Summer 2015 Budget… A Summary

Budget red boxWell the first all conservative budget is over and lots of changes as expected.

Although there is a lot of information and figures, we have taken the key information for our mortgage and protection customers and highlighted the impact of these to you here.

PLEASE NOTE: This snapshot is not intended as an in-depth analysis of the Chancellor’s speech (we will leave that to the press and experts) but we hope this brief summary helps you gain a quick grasp on the key points delivered by the Chancellor yesterday.

For full details of the following headlines (and more) you may wish to visit the HM Treasury website

The key points affecting mortgages, insurance and housing are as follows:

Insurance Premium Tax

This will be raised from 6% to 9.5% from November this year.  Any policies affected by this rise will be contacted by the provider in due course to advise of the rise and to confirm the new payments.

This is not a rise in premiums, just a rise in taxation and should affect around one fifth of all insurance bought in the UK.

Home Ownership

The chancellor reaffirmed that the government was committed to:

New Help to Buy Isa this Autumn

Giving Housing Association Tenants access to Right to Buy

Further planning reforms to be announced Friday 10th July

Buy to Let Mortgage Interest Relief

This will be restricted to basic rate tax only, meaning that higher rate tax payers will no longer receive tax relief at the higher rate.

This will be implemented over a 4 year period and will start in April 2017

Rent a Room relief

This has been set at £4,250 for the last 18 years.  Next year it will be raised to £7,500, a much more realistic figure in today’s economy.

Inheritance Tax on family homes

From 2017, an additional £175,000 allowance will be granted on top of the standard £325,000 threshold when you leave your own home to either your children or grandchildren.  For couples this means that from 2017 you can effectively leave a property worth £1 million to your family free of charge.

This is particularly welcome to those families that have owned their own home for many years and have seen it grow rapidly in value, especially in the London and South East of England.

However, for estates worth more than £2 million this relief will be tapered away, so the intention is to return inheritance tax payments back to the wealthier estates in society.

Housing Benefits

Mortgage Interest Support, will change from a benefit to a loan.  The timescale to make a claim will also change from 13 weeks to 39 weeks.

This is a major change in benefits and potentially impacts anyone who has a mortgage and is out of work through long term illness or redundancy.

In addition, social housing tenants earning more than £40,000 in London and £30,000 elsewhere will see their rents rise to market rates, rather than being subsidised as they currently are.

Social housing rents will reduce by 1% a year for the next 4 years as well.

Highlights of other changes in brief

Forecasts

  • Chancellor announces that this budget, a one nation budget, puts security first and is a budget for working people looking ahead to the next five years.
  • The Chancellor announced adjustments to previous growth forecasts from those previously announced in the 2015 March Budget.
    • Growth last year at 3% – up from 2.6%
    • Growth forecast for 2015 – revised down to 2.4%
    • Growth forecast for 2016 – unchanged at 2.3%
    • Growth forecast for 2017 – revised upwards to 2.4%
    • 1 million more jobs to be created over the next five years
    • OBR borrowing forecast revised down to £69.5 billion for 2015/16
    • OBR states national debt now decreased to 80.1% of GDP

