FYI - In the News

The real problem with university costs Writing in the Financial Times, money saving expert Martin Lewis says: “With higher inflation, bizarrely the biggest practical problem with student loans is that the debt isn’t big enough. It’s time to change the debate. The cost of living crisis is the problem, and even cutting tuition fees to nothing wouldn’t solve it.” His point is that the tuition fees are covered by loans, but students living costs aren’t – what they get depends on their parents’ income, and the way parents are assessed for contributions means that those with more than one child at university are penalised. Yet this isn’t made clear either to students or their parents. Better parental leave The insurer Aviva has altered its parental leave policy and now offers both parents up to six months of paid parental leave, says the Financial Times. The company’s 16,000 employees can take the leave at any time in the first 12 months after the child’s birth. Its previous policy - a maximum of 4 months for women and 2 months for men – was more typical of what most employers offer. Statutory rights are much lower. Trade Unions welcomed Aviva’s move. Woodford backs UK as investors question performance Star fund manager Neil Woodford has been under pressure following over a year of poor performance by his flagship fund, says the Financial Times, which ran a long interview with the manager. He admitted to being worried but repeated his conviction that his decision to buy more shares in UK-focused businesses like housebuilders was right. He said: “People have become so extreme in their view that Brexit is a pre-determined disaster for the UK economy, that the share prices are discounting literally economic Armageddon for the UK economy.” He discounts the notion of a cliff-edge disaster if the Brexit deal is not right, saying that is just not how the world works. Our view is that Woodford might be right or wrong, but we would never invest our clients’ core portfolios in funds that are based on someone’s opinion. The key to successful investment is globally diversified portfolios, tapping into proven factors of additional return. Another tax hit for BTL investors The Budget concealed yet another tax hit for Buy-To-Let investors, says the Times. The Chancellor eliminated the ability of companies to uprate the cost prices of their investments in line with inflation with effect from April 2018. This brings the treatment of company gains in line with personal gains, and will bring an estimated £2 billion in extra tax over the next five years. It is a blow for Buy-To-Let investors who hold their properties inside a company. Up to 200,000 landlords have set up companies to hold Buy-To-Let properties since the rules were changed, and reduced their eligibility for tax relief on mortgage interest, while a further 500,000 landlords are estimated to be considering incorporation. HMRC gets heavier with penalties HMRC has got a lot of publicity for its proposal to replace penalties for late filing of tax returns with a points system like driving licenses, says the Times But in practice it has been imposing more penalties for deliberate errors on tax returns – the number of these penalties rose by 19% in 2016. The penalty can be between 20% and 70% of the tax due. Moreover, once you’ve had a penalty imposed, HMRC can monitor your affairs for several years, and you can be named and shamed on the HMRC website. Small step forward for cohabitation There has been a small step forward for the rights of cohabiting couples, says the Sunday Times. The Court of Appeal ruled that unmarried people may be entitled to statutory bereavement damages, which are worth up to £12,980 - though it will require a change in the law to bring this into effect. Cohabitees, whose numbers have more than doubled from 1.5m in 1996 to 3.3m now, are much worse off than married couples, especially in relation to inheritance tax (IHT). IHT is normally levied at 40% on assets worth more than £325,000, including property. The amount below this threshold is known as the nil-rate band. Any unused IHT nil-rate band allowance can be transferred to a surviving spouse or civil partner, allowing them to pass on £650,000 free of tax when they die. Cohabiting couples cannot do this. In addition, the new residence nil-rate band applies only to married couples and civil partners. This adds a further £100,000 to the amount someone can pass on free of IHT to a child, grandchild or other direct descendant if their estate includes their main home. The savvier Xmas gift Consider investment company plans as an alternative gift for children, says the Sunday Times. The average investment company would have converted a gift of £100 made 18 years ago to nearly £500 today, while £100 each year for the past 18 years would now be worth £6,200 compared with £2,100 if it had been put in a deposit account. Many of the 16 companies offering gift plans have monthly minimums of £25 and lump sums start from as little as £50. If you set up the plan as a designated account then you can decide when the child gets the money – it can be later than age 18, which is when they have to be handed the cash if you use a Junior ISA for their savings. Bluecoat Wealth Management Ltd can set up Trust funds for clients’ children and grandchildren, that can be used for education purposes or to build a deposit towards buying their first home. Why not speak to us about your requirements? What’s in their black box? Telematics – the use of a black box to monitor driver performance by insurers – is surging in popularity, says the Telegraph, with over 750,000 cars in Britain now monitored in this way. And the black box can cut premiums, especially for younger drivers. But each insurer has a different set of algorithms that measure performance and deliver the score that sets the drivers premium. And drivers have no way of using the data gathered by their existing insurer to get a quote from another insurer at renewal. The Telegraph says its time the rules were changed to give drivers access to their data. Do the sums on cashback mortgages Cashback mortgages have enjoyed a surge in popularity, says the Independent. It reckons there are 1,200 different offers on the market, and the average cashback today is about 10% higher than a year ago at £409, but that buyers need to do their sums to work out when they really deliver a better deal. Often, it says, a bigger cashback amount can make a 2-year deal at a higher interest rate better value than a rival one at a lower rate. But for those seeking a big mortgage, the interest rate cost usually outweighs the cashback. Who will benefit from Stamp Duty cut? The Chancellors decision to scrap Stamp Duty on property purchases worth up to £300,000 for first-time buyers gives them a theoretical gain of up to £5,000 the duty payable on a normal £300,000 purchase. But the average First-Time-Buyer purchase is £165,000, and on this the cut in Stamp Duty delivers just an £800 saving. Moreover, the Office for Budget Responsibility, using data from the stamp duty holiday after the financial crisis, says most of the benefit of the cut will be captured by property owners, and it expects house prices to be slightly higher as a result. The above content should not be construed as advice – please contact us if you wish to discuss how your finances might be affected by any of the above.