Making a will is not necessarily something any of us what to think about and although it isn't a service the Wealth Design Group provides directly we work with those who do to ensure it is done properly. As it is incredibly important for planning your future. Without a will, your estate will be distributed according to 'Rules of Intestacy' which will divide your estate in a pre-determined way. The Law Society states that “trying to make your own will, without legal assistance, can lead to mistakes or lack of clarity and could mean that your will is invalid.” So it is clear that preparing a will correctly is important but what is the best way to go about it? You either have the choice of using a will writing service or a solicitor.
There are many will writing services which tend to be cheaper. Generally speaking, a will writing service wold only be advised if you already have a good legal understanding and your will is considered to be straight forward. However, you must be sure that the will writer is legally qualified and belongs to one of these organisations:
• The Society of Will Writers
• The Institute of Professional Will Writers
As members of these groups:
• Have training that’s regularly updated
• are insured to cover legal costs if your will is challenged, and
• Follow a code of practice approved by the Trading Standards Institute
The Law Society advises “If you have a number of beneficiaries and your finances are complicated, it is even more important that you get a professionally trained solicitor to create your will.” The advantages to paying a little bit more for a solicitor means that they:
• Provide a reliable legal document
• Are highly regulated
• Are fully legally qualified
• Store your will safely
With a solicitor, you will also be rest assured of no mistakes as well as being protected if something goes wrong. We will be including a feature about the change in Wills written by an expert in our first newsletter of 2018.
Last November, the then relatively new Chancellor, Philip Hammond, announced he would be switching to Autumn Budgets, starting after the Spring Budget in 2017. This was a reversion to an idea introduced in the early 1990s, but abandoned when Gordon Brown replaced Ken Clarke at the Treasury in 1997.
Following last year’s announcement, the Treasury published a “7 things you need to know” press release explaining how the Autumn Budget timetable would work. This said “From winter 2017, Finance Bills will be introduced following the Budget. The aim will be to reach Royal Assent in the spring, before the start of the following tax year.” It also promised that “Legislation Day”, when most tax policy consultation summaries and draft Finance Bill legislation is published, would move from December to the summer, starting in 2018.
What the Treasury did not say was that there will effectively be no Legislation Day for the Autumn Budget 2017 because there is not sufficient time. However, the Treasury has “opened the Budget representations portal earlier than usual to allow more time for HM Treasury to note and consider representations”. The deadline for submitting representation for the Autumn Budget 2017 is 22 September, according to Treasury guidance.
Before considering what might be in the Autumn Budget, some background points need to be considered:
• Traditionally, the first Budget after an election is when the unpalatable medicine, ie tax increases, is dispensed. According to the Institute for Fiscal Studies, prior to the 2015 election, each of the previous five post-election Budgets saw net tax rises of more than £5bn in today’s terms. The Summer Budget after the 2015 election topped this, aiming to raise the Treasury’s inflow by more than £9bn. However, over a third extra of this revenue disappeared in the following Autumn Statement., when George Osborne was forced to climb down on reforms to tax credits.
• Philip Hammond has already lost planned income from of his own Budget climb down on NIC Class 4 contributions – a measure which never even reached the first Finance Bill. In the grand scheme of things, the loss is small beer – about £2bn spread over four years from 2018/19. He is on record as saying he will need to replace the missing revenue, but any recoup will be lost on the noise of overall numbers.
• On the expenditure side, Mr Hammond must find the extra £0.5bn a year over the next two years that was pledged to Northern Ireland as part of the DUP’s “confidence and supply” deal following the general election.
• The DUP’s support means that in theory the Government has a majority in the House of Commons for Finance Bill legislation. In practice, as the Class 4 row showed, theory can be overturned if enough Conservative backbenchers are unhappy – and they are hardly an overjoyed team post-election and mid-Brexit.
• The latest government borrowing figures appear to give the Chancellor as much as about £10bn wriggle room. However, he will face the problem which prompted Gordon Brown to drop Autumn Budgets: the fiscal picture at the start of the new tax year can be very different from that the previous autumn.
What might appear in the Autumn Budget? At present, there are few clues. The ‘normal’ Budget process in which the previous (Autumn) Statement gives a clear steer of future Budget contents does not exist on this occasion. The Budget 2017 Red Book mentioned a variety of future consultations, some targeting an Autumn Budget announcement. In the aftermath of the election little has emerged, as a look at the Treasury’s list of consultations reveals.
The Brexit legislative programme will mean that Mr Hammond is unlikely to risk any controversial proposals that could upset backbenchers, such as major revisions to pension tax relief or other tax increases. The absence of consultations also points to few changes. Mr Hammond will face the further headwind of MPs weary of Finance Bill work alongside the European Union Withdrawal Bill 2017-2019.
