Paul's Blog

At the beginning of March 2018, HMRC published figures on personal taxation and income throughout the UK for the 2015/16 tax year. The full report offers some interesting insights into the nation’s finances.

According to the report by HMRC, the UK population collectively earned moreincome in 2015/16 than ever before. Total UK income broke the £1 trillion mark for the first time, reaching £1.040 trillion. The total income tax paid on this staggering amount was £178 billion, which is £11 billion more than the £167 billion paid in 2014/15. Perhaps unsurprisingly, therefore, income tax made up the greatest proportion of the government’s total revenue during that year. The total amount collected was enough to pay for the government’s combined investment in education, defence, policing, transport and welfare benefits, not including pensions.

Considering the hefty total income tax bill, you might be surprised to learn that 53% of the UK population (34.6 billion people) paid no income tax at all in 2015/16. Of the remaining 31 million tax payers, 25.3 million paid the basic rate of tax, 4.5 million taxpayers were liable at the higher rate and 800,000 were taxed at the “savers” rate. Only 400,000, less than 1% of all taxpayers, were taxed at the additional rate. Even though they made up just 7% of the total UK population, higher and additional rate taxpayers brought in £120.5 billion of the £178 billion collected – just over two thirds (67%) of the total income tax paid in 2015/16. The 400,000 people earning enough to be taxed at the additional rate paid 30% of the total UK tax bill.

“Income tax is critical to public spending. It represents £1 in every £4 that the government raises in tax,” said Alistair McQueen, Head of Savings & Retirement at Aviva plc. “The latest figures show that our total income rose by 6% over the latest year. At the same time, our total tax bill also rose by 6%.”

Sources
https://www.linkedin.com/pulse/new-data-5-surprising-facts-income-tax-uk-including-most-mcqueen/
https://www.ons.gov.uk/peoplepopulationandcommunity/populationandmigration/populationestimates/articles/overviewoftheukpopulation/july2017
https://www.ukpublicspending.co.uk/piechart_2017_UK_total
https://www.ifs.org.uk/publications/9178
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/685472/National_Statistics_T3_1_to_T3_11_publication_-_FINAL.pdf

Following the financial crisis of 2008 when a number of big British banks came close to collapsing, the Financial Services Compensation Scheme (FSCS) was strengthened by the government. As such, the FSCS 100% guarantees the first £85,000 of a person’s cash savings per banking licence in total, including interest. This means that a couple with a joint account holding up to £170,000 will have every penny of this covered.

But what does ‘per banking licence’ mean? Simply put, one banking licence can cover a number of different banks, building societies or brands. It’s important therefore to spread your cash across more than one provider, as it could mean some of your hard-earned money isn’t as safe as you think in the event of a future collapse.

With that in mind, below is a list of the biggest banks and building societies in the UK and all the brands which fall under their banking licence. That means if you hold more than £85,000 across different brands but under the same licence, you could be in a position to lose out should the worst happen.

HBOS (Halifax/Bank of Scotland group):
AA
Bank of Scotland
Birmingham Midshires
Halifax
Intelligent Finance
Saga

Lloyds Banking Group*:
Cheltenham and Gloucester
Lloyds Bank

*HBOS was acquired by Lloyds Bank, but both HBOS and Lloyds Banking Group have continued to operate under separate banking licences.

TSB:
TSB

Barclays:
Barclays
Barclays Direct (formerly ING Direct)
Standard Life
Woolwich

HSBC:
First Direct
HSBC

Royal Bank of Scotland (RBS)**:
RBS

NatWest:
NatWest

Ulster Bank:
Ulster Bank

Coutts & Co:
Coutts

**NatWest, Ulster Bank and Coutts are all subsidiaries of RBS, but have their own separate banking licences. As such, someone with accounts in each of these banks would be covered for up to £85,000 in each bank.

