND!

If you are aged 55 or older, you can access all your private pension benefits at any time. This opens the door for many to access lump sums that were not available before. Ever since the new Pension Freedoms came into force last year, many people have chosen to draw significant amounts from their private pensions or even take it all. However, some have not taken into account the tax ramifications and paid unnecessarily high levels of tax. Others have failed to look ahead to see what the effects of taking their pension benefits now would be when they are older.

Our priority is to help our clients achieve their objectives and enjoy financial security. Sometimes it is not possible to achieve both of these aims, but we can help work out what can be done so you can make an informed choice. Do contact us if you want to look over your plans. For those in a position to maximise pension contributions do remember it is possible to carry forward unused pension allowances for up to three years.

MORTGAGE PROBLEMS?

There are a number of property owners who find themselves unable to obtain a new mortgage – whether to move property or even to just obtain a better mortgage interest rate. Changes in the recent past have tightened lending criteria on income requirements and age restrictions. This has meant that in many cases borrowers have been left stuck with their lender’s standard variable rate when new fixed rates are 1% to 2% better. Just a 1% reduction on a £150,000 mortgage would save £1500 in interest each year (assuming a 20 year repayment mortgage).

Here are a few examples of this ‘mortgage prisoner’ problem along with possible solutions:

Problem

Some older people cannot get a new mortgage with a longer term, or extend the

term of their existing mortgage, because of the current attitude of most lenders to

maximum mortgage ages.

Solution

Try your present lender to see if they can help, or contact us. There are more

and more niche lenders who will take a more enlightened view about maximum

mortgage ages – where the deal makes sense otherwise.

Problem

Some people were able to take a mortgage out in the past where it was possible

to self-certify the level of their income. In virtually all cases now income must be

proven and the self-employed will be assessed on the net income as shown by

the Tax Office.

Solution

Some lenders are more generous in their income calculations than others and some

lenders require only one year’s completed accounts for the self-employed. For those

over 55 with relatively small mortgage needs, Lifetime Mortgages (Equity Release)

can often get over the problem of age or affordability. We can research what is

possible for you.

Problem

Some people took out interest-only mortgages. Usually they had a plan of how

to repay them, but sometimes that original plan is no longer possible.

Solution

For some simply down-sizing will be a solution. For others who want to stay where

they are, however, there may be other options. There are still some interest-only

mortgage options available if one is looking to extend the time he can continue to

stay in the property. It is also possible for those aged 55 and older to use a Lifetime

Mortgage solution. Contact us and we can work out what options are available for you.

CAPITAL GAINS TAX

The Capital Gains Tax Allowance level remains at £11,100 in 2016/17 but there has been a change

in the charging structure for capital gains. Above the £11,100 allowance level, capital gains tax will

be charged at 10% for basic rate taxpayers and 20% for higher rate tax payers — except for second

properties where the tax will remain at the 18% and 28% rates respectively. This is meant

to encourage people to invest in stocks and shares rather than property.

STAMP DUTY ON PROPERTY PURCHASE

(Note: There is a 3% increase on all bands for Buy-To-Let/Second Property)

                   

                             Residential             Second Property/Buy to Let

£0 to £125,000                  0%                                 3% (0% up to £40,000)

£125,001 to £250,000       2%                                 5%

£250,001 to £925,000       5%                                 8%

£925,001 to £1,500,000   10%                              13%

£1,500,001 plus               15%                              18%

Note: The Chancellor did also announce some changes to Stamp Duty on purchases of commercial property.

Contact us if you need details.

TAX NOTES for 2016/17

Personal Allowance      £11,000 (reduced for those with incomes over £100,000)

20% Rate Tax Band     £32,000 (adding in the personal allowance of £11,000 means

                                            that your income would need to be in excess of £43,000

                                            before the 40% rate starts to be charged)
Dividend Income Nil

Rate Band                   £5,000

Personal Savings

Allowance                   £1,000 (basic rate taxpayer), £500 (higher rate taxpayer)

ISA Allowance             £15,240 (same as last year)

Lifetime Pension

Allowance                   £1 million

Inheritance Tax Nil

Rate Band                   £325,000 (same as last year)

Annual Pension

Allowance                   £40,000 (reduced for those with income in excess of £150,000)

Rent-A-Room

Allowance                   £7,000 per annum - tax free (up from £4,250 last year)

State Pension              New Single Tier State Pension comes into effect

THE BUDGET AND THE NEW TAX YEAR

The March Budget did not bring in any additional immediate changes to personal finances. Once

again the Chancellor has made promises for the future, but we will focus on what the tax position

is as from 6 April 2016. We will introduce the new LISA (Lifetime Individual Savings Accounts)

closer to her arrival time in 2017!

Can You Afford To Take The Risk?

You have to insure your car and you have to insure your house, but you are not required to insure yourself or your spouse despite the possible consequences!

Life Assurance does not need to be expensive and we can generally provide a quote within an hour or less.