Category: Company News

Changes to Income Tax

The freeze on the personal allowance, and the basic and higher-rate income tax thresholds in England and Northern Ireland will be extended to April 2028. The freeze on these taxes had been due to lift in 2025-26. While this freeze may not look like a tax rise on the face of it, having thresholds that fail to rise in line with salaries, you’ll still end up paying more tax on your income – particularly if you end up in a higher tax band as a result.

The biggest change announced in the Autumn Statement was the reduction of the additional-rate income tax threshold, dropping from £150,000 to £125,140 from 6 April 2023. It’s estimated around 250,000 taxpayers will be pushed into this higher tax band, paying 45% tax on any income above the new limit.

Chancellor Jeremy Hunt, said lowering the additional-rate means someone earning £150,000 will pay an extra £1,200 income tax per year.

What’s happening in Scotland and Wales?

During the Draft Welsh Budget, it was announced that Welsh taxpayers will pay the same amount of income tax as those in England and Northern Ireland from April 2023. The Welsh plan includes adopting the same additional-rate threshold change.

In Scotland, income tax rates will rise for higher earners. Under the Scottish Budget proposals, the higher rate of tax will rise from 41p to 42p in the pound, and the top rate from 46p to 47p.

The threshold for the top rate of tax will be reduced to £125,140, in line with the additional-rate tax band in place elsewhere in the UK. The personal allowance and other income tax bands (starter, basic and intermediate) will remain frozen.

National Insurance to stay the same

There were a lot of changes to National Insurance in 2022-23. First, on 6 April 2022, rates went up by 1.25 percentage points, as part of the government’s plan to pay for health and social care.

The levy was controversial, however, and as a result then-Chancellor Rishi Sunak raised the contribution threshold from £9,880 to £12,570, which came into force in July 2022.

Then, come ex-Chancellor Kwasi Kwarteng’s mini-budget in September, the levy was abolished altogether. Since 6 November, the rate employees pay on earnings between £12,570 and £50,270 therefore dropped back down to 12%, from 13.25%. Those with earnings above £50,270 now pay 2%, down from 3.25%.

After this rollercoaster, no further changes are expected for 2023-24.

 

Inheritance tax threshold frozen

Another threshold to be frozen is for inheritance tax. IHT is charged at 40% on assets or money you leave to your heirs after you die.

The ‘nil-rate band’ – the amount that can be passed on before IHT is due – will remain at £325,000 until April 2028. The allowance has not changed since 2010-11.

Similarly, the residence nil-rate band – which can be applied if your home is being left to direct descendants – will remain at £175,000.
This means, for example, if you leave behind an estate worth £500,000, the tax bill will be £70,000 (40% on £175,000 – the difference between £500,000 and £325,000).

Similar to the freeze on other allowances, by keeping the nil-rate band at a fixed point, rather than rising in line with price rises, more people’s estates will be dragged above the tax threshold.

Capital gains and dividend tax allowance cuts

Capital gains tax (CGT) is charged on the profits you make from selling an asset, such as a second property or valuable possession. The tax-free allowance is £12,300 for 2022-23, but from April this will be dramatically cut to £6,000. From April 2024, it will be reduced again to just £3,000.

From 6 April, the dividend allowance will also be cut from £2,000 to £1,000. From April 2024, it will be reduced to £500.

Council tax may rise for some

Many people could see their council tax bills increase from April.

For 2022-23, local authorities could raise council tax by up to 2.99% without the need to hold a local referendum. But for 2023-24, this is set to increase to 3%, with an additional 2% if they qualify for the social care precept. This means your council tax bill could increase by 5% without needing to go to a vote.

Proposals in the Scottish Budget also paved the way for higher council tax rates, as there will be no limit set on council tax bill rises for 2023-24. However, the Scottish government is urging local authorities to act responsibly and consider the impact of any potential rate increase on already stretched household budgets.

Stamp duty changes

The changes to stamp duty, which took immediate effect from the day of former Chancellor Kwasi Kwarteng’s mini-budget on 23 September, will remain until 31 March 2025.

Until that date, first-time buyers won’t need to pay stamp duty on the first £425,000 of the property they buy (up from £300,000), while existing homeowners won’t have to pay on the first £250,000 (up from £125,000).
If you live in Scotland, homeowners start paying land and buildings transaction tax (LBTT) on properties costing more than £145,000 (or £175,000 for first-time buyers).