Santander UK:
Cahoot
Santander

The Co-operative Bank:
Britannia BS
Smile
The Co-operative Bank

Bank of Ireland UK:
Bank of Ireland UK
Post Office

Clydesdale Bank PLC:
Clydesdale Bank
Yorkshire Bank

Sainsbury’s Bank:
Sainsbury’s Bank

Tesco Bank:
Tesco Bank

Virgin Money:
Virgin Money

Nationwide BS:
Cheshire BS
Derbyshire BS
Dunfermline BS
Nationwide BS

Yorkshire BS:
Barnsley BS
Chelsea BS
Egg
Norwich and Peterborough BS
Yorkshire BS

Coventry BS:
Coventry BS
Stroud and Swindon BS

Skipton BS:
Chesham BS (renamed Skipton BS)
Scarborough BS (renamed Skipton BS)
Skipton BS

So, what about banks outside the UK? Whilst most banks which accept British savings are not covered by the FSCS, some within the European Economic Area are covered by their home country’s compensation scheme through the ‘savings passport’ scheme. One of the most prominent examples is Triodos Bank in the Netherlands, which is covered by the Dutch equivalent of the FSCS up to €100,000 per person. There are also some international banks which are covered by the FSCS, including:

Axis Bank UK
ICICI Bank UK
State Bank of India UK

Money saved in accounts and products offered by Government-backed National Savings & Investments (NS&I) enjoys 100% security (although these products are not protected by the FSCS). This includes premium bonds.

Sources
https://www.lovemoney.com/news/15729/who-owns-your-bank-or-building-society
https://protected.fscs.org.uk/banking/how-is-your-money-fscs-protected/

‘We are living in a material world, and I am a material girl’. So sang Madonna in her famous pop ode to owning things in 1984. But just as Madge’s song is now well over thirty years old (yes, really), so is the sentiment that you need to fill your life with stuff in order to enjoy the money you earn. Whilst allowing yourself some creature comforts and the occasional material expense is important, nowadays spending your money on experiences rather than things is considered by many to be a far better investment. With that in mind, here are a few suggestions for where you might head in 2018 to live this year in an ‘experiential world’.

Mongolia – If you’ve done one too many commercial festivals which could easily be transposed from one location to another, Mongolia’s Eagle Festival could be the remedy you’ve been looking for. Keeping its roots in the nomadic ‘ger’ camps situated high up the Altai Mountains, the festival celebrates traditional eagle hunting that is still part of the everyday lives of the people who call this magnificent landscape home. Other experiences to take in include tracking wild horses with the Gobi locals, hiking Bayanzag’s ‘Flaming Cliffs’ and exploring the ruins of monasteries destroyed by Stalin.

Iceland – Few other destinations offer the chance to see both the Northern Lights and whales in their natural habitat. On top of this, you’ll get to see the glaciers, lava fields and wild waterfalls that make up Iceland’s natural landscape. There are cruise packages which offer all of this as one week-long excursion, providing you with seven days of natural wonder that you won’t forget.

India – Sadly, a destination that’s perhaps become a bit clichéd, thanks to the gap year crowd wanting to ‘find themselves’ before heading off to university, but India has so much more to offer. The country has countless communities still ‘off grid’, such as the Konyak tribe of Nagaland, where you’ll be able to immerse yourself in their ancient rituals and headhunting history through their Aoling Festival. There’s also a chance to see the ancient temples which pepper the landscape and even see a nearby World War II battleground.

The Netherlands – If you’re after an experience slightly closer to home, you could do a lot worse than heading to Leeuwarden, the capital city of Friesland in the Netherlands and the European Capital of Culture in 2018. You can explore the seventeenth century streets and canalways on foot or by bicycle, with the chance to learn about famous Leeuwarder and World War I spy Mata Hari.
Sources
https://www.wanderlust.co.uk/content/best-experience-trips-2018

Whether you’re someone who prides themselves on having their accounts in order every year, or you’ve just had yet another last-minute scramble to submit your tax return before the deadline at the end of January, the start of a new calendar year is a great time to review your books and ensure they’re all in order for the twelve months ahead. Here are our top four tips for 2018 in terms of your accounts, ensuring your bottom line is secure and most likely giving it a bit of a boost too.