The result could be a dull, steady-as-she-goes Budget, with little of interest beyond the standard tweaking of tax bands and allowances. The Conservatives’ election manifesto promised a personal allowance of £12,500 and a higher rate threshold of £50,000 by 2020 (ie 2020/21). That implies increases of £1,000 and £5,000 spread over the next three tax years.
One of the reasons given by the Treasury for the Autumn Budget timetable was that it would “help Parliament to scrutinise tax changes before the tax year where most take effect”. It may be that this time around there will be few changes for the Finance Bill weary parliamentarians to study.
At Wealth Design, we are constantly looking for ways we can improve the service we offer our clients and we are proud to announce the launch of our Wealth Design App. It’s completely free of charge and it’s available for iPhones, iPads and Android devices.
So the next time you need to look up a tax rate or work out a VAT calculation, our new App can help. It provides you with up to date, important financial data at your fingertips. PLUS:
Keeping in touch via ‘Push Notifications’
At Wealth Design we are committed to finding ways to communicate and interact with clients in the most efficient possible way and it is really important that we demonstrate a proactive approach to deliver the best quality service and also to satisfy the requirements of the Financial Conduct Authority. Our App enables us to send push notifications to all App users. We will be using this feature to share important news, deadline reminders and financial updates with you.
This App was designed to provide every service you could ask from us. We’ve included invaluable tools and features such as calculators, tax tables, logbooks, receipt and income management, instant access to the latest financial news and information and valuable company info, directly from us. With all this on one App, we hope our App will be your go-to tool in the future.
Photo Receipt Management, Email and Store
For our financially savvy clients who like to keep on top of things this functionality means you never lose a receipt again! Using the latest App, you can track receipts and expenses literally at the touch of a button. With minimal effort you can take a picture of any receipt and save it to your App. Any additional information can be added later and receipts stored by amount, category, and date. It can help you track all your expenses with ease and enable us to interact digitally with you.
GPS Mileage Tracking and Management tool
When it comes to mileage tracking, half the battle is keeping an accurate tab on your journeys. Using the built-in GPS on your device, it will automatically track your mileage, helping you to record every single trip at the touch of a button. It also manages trips as well, storing them and allowing you to view, edit or email them with complete ease.
It’s available for iPhone, iPad and Android devices completely free of charge right now! Enjoy our App with our compliments!
Here is the link to download it at Itunes - https://itunes.apple.com/us/app/wealth-design/id1246692963?ls=1&mt=8
Here is the link to download it at Google Play - https://play.google.com/store/apps/details?id=uk.co.myfirmsapp.WealthDesign
New research exposes a lack of preparation for the costs of education
A quarter of UK parents regret not saving earlier for their child’s education and one is five say they wish they had saved more, according to new data. Funding the cost of education is a big and important issue.
It seems that more than 70% of parents contribute towards the cost of their child’s education, at a “rich mix” of fee-paying schools, colleges or university. Despite this, less than half of those questioned in research by HSBC said they had started thinking about these costs before their child had started primary school. This compares to 60% of parents in the rest of the world. Blimey, we’re way behind!
20% of those British parents interviewed said they would be willing to cut back on holidays to fund their child’s education (not what the owners of Peppa Pig world and CeeBeebies land want to hear) and 14% said they would work longer hours to keep up with education costs. Nearly three-quarters of parents said they relied on day-to-day income to fund their child’s education.
HSBC, who were behind the research say almost half of UK parents admitted to not knowing how much they were spending on their child’s education. This was the highest proportion of any country in the survey; the global average was 22%. Given the “every day” grind/joy of bringing kids up, these stats are pretty worrying.
Many parents, it seems, just don’t know how much they are spending on education – even when the core fees are met by the local authorities. Ignorance is bliss – but the opposite has the strong capacity to create so called “justifiable anxiety” – you (may) have heard it first here.
HSBC say that for parents in the UK with a child in paid-for education can spend about £128,600 over the course of primary, secondary and tertiary education.
It seems from the HSBC report that parents in Asia lead the way in terms of planning ahead. More than half of parents in China said they funded their child’s education through general savings, investments or insurance and more than two-fifths through a specific education savings plan. In contrast, fewer than one in 10 parents in the UK (5%), Australia (8%) and Mexico (8%) choose to fund their child’s education through a specific education plan.
HSBC said that in nine of the fifteen countries surveyed, paying for their child’s education is most likely to be parents’ biggest financial commitment, above others such as mortgage or rent payments and household bills.