Scottish Budget proposals set out plans to keep these thresholds unchanged in 2023-24. However, rates increased on 16 December for people buying a second home, as the additional dwelling supplement was hiked to 6%, up from 4%. This is charged on top of standard LBTT rates.

 

It’s hard to escape news stories of NHS wait times, A&E crisis points, nurses striking, low numbers of NHS doctors and nurses and even winter flu reducing NHS staff availability, so the increase in those looking towards securing private health care shouldn’t come as a surprise to many.

The pandemic has no doubt caused a knock-on affect further exacerbating already lengthy wait times for NHS treatments, meaning many are choosing to skip the queues and secure private treatment. And it isn’t just hospital treatments that are suffering under the NHS pressures, but access to GPs is also under strain, pushing more people to secure alternate options.

The beauty of Private Healthcare is that it is built to compliment NHS provision, as we are all entitled to NHS healthcare. But as we see a significant increase in companies offering healthcare benefits and incentives to their employment packages as well as individuals seeking their own private options, is it the start of a new Hybrid era for healthcare?

What can Private Medical Care be used for?

The benefits offered by employers typically offer dental, optical and basic treatments as a standard package, but private healthcare is available for a huge range of illnesses and ailments. Different health insurance providers offer different kinds of coverage, but typically health insurance covers a range of acute conditions, diagnostics including scans and x-rays, GP appointments, cancer treatments, physiotherapy, and in more recent years, mental healthcare.

Roughly 1 in 4 adults in England* are battling some form of mental health condition including anxiety and stress, and the World Health Organization recently reported a 25% increase in anxiety and depression worldwide. Insurance companies are recognising the need for good mental health coverage now more than ever, and with mental health conditions on the rise, it’s no surprise that some people are deciding to go private to get the help they need.

If you would like to discuss securing Private Health cover for yourself, or even for your employees, get in touch today to discuss the options available.

“Total debt held by over-55s up by almost 20% in five years”

Recent research carried out by Later Life Lender more2life and economics consultancy Cebr has revealed that that the total amount of debt owed by the over-55s will rise to £294bn this year, up from £272bn in 2021 and £209bn in 2017. This is a leap of two fifths (41%) in five years and the total is set to soar even further over the next decade, to £402bn by 2032. This is a significant rise of 92% in just 15 years.
Over 55s are not the only demographic to be pushed towards credit and loan options following the increases in the cost of living and rising bills, but this significant rise

“55–64-year-olds bear the brunt of later life debt”

Most of this debt is held by younger retirees aged 55-64 who are typically still working while repaying mortgages and supporting children. Total debt held by this group is expected to rise from £196bn last year to £210bn in 2022. Indeed, half (50%) of 55–64-year-olds say that they are currently in debt or have been in the past five years, equating to 4.4m people.

“Unsecured debt to rise by over a third this year”

Unsecured debt amongst the over-55s grew rapidly from less than £20bn in 2015 to over £25bn in 2019 but contracted slightly over 2020-2021 as spending reduced during the pandemic. However, unsecured debt is expected to rise by over a third (34%) in 2022, reaching £20bn, as the cost-of-living drives many to borrow to make ends meet. Currently, almost 40% of retirees have spent more than they receive in income in some months in 2022 (with 8% saying this often or always happens), which will likely only rise further as this debt level increases.
Again, those aged 55-64 are most likely to have larger unsecured debt levels in 2022, with the average credit card debt of those with debt standing at £2,800. Other types of unsecured debt levels are expected to average £10,700 per individual with debt. Higher interest rates are unlikely to deter this rise in unsecured borrowing in the short term, but by the next decade should see the total amount plateau at £19bn.

“Nearly 5m over-55s struggled with credit card debt in the past five years”

More than one in five (22%) over-55s revealed that they had credit card debt in the past five years which they had not paid off in full each month, equating to 4.7m people. The second most common type of debt was an overdraft, with 9% (1.9m people) noting that they had used this solution over the same period.
Following this period of growth in debts among over 55s, it’s important to understand that there are options available that could not only support those facing escalating debts but that could also support loved ones as their outgoings rise too. It’s important to speak to us to understand the options available for the finances of you and your families.

If you’d like to discuss your options in the face of debts, please get in touch today

 

While having bad credit can certainly make it more difficult to get a mortgage, it’s not impossible. When you have a poor credit history, you are more limited on which mortgage deals you can access, in turn this can lead to more costly options.