  1. Get the tax man on your side – okay, maybe you’re unlikely to be inviting ‘the tax man’ to the pub on a Friday night, but it’s a good idea to keep HMRC on side for your business. The HMRC website is the best way to get up to speed with everything you need to know and all the latest accountancy developments for your business. And, if you’re in doubt about anything, get in touch with the tax authorities sooner rather than later and find out the answer. Forewarned is forearmed, as they say.
  2. Make your accountant’s life as easy as possible – your accountant’s job shouldn’t be to make sense of your business’s incomplete and poorly kept books. Not only does keeping your records in a reasonable order for them keep your costs low and reduce the likelihood of any unexpected fines coming back to haunt you, but it also frees up the time you’re paying your accountant for – to offer advice and save your business money over time. So, with that in mind…
  3. … When it comes to finances, keep everything – all your receipts and invoices need to be logged and traceable. Digital technology makes this easier now than ever, as paperwork can often be provided electronically and anything that can’t, can be scanned and linked to your records. As long as you keep your records up to date, you shouldn’t find yourself turning your business upside down for that one vital receipt you can’t find come the next tax deadline.
  4. Simplicity is key – Keeping financial records doesn’t have to be complicated; in fact, the simpler you can make your system, the better. That way you’re not having to decipher your own labyrinthine puzzle to understand your own business accounts. This will also make it far less likely that you’ll miss any unpaid invoices and have to chase them several months down the line. If your records have got out of control, the new year is a great time to start afresh with a modern system that works for you and your accountant.

    Sources
    https://www.pandle.co.uk/top-tips-getting-books-order-2018

You may have seen Curtis “50 Cent” Jackson make the news at the end of January after becoming a Bitcoin millionaire. The rapper, actor and businessman made his 2014 album, Animal Ambition, available for purchase for a fraction of a Bitcoin upon release, making around 700 Bitcoin from sales. 50 Cent has admitted that he had forgotten about the earnings, which have sat untouched since 2014 and are now reportedly worth somewhere between £5 million and £6 million thanks to the meteoric rise of the cryptocurrency’s value in recent months.

Despite 50 Cent’s good fortune, those in the financial sector continue to warn against Bitcoin and other cryptocurrencies as a sound investment. Alex Weber, chairman of global financial services company, UBS, is one of the latest figures to lend his voice to these warnings, describing cryptocurrencies as ‘not an investment we would advise.’

There have also been warnings from consultancy firms that initial coin offerings (ICOs), which raise funds by providing cryptocurrency tokens, are prime targets for cybercriminals. Ernst & Young analysed 372 ICOs which had raised $3.7 billion in total and found that hackers were taking as much as $1.5 million in proceeds from these each month with approximately $400 million stolen in total.

The announcements from governments worldwide that cryptocurrencies will soon be regulated has resulted in huge price fluctuations, with Bitcoin dropping from its high point of almost $20,000 in December 2017 to around half that towards the end of January 2018. The steep drop is due in part to the announcement by the government of South Korea, the third largest cryptocurrency market in the world, that its planned ban on the use of anonymous bank accounts in cryptocurrency trading would be implemented from 30th January.

Another concern surrounding cryptocurrency technology is the continued hype surrounding it, with companies taking advantage of investor buzz. The US Securities and Exchange Commission has warned that companies will be scrutinised over name and business model changes which have been made to capitalise on the hype.

Due to these developments in recent months, many economists are now predicting the cryptocurrency bubble could be about to burst. When, or if, this will happen remains to be seen, but the risks surrounding these relatively new forms of investment continue to be a worrying reality.
Sources
https://www.theguardian.com/technology/2018/jan/23/bitcoin-ubs-chairman-warns-against-cryptocurrency-investment-currency-falls
http://www.telegraph.co.uk/technology/2018/01/25/50-cent-becomes-accidental-bitcoin-millionaire-forgotten-investment/

There are no shortcuts or guarantees when it comes to achieving self-made millionaire status. That said, it can’t hurt to look at the financial habits of those who have managed to do just that to try and boost your own coffers. Here are our top tips from looking at those who’ve become millionaires by age 30. Who knows, they might just lead to you being worth seven figures in the future.