Whatever may happen politically in relation to government support of higher education costs there is a real and, I believe important need for informed advice to seriously and concertedly attack this wide open door of opportunity. Done well this will benefit parents, grandparents, children and the advisers putting in the time and expertise to deliver excellent outcomes
The buy-to-let burden continues: additional stringent rules to apply to private landlords as of September 2017
In September 2016 the Bank of England issued a press release which outlined that buy to let mortgage lenders (that are regulated by the Prudential Regulation Authority) will have to implement certain restrictions on lending criteria from 1 January 2017. These initial changes included stricter affordability tests including interest cover ratio including the impact of recent tax changes and a stress test on interest rate rises.
In addition, the Prudential Regulation Authority has made a proposal to impose additional rules on private landlords/buy-to-let investors, which will be implemented, as of 30 September 2017.
The new rules basically mean that lenders will be forced to apply stringent rules against applications for buy-to-let mortgages, by private landlords, with four or more mortgaged properties.
Lenders may be forced to review a landlord’s entire portfolio, when offering a mortgage on a single property.
Lenders may require proof of rental income and a business plan to support a new application.
Landlord borrowers could find the amount they can borrow will be restricted, if they fail a “stress test” across their portfolio.
The new rules are clearly part of the government’s crackdown on the buy-to-let market. It will be interesting to see how the new rules apply in practice especially in cases where properties are for example, held directly by an individual or via a limited company because it is currently unclear whether all properties would be taken into account. And, it may be advisable for those who are currently considering making a mortgage application to apply now before the new rules are implemented.
HMRC has announced that its online Trusts Registration Service will not be ready for launch this month as originally intended. The online Trust Registration Service, which was covered in detail in our February Bulletin ‘Money Laundering Rules and Trusts’, replaces the paper 41G(Trust) form and the ad hoc process for trustees to notify changes in their circumstances, and will be relevant to any trust that generates "tax consequences".
The online Trust Registration Service, which was covered in detail in our February Bulletin ‘Money Laundering Rules and Trusts’, replaces the paper 41G(Trust) form and the ad hoc process for trustees to notify changes in their circumstances, and will be relevant to any trust that generates "tax consequences".
As reported in our most recent bulletin on this subject here, HMRC’s new online Trusts Registration Service was due to be launched this month following withdrawal of the paper form 41G (Trust), however, it is understood that the launch, which was intended to coincide with the beneficial owner registration requirements of the EU's Fourth Money Laundering Directive (4MLD) - transposed into UK law this week - has now been delayed.
The register will allow HMRC to collect and hold adequate and up-to-date trust information centrally in line with the specific requirements of the 4MLD, and will require any new or existing trust that generates a ‘tax consequence’ to provide information on the identity of the settlor, the trustee(s), the protector (if any), the beneficiaries (or class of beneficiaries if the trust is a discretionary trust) and any other persons exercising control over the trust; as well as a detailed picture of the assets held. This imposes a more onerous reporting obligation on many trustees who have until now been exempted from the requirement to complete a 41G(Trust) if there was ‘no income arising, and no likelihood of income or gains in the future’. By contrast, the new requirement to register or update trust details online applies in any year that the trust generates a UK tax consequence of any kind - this could be an income tax, CGT, IHT or SDLT implication.
Trusts that hold collectives will have needed to register under the previous system and for these trusts little more will change other than when and how the information is provided. For trusts that hold no assets other than onshore or offshore bonds life insurance investment bonds, the new rules will presumably mean that online registration will not be required unless either a chargeable event arises or a chargeable occasion for IHT occurs - however, the position is not yet completely clear.
The requirement to register will apply to both onshore and offshore trusts, however bare trusts, where any tax liability that arises, arises to the beneficiary rather than to the trust, are excluded from reporting.
Until the Trust Registration Service is available, HMRC have asked customers to delay notification of new trusts. In the meantime, those completing Trust and Estate Tax Returns have been instructed by HMRC to leave the box that asks for confirmation that ‘changes to the trust have been updated on the Trust Register’ blank, with a view to ensuring that correct details are recorded on the register when it is up and running. Once the service is operational, trustees will have until October 5 this year to register new taxable trusts and until January 31 2018 to provide information on existing trusts.
The House of Commons has published a briefing paper looking at the interaction of Carers Allowance and the state pension.
Carer’s Allowance is an “income replacement” benefit for people who are unable to work because they are caring full-time for a disabled person. Since 2002, Carer’s Allowance has been payable to people aged 65 or over, but it cannot be paid in addition to the Retirement Pension. This is because of the “overlapping benefits” rule. Although an entitlement to both benefits can mean that Carer's Allowance is not payable, for lower income pensioners an “underlying entitlement” to Carer's Allowance can give access to carer additions to means tested benefits such as Pension Credit. For other pensioners however, a claim for Carer’s Allowance may result in them receiving no additional financial support.
