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News

Find out what's going on at Protea Financial Services and the industry.

More News about the Bank of England's Base Rate

19th of February 2018

Inflation reached 3 per cent in January despite a predicted fall, further fuelling expectations that interest rates could rise in May.

A Reuters poll shows that 32 out of 57 economists tipped the Bank Rate to rise in May following carney's warningsin last week's Inflation Report and rate decision commentary.

Meanwhile, Gertjan Vlieghe, a member of the monetary policy committee that sets rates, said this week that a pick-up in wages and an increase in household debt meant the economy was ‘ready for somewhat higher interest rates’.

 
The Inflation Report mapped out how markets see interest rates rising faster than previously expected in the UK, US and Europe

4 August 2016

Bank of England Cuts Base Rate

 

The Bank of England has decided to cut interest rates to 0.25 per cent as part of a wider package of measures aimed at boosting the economy.

 

The programme of quantitative easing has been increased by £60bn and now stands at £435bn, with the Monetary Policy Committee voting 6-3 in favour of the move.

 

As part of its stimulus measures, the Bank has also announced a corporate bond buying programme of up to £10bn. It has also announced the launch of a “Term Funding Scheme”, which will provide funding for banks at close to the base rate. The Bank says this reflects lenders’ difficulty in cutting saving rates beyond their existing low levels, which may have prevented further cuts to mortgage rates.

 

The Term Funding Scheme aims to ensure the cut to interest rates feeds through to households and firms, and to support lending.

The interest rate cut marks the first time the Bank has moved on interest rates since 2009. The vote to cut rates and introduce the Term Funding Scheme was unanimous. The Bank says the majority of MPC members expect interest rates to be cut further during the year to “close to, but a little above zero”. In a letter to Bank of England governor Mark Carney, Chancellor Philip Hammond says: “Alongside the actions the Bank is taking, I am prepared to take any necessary steps to support the economy and promote confidence.

 

“The UK starts from a position of economic strength as we address the challenges and take advantage of the opportunities that will arise as we forge a new relationship with the EU. The Government will set out its fiscal plans at Autumn Statement in the normal way, once the Office for Budget Responsibility has produced a new forecast.” Capital Economics Chief European economist Jonathan Loynes says: “The MPC has made good on its pledge to implement a package of policy measures to support the economy after the EU referendum. Together, the measures are close to our expectations and should meet or even exceed market expectations after July’s let-down. If nothing else, the measures send a strong signal that the MPC is prepared to look through the inflationary consequences of the post-referendum drop in the pound and focus instead on supporting sentiment and activity.”

 

M&G Investments macro investment fund manager Eric Lonergan says the move is the “first serious decision Mark Carney has made since becoming governor”.

 

24 June 2016

Brexit: Advisers warn of mortgage impact and need for advice

Brexit Mortgages Brexit and Mortgages

With the UK voting to leave the EU, there are many questions that will need to be answered over the coming months. There is a mix of certainty about some issues as well as a lot of uncertainty about others. The feeling amongst Financial Advisers is that clients will need advice more than ever in order to properly plan ahead and protect against inflation and interest rate rises.

 

Thankfully, from our clients' point of view, there are many outstanding fixed rate products available in market at the moment. Cover Magazine have featured an interesting article with comments from a number of well-known advisers here: BREXIT

7 June 2016

Beware of Capital Gains Tax (CGT) on your home

 

Our homes are mostly free of capital gains tax but there have been some changes in the last few years that could catch us out. One has been the reduction in the period for which a homeowner qualifies for CGT relief at the end of their period of ownership, even if they have left home: down from three years to 18 months. Another is that non-residents may be subject to CGT on the sale of their UK main residence on gains arising since April 2015.

The basic rule is that a person’s main residence is exempt from CGT.

