Starting Your Savings Pot
Now that Christmas and New Year are over, it’s the perfect time to stop delaying the inevitable, sit down, and take a good hard look at your financial situation. Naturally, the festive period will have put a bit of a strain on your wallet, but don’t fret – the experts at Robson Laidler Wealth have provided us with some simple, handy tips that will make planning for the long-term a breeze.
Amanda Cowie, Robson Laidler Wealth Director and chartered financial planner, gives us her top tips for getting your savings underway. ‘Have a good look at last year’s expenditure,’ says Amanda, ‘take 30 minutes to look at your internet banking transactions or statement. Most people underestimate what they spend – be honest with yourself.’
‘If you are consistently over-spending, take control – set a budget, stick to it and look into reducing your fixed costs. Set some goals. These might be to reduce or eradicate debt, or to establish some sort of emergency cash fund (typically six months’ fixed expenditure is good if possible).’
It’s also important to establish your priorities: ‘Think about what is important to you,’ advises Amanda. ‘What will make you happier, reducing your debts, retiring early, or another expensive handbag? If, after all this, there is still a surplus, think about how this could work best for you in achieving your longer-term goals.’
For more information, visit www.robson-laidler.co.uk
Buying and Selling in 2019
Despite worries about Brexit, 2019 is still looking to be a great year for homeowners, according to Jane Fiddes, Head of Residential Property at North East-based Samuel Phillips Law Firm. ‘House prices continue to rise; mortgage interest rates on fixed deals remain low; and the number of rental properties on the market are decreasing with the impact of higher rate stamp duty on second homes,’ says Jane.
RightMove have predicted a two to four percent rise in increase in house prices in the North, suggesting that homeowners thinking of selling should do so early on in 2019 to make the most of the surge in interest from buyers making it their New Year’s resolution to move home.
There are also schemes in place to help those looking to buy their first property: ‘First-time buyers have the benefit of stamp duty relief on the first £300,000,’ explains Jane, ‘and if they have a Help to Buy ISA, the government will provide an additional £50 for every £200 saved, up to a maximum of £3,000, towards the deposit on their first property.’
For buyers looking into new-build properties, the government will lend up 20 percent of the cost of the home, so you’ll only need a five percent cash deposit and 75 percent cash mortgage to make up the rest. This loan is interest-free for the first five years, and then you are only charged interest of 1.75 percent of the loan’s value and thereafter payments increase every year at one percent above inflation, which is a great reason for younger people to consider buying instead of renting.
If this is still not a viable option for you, Jane suggests shared ownership, another way of getting onto the property ladder if you can’t afford a higher mortgage. ‘This means that you can buy part of the property from a housing association, such as Home Group, and pay rent on the remaining amount,’ explains Jane. ‘You can buy anything from 25 to 75 percent of the market value of the property, and when your circumstances change for the better, you can buy the remaining percentage and have the freehold transferred to you.’
If you need any advice regarding moving home or any other aspect of your financial life, visit www.samuelphillips.co.uk
Protecting Your Business Assets from Iht
Most of you are aware that Inheritance Tax (IHT) applies to the transfer of assets, with 40 percent payable if the transfer takes place on death, and 20 percent if it takes place during a lifetime, with a further 20 percent becoming payable if death occurs within seven years.
But you may not be aware that shares in a private company are also subject to IHT – we got the private client experts from North East law firm Muckle LLP to shed some light on this complex issue, so business owners don’t miss out on this valuable relief.
Business Property Relief (known as BPR) is sometimes applicable to shares in a private company, and in this case, shares can be transferred on death or during a lifetime free of IHT. Obviously, there are certain requirements that must be met before you are able to benefit from this valuable relief. Keith Hately, Partner and Head of the Private Client team at Muckle LLP, gives us the criteria:
• The company must be privately owned and the shares must be unquoted (although an AIM listing is permitted).
• The shares must have been owned for at least two years.
• The company must carry on a trading rather than investment business, as BPR is generally not available for companies wholly or mainly dealing in land, buildings or investments.
• If the company deals with both trading and investment, this can threaten BPR, so consider creating two separate companies to save on tax.
• A holding company with trading subsidiaries can quality for BPR.
• Any asset owned by the company but which has not been used wholly or mainly for the business during the last two years or which is not required for future business use, will not qualify for BPR. A high level of cash, for example, can cause problems unless there is clear and convincing evidence that it is required for future business purposes.