Taxation/Welfare

  • New National Living Wage of £7.20 to be introduced in April 2016 (to reach £9.00 per hour by 2020 – compulsory for working people aged 25 and over)
  • £12billion in savings required through welfare changes
  • £5billion in savings through crackdown on tax evasion and avoidance
  • Corporation tax to be reduced to 19% in 2017 / 18% in 2020
  • Non-domiciled taxation status to be abolished from April 2017
  • Dividend tax credit to be replaced by £5,000 tax free allowance
  • Inheritance Tax  – up to £1million can be passed onto children without inheritance tax
    • This measure introduces an additional nil-rate band when a residence is passed on death to a direct descendant. This will be £100,000 in 2017 to 2018, £125,000 in 2018 to 2019, £150,000 in 2019 to 2020, and £175,000 in 2020 to 2021.
    • It will then increase in line with Consumer Price Index from 2021 to 2022 onwards. Any unused nil-rate band will be transferred to a surviving spouse or civil partner. It will also be available when a person downsizes or ceases to own a home on or after 8 July 2015 and assets of an equivalent value, up to the value of the additional nil-rate band, are passed on death to direct descendants.
  • NHS to receive a further £8billion over the next five years
  • Public Sector pay rises of 1% for the next four years
  • New youth obligation for 18-21 year olds to ‘earn or learn’
  • Automatic housing benefit abolished for 18-21 year olds
  • Rents in social housing sector reduced by 1% a year for next four years
  • All working parents with children age 3 & 4 to receive 30 hours of childcare per week
  • Working age benefits to be frozen for four years
  • Benefits cap to be reduced to £23,000 in London and £20,000 elsewhere
  • Threshold in tax credit to be reduced from £6,420 to £3,850
  • Tax credit and universal credit limited to two children after April 2017
  • Annual investment allowance set at £200,000
  • Personal tax allowance – increased to £11,000 from April 2016 (further rises in line with minimum wage)
  • Higher rate tax threshold – increased to £43,000 from April 2016
  • Disability benefits will not be taxed or means tested
  • Bank Levy to be reduced over the next 6 years / 8% surcharge on bank profits to be applied from January 2016
  • Insurance premium tax to be raised from November 2015 to 9.5%

Pensions / Savings

  • Green paper to be issued on reform of pensions

National Security

  • Real increase in defence budget guaranteed every year
  • Joint security fund of £1.5billion to be created by the end of Parliament
  • Commitment to meet NATO pledge of 2% of national income on defence

Housing

  • Mortgage interest relief restricted to basic rate of income tax
  • Reduced tax relief for buy-to-let landlords
  • Rent a room relief to be raised to £7,500 from 2016

Education

  • New apprenticeship levy on all large firms
  • To support Universities – From 2016/17 (academic year) maintenance grants to be replaced by loans for students. Loans only need to be repaid once the individual is earning over £21,000 per year.

Transport/Fuel/Energy

  • New car tax bands introduced for new cars from 2017
  • Vehicle Excise Duty: £140 per year for 95% of new cars from 2017
  • New roads fund will benefit from car tax payments
  • First MOT to be extended to 4 years from 3
  • Fuel duty to remain frozen this year
  • Climate change levy to be removed

Northern Powerhouse

  • Further powers to be devolved to Greater Manchester (option available to other cities)
  • £30million funding for Transport in the North
  • Various commitments to growing transport, industry and skills to create growth of Northern cities

Plus – Various other commitments and initiatives to be applied to Southern England, Scotland & Wales, more details to be released in the future.

I hope that this has provided a brief summary to you and covers the key points that affect our customers.

If there are points you want to discuss please feel free to contact me direct on 01278 453926 and I would be happy to discuss further.

Regards

Mark Davis

XL Financial Services Limited

Stay On Top Of Your Money In Just A Few Minutes Everyday

blog-1-1-2For people who lead busy lives, managing the family finances may be just one of many important jobs to do. Fortunately taking care of your personal wealth can take less time than you might think. Here’s a quick guide to what you need to do and how often.

Once a year – review your goals and your progress towards them

All of your financial decisions should help to bring you closer to your financial goals. In order for this to happen, you need to be clear about what they are. Like many aspects of life, financial goals can change through time. For young adults their major goal may be to buy a house, whereas for older adults it may be investing strategically to finance a comfortable retirement. In between there may well be children to raise and provide for. This annual review can also be a good time to get some unbiased financial advice from a professional financial adviser.

Once a quarter – make sure everyone is on the same page financially

In households where more than one person is financially responsible it’s important to make sure that the people in question stay on the same financial page. In an ideal world, people would take all financial decisions together. In the real world however, time pressures can make this impractical. Sometimes families need to divide financial tasks. This may be done equally or with one person taking most of the day-to-day responsibilities. In this situation people can drift apart, financially speaking, which can lead to problems later down the line. To prevent this from happening it’s important that all the people concerned have regular catch-ups.