However, if any of the following conditions apply, there could be a liability:

  • The owner has not lived in the property all the time they have owned it
  • The property has been let or part of it used exclusively for a business
  • The grounds are more than 5,000 square metres (a little over an acre)
  • The owner purchased the property just to make a gain on it

For CGT purposes, married couples and civil partners count just one property as their main residence. If someone has more than one home at the same time, they have to nominate which is their main one.

If there is a possible CGT liability, the first step is to calculate the amount of the gain on the disposal. The sale and purchase amounts are usually used as the starting points for working out the profit. However, if the owner has been given the property, or bought it from a relative and did not pay market price, you have to use the market value of the property at the time, which can sometimes be hard to establish accurately.

In calculating the profit, certain expenses can be deducted. These include estate agents’ and solicitors’ fees for buying and selling, as well as the costs of improvements to the property, such as an extension. The cost of normal repairs and maintenance or mortgage interest cannot be deducted from the profit.

 

If you did not live in the home for a time, the profit relating to that period may be taxable. But there are some special rules that mean certain periods of absence are not subject to CGT. For example, you can always get an exemption for the last 18 months before you sold the property, as well as the first 12 months of ownership, if the property was being built or renovated or you could not sell your old home. To get the main residence relief, though, you must have lived in it for some of the time you owned the property. This 18-month period is extended to 36 months (the old limit that used to apply generally before 2014/15) for owners who are disabled or in long-term residential care.

The limit is four years if you have had to live away from home in the UK for work and there is no limit on the period if you have been working outside the UK. You must live in the property both before and after this period for it to qualify. Broadly speaking, a non-resident owner will need to spend at least 90 days a year there for the period of occupation to count.

 

Letting out a home may mean having to pay CGT on the property but this potential liability may be reduced or even wiped out by some special reliefs for let property.

It is important to calculate the proportion of gain on which the liability and any reliefs would be based. Take the following example: Frank makes a gain of £100,000 when he sells his home. He owned the home for 20 years, during which time he let it for 12 years (60 per cent of the time) and lived there for the remaining eight.

Of the 12 years he let the house out, 1.5 were while he was working abroad. This means they are left out of account for working out the taxable amount. The last 18 months is also not taxable. So the amount on which Frank gets private residence relief will be eight years, plus 1.5 years and 1.5 years: 11 years.

So Frank will get principal private residence relief for 11/20ths of the gain (55 per cent) and not for 9/20ths (45 per cent). The gross gain is £100,000 and 45 per cent does not qualify for the relief. So £45,000 is potentially taxable and £55,000 is, in any case, tax free.

Then there is relief for homeowners who let part of their property for some of the time (or all their property for some of the time). The maximum for this relief is £40,000 and in any case you cannot get more letting relief than private residence relief. For example, Jason makes a gain of £60,000 on selling his home. He let it out for 60 per cent of the time he owned it. He can get private residence relief for 40 per cent of the gain – £24,000 – and the remaining gain is therefore £36,000. So the limit on his letting relief is £24,000, and the tax liability is based on the remaining £12,000 (£36,000 – £24,000).

3 June 2016

Nationwide Building Society has the longest unbroken run of house price data, stretching back to 1952 on a quarterly basis and since 1991 on a monthly basis. Here you can access their monthly and quarterly house price reports, special features and download data series. You can also use the house price calculator to get an indication of how much your property is worth based on price movements in your region. Click here to see the latest: House Price Index.

25 May 2016

Divorce Mortgages

An interesting article in Telegraph Money about a new type of mortgage apparently being discussed by lenders which will specifically allow a divorcing partner on modest income to remain in the matrimonial home having been granted a mortgage to buy out the partner. No such products exist as yet, but the article is nevertheless interesting. See it here: Telegraph Article

 

 

17 March 2016

Budget 2016 – Salient Points

 

It's business as usual for pension saving as the Chancellor confirmed there will be no imminent changes to pension tax relief. And the introduction of the new LISA saving vehicle from April 2017 adds another attractive complementary option to the saving landscape.