Cash benefits for carers consist of:
- Carer’s Allowance, currently worth £62.70 a week (2017-18 rates)
- The carer premium/addition payable with means-tested benefits such as Income Support, Pension Credit, and Housing Benefit. It is payable to those who satisfy the conditions for Carer’s Allowance, and is currently £34.95 a week.
People who make a claim for Carer’s Allowance are often unhappy to find that it is withdrawn if they are also entitled to a state pension. This is due to the “overlapping benefits rule”. In 2017-18, around 367,000 people over State Pension in Great Britain are expected to satisfy the care conditions for Carer’s Allowance, but only around 18,000 will actually receive the benefit.
The overlapping benefits rule does not only apply to people eligible for both Carer’s Allowance and the Retirement Pension. Carer’s Allowance cannot be paid in full if an individual could also get any of the following benefits:
- Retirement Pension
- Incapacity Benefit
- Contributory Employment and Support Allowance
- Severe Disablement Allowance
- Contribution-based Jobseeker’s Allowance
- Widow's Pension/Bereavement Allowance
- Widowed Mother’s/Parent’s Allowance
- Maternity Allowance
- Unemployability Supplement paid with Industrial Injuries Disablement Benefit or War Pension
- Training allowances.
If the amount of the above benefits is less than the amount of Carer’s Allowance, then the difference is made up.
The rationale for these provisions is that Carer’s Allowance is paid to provide income for a person unable to work because of their caring responsibilities. It cannot therefore be paid in addition to any of the other income maintenance benefits listed above. To do so would be against the long-standing feature of the social security system that “double provision should not be made for the same contingency”.
Although there has not been a change to the overlapping benefits principle, it worth remembering what benefits are impacted on receipt of the state pension.
Newsletter providing HMRC update on the pension advice allowance, RAS, Scottish rate of income tax and changes to the ROPS listing
HMRC has recently published Newsletter 87 which covers:
· Pension Advice Allowance
· Relief at Source
· Scottish Rate of Income Tax
· Pension Scheme return (SA970)
· Changes to the ROPS listing
Of notable interest:
Pension Advice Allowance
HMRC has received queries from pension scheme administrators asking if their members can request the pension advice allowance from their scheme by email. The Registered Pension Schemes (Authorised Payments) (Amendment) Regulations 2017 say that the request must be made in writing by the member. HMRC confirmed that the member can make this request by email, however it’s down to the pension scheme administrator to decide if they will accept requests by email.
The pension scheme return and the SA970 tax return for trustees of registered pension schemes
HMRC has received a number of queries from pension scheme administrators confusing the pension scheme return (PSR) with the SA970 tax return for trustees of registered pension schemes.
These are 2 different information returns; the pension scheme return and the SA970 tax return for trustees of registered pension schemes. As pension scheme administrator/pension scheme trustee, may have to complete both the PSR and the SA970 tax return for trustees of registered pension schemes.
PR are carrying out AE spot checks on employers
The Pensions Regulator (TPR) is to begin carrying out spot checks in Birmingham to ensure employers are complying with their automatic enrolment duties.
Inspection teams will visit dozens of businesses in and around the city to check that qualifying staff are being given the workplace pensions they are entitled to.
The move is part of a nationwide enforcement campaign which began in London in April to ensure employers are meeting their automatic enrolment duties correctly.
Birmingham is to become the third area to be the focus of the short-notice inspections. TPR carried out checks in Greater Manchester earlier this month.
The checks will also help TPR understand whether employers are facing any unnecessary challenges that we can help them with, such as by improving our systems.
But they will also highlight employers who have not taken the required steps to become or remain compliant, paving the way for enforcement action.
HMRC has recently updated its guidance on the Let Property Campaign.
The Let Property Campaign is for landlords who owe tax through letting out residential property, in the UK or abroad, to get up to date with their tax affairs in a simple and straightforward way. It includes:
- those that have multiple properties
landlords with single rentals
specialist landlords with student or workforce rentals
renting out a room in your main home for more than the Rent a Room Scheme threshold
those who live abroad or intend to live abroad for more than 6 months and rent out a property in the UK as you may still be liable to UK taxes
Those who are unsure whether they need to disclose unpaid taxes under this campaign can use the Let Property questionnaire to help them decide. Full details of the campaign and how to make a disclosure can be found here.
This is an ideal opportunity for advisers to contact clients to ensure their tax affairs are up to date and an early disclosure will result in lower penalties and interest being payable. Clients should also be made aware that if HMRC accepts a disclosure they do not necessarily have to make an upfront payment as HMRC accepts various payment methods and will be able individuals to spread payments.