What is bad credit?

If you have ‘bad credit’, or a poor credit rating, it usually means that you have missed (or been late with) some payments in the past. This could be payments on utility bills, loan repayments or any other situation where you failed to pay on time or in full.
Another thing that can harm your credit record is applying for credit a lot, or being ordered to pay someone money as the result of legal action. Ironically, never applying for credit can also damage your rating (as you don’t have a proven record of repaying money)
Your credit history is one of the key factors that lenders use to assess whether they’ll give you a mortgage, and how generous that mortgage deal may be. The good news is that lenders do offer mortgages for first-time buyers and homeowners with bad credit, and the process for getting one is similar to a ‘regular’ mortgage application.

Getting a mortgage with bad credit

Whether you want to buy a house or remortgage, remember that there are different types of ‘bad credit’ and these are treated in different ways. So first you need to get an idea of how your particular credit situation will appear in the eyes of a lender.
A lender will be reluctant to approve your mortgage if you have:

• defaulted on a loan (including a payday one)
• had items repossessed
• been issued a county court judgement (CCJ) in the last 12 months relating to debt that is secured against a property or asset.

However, after a year or two has passed, lenders may be more willing to accept your application. You might still need a large (25 per cent or higher) deposit or (if you are remortgaging) a lot of equity. This will make you less of a lending risk. Anything else you can do to convince lenders that you are low-risk is worth trying.

Lenders may be more willing to lend if your adverse credit relates to unsecured finance. This means that although you had a debt you failed to repay, it wasn’t secured against any property or assets. Lenders are often happy to accept mortgage applications if you have late payments, defaults and CCJs for unsecured finance. Even applicants who have declared bankruptcy may find success, but again you are likely to need at least a 25 per cent deposit.
It is also possible to have a good, steady source of income, but still have a poor credit history. Lenders love reliable incomes because it means you are more likely to make every payment, but the type of bad credit you have could still affect your application.

How can I get a mortgage with bad credit?

There are a couple of clear strategies for improving your credit score, but no quick fixes. Most importantly, make a real effort to pay back your debts (especially secured debts). Also get rid of things like old phone contracts or shared bank accounts that could be affecting your rating. It will take time for your credit score to recover, but making these changes now will have an impact.
Second, because you know you will be seen as a risky proposition to lenders, prepare as much as possible. Try to save a large deposit, as your lender could require you to have at least 20 per cent of the property’s value. It can be a tough decision, especially for first-time buyers, but delaying your plans by six months to focus on improving your credit score can have a big impact on the interest rates you are able to get.

Another option, if you can get help from your family, is to look at a guarantor mortgage where someone else (e.g., a parent) agrees to cover any repayments you may miss.

If you’re looking to discuss mortgage options, despite having a less favourable credit score, get in touch today.

Your home or property may be repossessed if you do not keep up repayments on your mortgage. You may be charged a fee for mortgage advice.

 

What is mortgage life insurance?

When we think about life insurance, we typically think of the large cash pay outs should the worst happen, but a mortgage life insurance product is created specifically to cover the outstanding mortgage should those events unfold.

The aim of a mortgage insurance product is to provide reassurance that should you or your loved one pass away, the remaining partner and any possible children would be catered for and have one less thing to thing about while going through grief and loss.

Typically, there are 2 types of mortgage insurance; level term and decreasing term, but what do they both mean and which suits your needs best?

Level Term Life Insurance

A Level term policy fixes the amount paid out for the length of the policy.

These policies tend to be more expensive, as they pay a defined lump sum if you die within a fixed time, for example, £200,000 if you pass within the next 18 years. However, this could be better if you want to leave a lump sum for your dependents to cover more than just your mortgage, for example other debts and/or ongoing spending.

Level-term is also likely to be a better bet if you have an interest-only mortgage, as the lump sum would be available to cover the capital rather than just the repayments.

Decreasing Term Life Insurance

This is the most common, and usually the cheapest, as the amount you’re covered for decreases as you pay your mortgage off (though your monthly payments stay the same). This leaves your dependents with enough money to pay the rest of the mortgage.

It’s therefore designed for repayment mortgages – the most common type where the amount you borrow is fully repaid at the end of the term.

Do you need Mortgage Life Insurance?