Taken together with cuts in CGT rates, further boosts in income tax thresholds and some welcome tidying-up of pension anomalies, it's been a good Budget for savers.

 

Pensions

It's business as usual for pension saving as the Chancellor confirmed there will be no imminent changes to pension tax relief. And the introduction of the new LISA saving vehicle from April 2017 adds another complementary option to the saving landscape.

In the run-up to tax year end, this allows clients to focus on:

  • Pension saving: Using the higher 2015/16 annual allowance, and carry forward, to make the most of higher rates of tax relief.
  • Lifetime allowance: Planning in earnest for the imminent lifetime allowance cut (including final funding for those clients using fixed protection 2016 to lock into a £1.25M allowance).

Other pension news

  • Salary sacrifice is here to stay: In more good news for employers and employees, the Government has confirmed that salary sacrifice will continue to be a tax and NI efficient option to fund a pension (as well as other mainstream employee benefits, such as childcare or health-related provision). Its use for other employee benefits may, however, be cut back.
  • Workplace pension advice allowance going up: To encourage employers to boost employee access to professional advice on their pensions, the tax and NI free allowance for employer-arranged advice will increase from £150 to £500 per employee from April 2017.
  • Pension dashboard coming soon: To help pension planning, a new digital pension dashboard, giving a single view of an individual's total pension savings, will be launched by 2019.
  • Under 23 drawdown anomaly fixed: The current rule that requires minor dependants' drawdown to stop at age 23 will be scrapped, giving these dependants the same flexibility as other minor beneficiaries to continue drawdown after 23.
  • A fairer deal for the seriously ill: Pension tax rules will be relaxed so that serious ill-health lump sums can be paid even where funds have already been accessed under the scheme. And, for payments after age 75, they'll be taxed as income rather than at a flat rate of 45%.

LISA - a new savings option

The Chancellor unveiled plans to introduce a new Lifetime ISA (LISA) from April 2017. But this is a complimentary savings scheme for younger savers, not a replacement for traditional pension saving. Higher rate tax payers will continue to enjoy tax relief at 40% on pension savings of up to £40,000 a year, keeping pensions as their number one long term savings plan. Indeed, the under 40's will be able to use both and add up to £45,000 pa to their retirement funds.

The Government aims to encourage long term saving with the inclusion of a ‘buy four get one free' bonus, but with the ability for first time buyers to use savings to get a foothold on the property ladder.

 

How it works on the way in
The new LISA will only be available to the under 40s and will include a 25% Government top up at the end of each tax year. It won't be possible to pay as much into the LISA as you can into your pension. Contributions will be limited to £4,000 each year which will be topped up to £5,000. And savers will stop receiving their top up once they reach age 50.

LISA contributions will count towards the total ISA savings limit which will increase to £20,000 in 2017/18.

 

How it works on the way out
Funds can be accessed tax free after the age of 60. But to help first time buyers, funds may be withdrawn tax free to cover the cost of a deposit on their first home. And anyone already saving in a help to buy ISA will be able to transfer their existing savings to the new LISA.

Accessing savings before age 60 for other reasons will be allowed but the Government Bonus, and the growth on it, will be lost. There will also a 5% tax charge applied on the amount withdrawn.

As with other ISA schemes, the LISA will form part of the estate for IHT.

 

Good news for investors as CGT falls in 2016/17 - but not for landlords...

Investors who own mutual funds or shares can benefit from a CGT cut from 6 April 2016. The new rates are:

  • 10% where an individual is not a higher rate tax payer
  • 20% where the investor is a higher rate taxpayer, or the gain takes them into the higher rate band.

Trustees and legal personal representatives also win, as their tax rate on trust and estate gains falls to 20%.

However, landlords or second property owners will continue to pay 18% or 28% on any gains when they come to sell.

 

Income tax

In April 2017, the Personal Allowance will rise from £11,000 to £11,500 and the higher rate threshold will increase from £43,000 to £45,000.