Once a month – go over all financial statements from that month

Financial statements give you the reality of your financial situation. If you’ve kept on top of your finances then you’ll already have a pretty good idea of what they ought to say. You should, however, check them thoroughly to make sure of this. In particular take the time to investigate any transactions on your debit or credit card that you don’t immediately recognise. They may just be something you’d forgotten, but they may also be a sign that fraudsters are testing your card. This is also a good time to look out for any recurring transactions and decide if there are savings to be made. For example if you see three months’ worth of gym fees on your card but you’ve only managed to find the time to go a couple of times then is it really worth the cost? Finally, take a good look over your shopping receipts for the last month and see if there are any unnecessary expenses you could trim.

Once a week – tidy up your financial paperwork

These days paperwork is as likely to mean digital records as it is actual paper ones, but in either case financial records can only be any use if you can actually find them. Decide whether you are going to use paper records, digital records or both. Whichever you choose take some time out once a week to decide what you need to keep and what you don’t. Anything you keep needs to be stored in a safe place and organised in a methodical way. While you can use your own preferred system remember that if anything happens to you, even temporarily, someone else may need to take over. Anything you don’t keep needs to be checked for personal details and if necessary shredded before being recycled.

Once a day – keep track of your spending

It’s generally easier to see an elephant than a mouse. Similarly it’s often easier to remember big purchases like a weekly grocery shop than it is to remember all the little items. Fortunately smartphones and their cameras have made it much easier to stay on top of daily spending. Implement a straightforward rule that each and every purchase needs to be tracked. If you are given a receipt, photograph it. If you don’t get a receipt, photograph the item itself. At the end of each day, store these photos in a safe place to be reviewed later.

4 Simple Steps to Make Better Financial Decisions Today

Life is full of decisions. Some are simple and some are complex. Some are more important than others. Financial decisions have a direct impact on your quality of life. It therefore pays to get them right in every sense of the phrase. Here are 4 tips you can use to improve your financial decision-making. Starting today.

Think about who you are and what your goals are

It may be a cliché to say that everyone’s an individual, but it’s also true and this individuality is reflected in the decisions we take. As well as preferences based on our personality, age also plays a role in our financial decision-making. As children our goal may simply be to save up enough money to afford a special toy. As young adults we our immediate goal may be a deposit on a flat. As we grow into maturity, caring for children and planning for retirement may become more important priorities. In order to make effective decisions, financial or otherwise, we need to understand what our aims are and whether they are short, medium or long-term goals.

Don’t sweat the small stuff – but don’t ignore it either

On the one hand, the old saying “Look after the pennies and the pounds will look after themselves” has stood the test of time because it makes a fair point. Small costs here and there can slip by unnoticed until they turn into a surprisingly large amount. On the other hand, many people lead busy lives and would find it a huge challenge to keep track of every penny they spend and on what, let alone take the time to analyse whether each and every individual purchase was the best possible deal. This is where a little common-sense can go a long way. You don’t need to do your shopping at 4 different supermarkets to get the absolute best price on everything. It can, however, help to keep tabs on your day-to-day spending and think about where you could trim fat without too much inconvenience. For example, the savings you can make by taking a refillable bottle of water on the train to work as opposed to buying a bottle of water at the station can soon mount up and give a pleasant boost to the family finance.

Your personal wealth is your responsibility

Once you are an adult then you are responsible for your own health, wealth and happiness. This may seem like an intimidating prospect, but it can help to break it down into manageable chunks. You can create a budget so that you have more money than month. You can make notes of when financial purchases are due for renewal (anything from mobile contracts to insurance to mortgage deals ending) and find the time to look for the best deals; at least for the significant purchases. You can plan to ensure that there are funds in place to meet medium to long-term needs, whether it’s replacing big-ticket household items or funding a pleasant retirement.

Getting the right financial advice can more than pay for itself

Just because something is your responsibility, it doesn’t mean that you have to do everything single-handedly. Looking through the financial sections of the press can be a confusing and even intimidating experience for some people. Mortgage approvals, interest rates, market developments, mergers and acquisitions… -it can be a challenge to make sense of what it all actually means. Then of course there are conversations with family, friends and colleagues, some of whom may have their own advice to offer. It may be well intentioned but there’s no guarantee that it’s right for your situation. Fortunately a professional financial adviser can help cut through the headlines and jargon and tips from friends and help you to build your own plan for investing in your future. This advice can be, literally, invaluable.