If your income is being relied on to ensure the mortgage payments are covered then and they would likely struggle without it, then securing life insurance could be a good value option.
While Life Insurance is not a compulsory requirement, it could be worth weighing up the options and seeing if its right for you. There are a couple of things to consider:

• If you don’t have dependents, you don’t need life insurance.

You may not need to get a mortgage life insurance policy (or indeed any other sort of life insurance) if no one relies on your income to pay the mortgage, eg your partner and/or children. It would mean, however, that whoever inherits your property may need to sell it, unless they’re in a position to pay off your mortgage, or get a mortgage on the property themselves.

• If you’ve already got a life insurance policy, you could already be covered

You may not have ‘mortgage insurance’, but if you already have a level-term life insurance policy then this will give your dependents a lump sum if you die. However, they would want to use the insurance sum to pay off the mortgage, you’ll need to ensure the amount you’re covered for exceeds the amount you owe, and the policy is in force for as long as your mortgage term.

If you’d like to discuss your Life Insurance options, do get in touch today to give yourself some New Year reassurance, just in case.

The COVID-19 pandemic and resulting lockdown has created a number of challenges for financial advisers. It has typically been a requirement that customers must be provided with face-to-face advice – but due to lockdown regulations and social distancing requirements, this is currently not possible.

This has led to the Equity Release Council publishing a temporary modification to its rules following a consultation process with its members and the industry as a whole. The modification is designed to allow equity release specialists and financial advisers to provide advice with appropriate product safeguards, whilst also doing everything possible to protect the health and wellbeing both of the customers and their advisers.

Advice can be provided remotely

The major change to the Equity Release Council’s rules is that it will now temporarily be possible to provide advice without a face-to-face meeting in person. Advisers will be permitted to provide their services remotely.

To ensure this is carried out both effective and safely, there must be a number of mandatory contact points between the adviser and customer before any commitment is made to take out an equity release plan.

The new rules set out that customers must receive a combination of written advice, and telephone or video calls – and this actually increases the number of interactions between consumers and advisers.

It is important that advisers able to continue to fulfil their duties to consumers – crucially in that they must fully establish the identity of the individual, ensure that they have the mental capacity to enter into an equity release product contract, make sure that the client is under any kind of coercion or duress, and where there is more than one party, ensure that both agree to the contact.

A temporary change

It is important to note here that this is a temporary revision that is only in effect for as long as the government directs the public to stay at home in order to contain the COVID-19 pandemic. When people are allowed to go about their lives as normal, it is expected that the revision to the rules will be changed back.

During this time, the mandatory physical witnessing of a client’s signature must be carried out by an independent witness chosen by the client. This process will be subject to identity checks and due diligence.

Need further details?

If you would like further information about taking out an equity release policy during the COVID-19 pandemic, please get in contact with John Whyte today. We can provide you with any information that you require, and provide independent unbiased advice on potential options for you.

For residential property owners in the UK, your home is most likely to be probably your largest asset. Whether or not the mortgage is paid off, an increasing number of people are choosing to release money from their property, meaning they get the benefit of the extra cash without having to sell their home.

In order to qualify for equity release, you need to be 55+ years old, so you will either be approaching retirement or have already stopped working.

How much equity can I release?

The amount of equity in your home is calculated by taking a current market valuation of the property and deducting any outstanding loans you have against it. For instance, if the property is valued at £500,000 but there is £100,000 of mortgage still to pay off, then the equity in your house would be £400,000.

The amount of equity you are able to release depends on the above calculation as well as your age and often your health too. If you are 55 years or older, you could release up to 50% of the property value – £200,000 in the above example.

That said, every personal situation is different and it’s essential to get professional advice from a qualified expert before you go ahead with any equity release scheme. John Whyte is an equity release specialist with many years’ professional experience as a mortgage adviser, personal insurance broker and Independent Financial Adviser.

Make an appointment to talk through your options to ensure equity release is the right solution for you, and to compare the market to find the best schemes based on your personal circumstances. To start with, why not use this form to find out how much you could release from your home?

So, what is equity release and how does it work?

Broadly speaking, there are three different types of equity release plans:

A Lifetime Mortgage allows you to borrow money against your home while you live there. You will have the option to pay some, all or none of the monthly interest. When your home is sold (i.e. you move into long-term care or you pass away), the mortgage will be redeemed.