  1. Don’t rely on your savings – The current economic environment makes it very difficult to become wealthy through saving, so increasing your income is an obvious but good way to boost your bank balance. Whilst increasing your main salary can also be a challenge, you might think about other ways to achieve this such as earning passive income through property rental, or taking on freelance or consultancy work on the side (just keep an eye on any tax repercussions).
  2. Invest, invest, invest – Instead of saving for a rainy day, put your savings into investments. If you choose investments and accounts with restricted access to your funds, not only will this ensure your investments pay off, but it will also help you to focus on increasing your income rather than relying on money you’ve put away.
  3. Change your mindset – Nobody has ever become a millionaire without believing that it’s something they themselves can both achieve and control. The best way to do this is to invest in yourself. Spending time educating yourself about both your business area and the financial world in general will help you to understand how to capitalise on opportunities and genuinely believe you can increase your net worth.
  4. Make plans and set goals – You’ll only boost your wealth if you actually plan out how you’re going to do it. Before you can make a plan, however, you need to decide what you’re aiming for. If you really do want to become a millionaire, then think big: if you have a certain figure you want to achieve, aiming higher will help ensure you reach it or even surpass it.
    Sources
    http://www.independent.co.uk/life-style/9-things-to-do-in-your-20s-to-become-a-millionaire-by-30-a7377801.html

A recent report has revealed that millennials are set to benefit from an ‘inheritance boom’ bigger than that experienced by any other generation in the post-war period. The Resolution Foundation, the think-tank which carried out the research, defined millennials as people currently aged between 17 and 35, and found that those within this age bracket will be left record amounts of wealth by their ‘baby boomer’ parents and grandparents.

The report found that inheritances will double in size over the next twenty years, peaking in 2035, as baby boomers who generally have high levels of wealth move through old age. Additionally, nearly two thirds of millennials have parents who are property owners, of which they may receive a share in the future. This is a stark difference to adults born in the 1930s, of whom only 38% received an inheritance.

However, the Resolution Foundation also stressed that the inheritance boom will not be a ‘silver bullet’ which allows millennials to get on the property ladder or address the wealth gaps which are currently growing in society, as most will only benefit from their inheritance when they themselves are nearing pension age. The average age at which people lose both parents is getting later; people who are currently between 25 and 35 are expected to be 61 years old when this happens.

Another key finding of the report was the strong correlation between the property wealth of millennials and the amount they are set to inherit from their parents, with those who were able to get on the property ladder during their early 20s, destined to benefit the most from the inheritance boom. The new inheritance tax housing allowance will also be fully implemented in 2020, meaning that as much as £500,000 per person will be able to be passed on without incurring tax, allowing millennials whose parents own valuable homes to cut their average tax burden in half.

In comparison, those millennials who do not own their own home by their mid thirties are much less likely to receive a large inheritance from their parents. Additionally, if they inherit this when in their 60s, they’ll then be much less likely to be able to secure a mortgage, meaning that some may struggle to climb onto the property ladder throughout both their working and retired lives.

Sources
http://www.telegraph.co.uk/news/2017/12/30/millennials-will-pensioners-receiving-inheritance/
http://www.bbc.co.uk/news/uk-42519073

Research into the housing market throughout 2017 has revealed the areas of the UK where property prices increased and decreased the most last year. Cheltenham in Gloucestershire was the place where prices grew at the fastest pace, with the average price of £313,150 marking a 13% rise – nearly five times the UK average increase of 2.7%. At the other end of the scale was the Scottish town of Perth, where prices dropped by 5.3% to make the average property price tag £180,687.

The places which saw the biggest growth were in southern England, with Bournemouth and Brighton coming in second and third place with rises of 11.7% and 11.4% respectively. At the other end of the scale, Scotland, Yorkshire and the Humber were the areas where the biggest falls were seen. The second-biggest fall in house prices was seen in Stoke-on-Trent (4%), with Paisley in third position (3.6%).

Fifteen out of the top twenty areas for house price increases are located in London and southern England. This is in spite of the capital overall seeing its average house price fall by 0.5%, thanks to the economy slowing down and consumers continuing to feel the effects following the Brexit vote of 2016.

The outlook for the year ahead offers little reprieve: many in the property sector, including the Royal Institution of Chartered Surveyors, predict that the market in 2018 will, for the most part, remain flat, with some expecting property price growth to slow even further. Whilst this would be good news for those looking to take their first steps onto the property ladder, it’s more worrying news for people hoping to invest in the market.