• If the shares are subject to a sale contract, no BPR is available. It is important to make sure that any shareholder agreement, allowing shareholders to purchase the shares of a deceased shareholder, does not result in a contract and loss of BPR.
If your company does meet these criteria, then it is essential not to waste the relief. Keith advises having a will professionally drawn, kept up to date, and staying aware of certain warnings, including the risks of leaving shares to your spouse, or children, or dividing it between them, as these options can all lead to undesirable tax positions.
The safest solution might be to leave the shares in a family trust for your spouse and children, and they can either remain in the trust or be transferred to your children without IHT. If the shares are sold after your death, the cash from the sale will sit within the protection of the trust and be free of IHT if your spouse dies, or your spouse can even buy the shares from the trust and use BPR twice. Most of all, remember, whatever your situation, it’s never too early to start planning for your family’s future.
For more advice on protecting your assets, visit www.muckle-llp.com
Planning in the Face of Uncertainty
It’s safe to say that 2019 is going to be an interesting year due to the uncertainty of Brexit, and while this may seem like an undesirable climate in which to make important financial decisions, we speak to Alison Hall from Hay & Kilner Law Firm about the need to plan in such times.
‘At times like this, we notice that clients can be reluctant to carry out any planning, as they want to “wait and see” what happens before making any decisions,’ explains Alison. These decisions could include selling your house, retiring, or selling or expanding your business.
‘A wish to maintain the status quo is understandable when the country is going through such flux,’ says Alison. ‘I would argue that it is at times like this that you do need to address some of these questions, and in particular, ensure that you have planned for the year ahead.’
Alison recommends undertaking personal financial and business ‘health checks’ in 2019, to make sure all aspects of key planning have been considered. ‘If you are a business owner, it is a good time to review the company documents,’ suggests Alison.
But there’s more to ensuring your business’s good health than documents: ‘Make sure that you have a strategy to deal with events which can impact on the bottom line,’ advises Alison. ‘For example, what happens if a key shareholder/director dies? Who receives their shares; will a pay out to their family be required; does that shareholder own any assets from which the business trades; and is the value of the goodwill of the business impacted by their death?’
If you are the sole shareholder, these questions need to be considered very carefully in the instance of your death. ‘The business will be frozen with no one having the power to continue to trade until Grant of Probate is granted in your estate which can take a few months,’ warns Alison.
As well as your business, you need to consider your own personal estate. It is essential to review your will regularly to make sure it’s up to date with new rules, as well as structured to make the most out of the Residence Nil-Rate Band, which is set to rise this year.
For more information on business and personal health checks, and more, visit www.hay-kilner.co.uk
Thinking About Retirement?
It’s never too early to start thinking about retirement, especially these days when there are so many different options available regarding your savings and pension pots. As it’s such a huge decision (with potentially catastrophic consequences if it goes wrong), it’s best to bring in an expert to guide you through the process. We speak to Stephen Sumner, Director at Explore Wealth Management, to find out more about planning your finances for retirement.
The first thing you need to do is fully assess your situation. ’When someone comes in for a chat about retiring, we have an initial meeting (at our expense) and we sit down and ask them how they got to that stage in life and their plans for retirement,’ explains Stephen.
Once it’s been ascertained whether you intend to buy a holiday home in Spain or simply take up a new hobby and your average yearly expenditure has been noted, you’ll be asked how comfortable you are taking risks with your savings, and this will affect whether to invest it in stocks or hold it all in a building society account, or find a happy medium.
‘When we’ve got all that information together, we work out from your savings and overheads and see whether retirement is actually doable and affordable, or if you need to rein in some of your spending,’ says Stephen. But it’s rare that this is the case.
Stephen has actually helped a lot of people retire earlier than they believed possible, which is always met with great enthusiasm. ‘When we do our numbers, we often find out that they have more than enough saved up to retire now,’ he says. ‘We’ve had people crying when we tell them this news. We had a guy in recently who was very ill and stressed out with the pressures of his job, and we showed him that he could resign and retire then without any financial worries.’
The benefits of seeing a professional advisor are numerous, but include peace of mind knowing exactly what you can spend during retirement without running out of money, advice on investments to know you’re investing safely, and of course professional knowledge concerning tax breaks.
‘We can ensure that the money they take from their pension or savings pots is withdrawn as tax-efficiently as possible, to make sure they don’t pay any unnecessary tax, and we can also help them with little known tax breaks,’ says Stephen. ‘There are too many options to consider now compared to a few years ago – it’s a lifetime decision that you need to get right.’
To find out more about planning for your retirement, visit www.explorewealth.co.uk