These two changes will see the take home pay of higher rate taxpayers increase by £500 each year, while for basic rate taxpayers the increase will be £100 each year.

Together with the new dividend and savings allowances available from April 2016, advice will be key to ensuring that clients have their savings in the right place to produce a tax efficient income when they need it.

Class 2 National Insurance
From April 2018, self-employed individuals will no longer have to pay Class 2 NICs, currently £2.80 per week.

They will still have to pay Class 4 NICs, which will be reformed to allow them to build up an entitlement to State Pension and other contributory benefits.

Corporation Tax
As an encouragement to UK business, the Corporation Tax rate will be further cut to 17% from 2020. The current rate is 20%. 

Here’s a recap of key tax allowances for 2016/17

Income Tax Allowances

Personal allowance

  £11,000

Dividend allowance

  £5,000

Savings rate band

  £5,000

Personal savings allowance

  £1,000 (£500 for HRT)

Income tax bands and rates

 

Income

Dividends

Basic rate band

£11,000 - £43,000

20%

7.5%

Higher rate band

£43,000 - £150,000

40%

32.5%

Additional rate band

£150,000 +

45%

38.1%

Capital Gains Tax

Annual exemption

  £11,100

Inheritance Tax

Nil rate band

  £325,000

ISA

ISA

 £15,240

Junior ISA

£4,080

 

 

 

9 February 2016

PROTEA FS in the Eastbourne Herald

Our business was recently featured in the "Business Matters" section of the Eastbourne Herald.

You can see a copy of the article here:

ProteaFS in the news
An article describing the business and what it is that we do.
Eastbourne Herald Article.pdf
Adobe Acrobat document [580.2 KB]

22 January 2016

(Buy To Let Mortgage News/Tax Changes)

New Tax Charges Due on Buy To Let from 1 April 2016

From 1 April 2016, most purchases of second homes and buy-to-let residential properties over £40,000 will be subject to an extra 3% stamp duty, over and above the level applied to other property purchases.

 

In short, if a Client owns more than one house (say their own private residence and a let to buy/buy to let) and purchase a further property, then the new stamp duty higher rate tax applies. If a Client owns a house and buys a further property then the higher rate tax applies. If a client owns a house and a further buy to let/let to buy property, and sells his main residence and purchases a new main residence then the higher rate tax does not apply.

 

If a client owns a portfolio of buy to let properties and buys more, then the higher rate tax applies.  Unless they own more than 15 buy to let properties then the higher rate does not apply. Basically – if the client owns more than one house then the second house rate applies unless it is to change the main residence.

 

Also worth noting is that a couple are classed as a single entity for tax purposes in this respect, so if either one of them owns a property and a second property is purchased by either one, then the second house higher rate applies. Read More...

 

 

 

6 January 2016

(Mortgage News)

Mortage Approvals Rocket by 20%

Total mortgage approvals shot up 20.7 per cent year-on-year in November, according to the latest Bank of England lending figures.

There were 121,505 loans approved in November, up from 100,629 a year earlier, the figures show. Read More...

 

 

15 December 2015

(Protection News)

AIG have announced major changes to their critical illness proposition.  Numerous early stage cancers have been added to the plan as well as 6 further conditions which would result in a 100% payout.  The new additional conditions mean there are 80 conditions covered within the plan. Read More…

 

 

30 November 2015

(Protection News)

Bright Grey has now completed its re-branding to the Royal London brand.  This will be further developed with the amalgamation of Scottish Provident into the Royal London brand which will start at the end of the year. Read More…

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The Financial Ombudsman Service (FOS) is an agency for arbitrating on unresolved complaints between regulated firms and their clients. Full details of the FOS can be found on its website at www.financial-ombudsman.org.uk Think carefully before securing debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it. Protea Financial Services is an Appointed Representative of Julian Harris Mortgages Ltd, authorised and regulated by the Financial Conduct Authority No. 304155 © Anthea Pienaar.