It’s expected that the story will differ geographically, but property portal Rightmove has also predicted that different property types are likely to grow at different rates. They have forecast prices for homes with two bedrooms or fewer will rise by 3%, whilst three and four bedroom homes will see growth of only 2%.
Sources
http://www.bbc.co.uk/news/business-42539137
http://www.independent.co.uk/news/business/news/uk-house-price-increases-biggest-2017-cheltenham-bournemouth-brighton-london-housing-market-david-a8137366.html
http://www.bbc.co.uk/news/business-42555351

Anyone with an email address is likely to have experienced a scam or phishing communication landing in their inbox, and unfortunately this type of attack is becoming both more frequent and more sophisticated. Sending a message purporting to be from HMRC is a popular method criminals can use to attempt to get hold of personal and financial details. It’s not limited to email either, with hoax text messages, social media communications and telephone calls also being used in order to illegally extract the information needed.

The most important thing to remember with any form of communication from anyone is to never give out private information unless you’re 100% certain that it’s from a genuine source. Most organisations, including HMRC, make it clear that they will never ask for personal or payment details in this way, so if you’re at all unsure, don’t reply at all. Additionally, HMRC says it will never use emails to let taxpayers know about either tax penalties or rebates.

Unfortunately, there are a number of official looking email addresses (i.e. ones that end with @hmrc.gov.uk) which have been reported as scamming taxpayers, so you can’t be certain whether the email is genuine even if it comes from an address which looks legitimate. Watch out for phrases such as “urgent action” or emails which generically address you as “Dear Customer” or something similar, as both of these are red flags that the email is a hoax.

Scam emails will often take you to an online form asking for personal information, which could include bank details such as your sort code and account number. If you find yourself looking at a form like this, even if it looks genuine, never enter any details. Another method used by hackers is to attach a document to an email which may allow them access to your computer and your data if opened. If you receive an email with an attachment that you’re not completely sure about, don’t open it, even out of curiosity – once is enough for a criminal to gain access!

Whilst HMRC does use text messages to contact taxpayers occasionally, it will never ask for any personal or financial details in this way, so don’t respond to any such messages. If there is a link in the text message, make sure you don’t open this either, as it will likely pose the same threat as an online form or malicious attachment in an email.

Phone scams are often used to target elderly and vulnerable people, with the scammers often threatening police involvement if the person they have called does not give them the details they request. If you cannot be certain who you’re speaking with, don’t engage them in conversation and never give out any personal information.

Sources
https://www.accountancyage.com/2017/12/14/avoid-hmrc-scam-emails-phone-calls/

If you’re saving for a home through a Help To Buy ISA or know someone who is, it’s worth being aware of a planning opportunity which could boost your savings by an additional £1,100. But anyone hoping to take advantage of this opportunity needs to be quick, as it will only be available for just under four months more.

Any savings in a Help To Buy ISA which are transferred to the new Lifetime ISA before 5th April 2018 will benefit from a top up of 25% from the government. The opportunity has arisen thanks to the Help To Buy ISA small print relating to the transfer of money saved before the launch of the Lifetime ISA on 6th April 2017.

Lifetime ISAs have an annual limit of £4,000, which includes money transferred from another savings account. However, money transferred from a Help To Buy ISA within the first twelve months of Lifetime ISAs becoming available does not count towards the contribution limit for the 2017-2018 tax year. As such, any money transferred into the Lifetime ISA from the Help To Buy ISA will be boosted by the government top-up, potentially resulting in hundreds of pounds being added to your savings.

For example, someone who had saved the £4,400 maximum amount into a Help To Buy ISA before April 2017 could transfer this into a Lifetime ISA before 5th April 2018. As this wouldn’t contribute to their limit, they could then save a further £4,000 into the Lifetime ISA for a total of £8,400. The 25% bonus would then be added to the entire £8,400 in April next year, giving an additional £2,100. In any other year, the maximum top-up which could be earned from the Lifetime ISA would be £1,000.

So If you know anyone using a Help To Buy ISA to save towards a first home, transferring money to a Lifetime ISA to enjoy an additional top-up of up to £1,100 in April next year could make collecting the keys to their own place happen a little bit sooner.

Sources
http://www.telegraph.co.uk/personal-banking/savings/use-isa-loophole-now-1100-savings-boost/