 A Home Reversion Plan allows you to sell all or part of your home in return for a lump sum or regular payments. You can live in your home rent free for the rest of your life though it will be your responsibility to maintain and insure the property. When it is sold, the proceeds are shared according to the remaining proportions of ownership.

A Later Life Mortgage is a conventional mortgage that is suitable for older home owners up to the age of 80+ who have suitable income sources (employment, self-employment, pensions, investment or rental income) to satisfy mortgage lenders’ affordability criteria.

It is important to understand the features and risks involved with each type of financial plan. At John Whyte Equity Release, we will draw up a personalised illustration to outline those features and risks that are relevant to your individual situation and equity release plan, to enable you to make the right decision.

What can I use the money from my house for?

Equity release can be used for a huge variety of purposes. In fact, you can choose exactly how you wish to use the money. While some people use the funds to treat themselves to a car or luxury holiday, the majority of home owners release equity to pay for home improvements such as a new kitchen or bathroom, perhaps adapting it to make life easier through old age.

Others gift the money to their children or grandchildren, perhaps to pay school or university fees, or to help the next generation to get a foot on the property ladder.

Alternatively, you can draw down the money as income to make life that bit easier financially, perhaps supplementing other retirement income, managing debt or repaying a mortgage, or paying for long-term care.

Will there be anything left to leave my family?

Equity release is a big decision and needs to be well considered before you decide to go ahead. We all know that the value of residential property can go up as well as down. That said, it’s worth pointing out that Lifetime Mortgages come with a guarantee that the outstanding amount won’t ever be more than the value of your home, thus eliminating the risk of negative equity.

If you release equity from your home, it goes without saying that the overall value of your estate will decrease, and that this will affect the amount of inheritance you can leave. What’s more, if you are not paying interest, the costs can increase the amount of the mortgage very quickly and your borrowing will be higher.

One of the biggest concerns people have is that there will be no equity left to leave as inheritance by the time they pass away, since they fear that the capital will have been eaten up by mounting interest charges. This is a tricky one since no-one can predict how long we live and what happens to house prices during that period.

Finally, equity release can affect your tax position, meaning you may no longer be entitled to means-tested benefits such as income support or universal credit.

If, upon reflection, you decide that equity release is not suitable for your situation, there may be alternative options you can consider such as

• Downsizing to a smaller property
• Using existing savings and investments
• Obtaining home improvement grants
• Ensuring all available benefits are claimed

Contact John Whyte for expert equity release advice and guidance

Equity release is fast becoming a popular and sensible financial planning tool for many home owners. Did you know that in the first 6 months of last year, UK home owners released an incredible £1.7 billion from their properties?

If you are considering doing the same, it is highly recommended that you seek professional advice before you sign on the dotted line. John Whyte is your friendly, independent equity release broker operating in Sussex and throughout the South East. For an initial free, no obligation discussion or meeting, please get in touch.

If you are a homeowner without sufficient savings to pay off an interest-only mortgage, you may want to consider equity release as an option. In this blog I’ll be explaining what an interest-only mortgage is, what the options are when your interest-only mortgage comes to the end of its term, and the benefits of using equity release to pay off an interest-only mortgage.

What is an interest-only mortgage?

An interest-only mortgage is when you only repay the interest on the loan each month, not any of the actual capital borrowed. It means that you are expected to repay the original capital borrowed at the end of the term. Many people opt for an interest-only repayment mortgage to make mortgage repayments more affordable, but don’t plan ahead and save to repay the loan.

Nowadays it is more difficult to get an interest-only mortgage, but ahead of the 2008 financial crisis, many customers were able to borrow on an interest-only basis without any proof of how they would repay the capital loan.

According to the Financial Conduct Authority (FCA), nearly 1 in 5 mortgage customers have an interest-only mortgage. In fact, nearly a million people in the UK have interest-only mortgages without any plan on how to repay the capital.

What happens when your interest-only mortgage comes to the end of its term?

When an interest-only mortgage comes to the end of its term, the capital needs to be repaid. This can be achieved with savings, by selling up, downsizing, extending your mortgage with your existing lender, remortgaging with a different lender, or repaying the capital with an equity release plan. Be aware that if you decide to repay in part, there may be a charge to do so.

Why consider equity release?

The main benefit of equity release and the reason many people turn to these schemes as a means to repay an interest-only mortgage is that many equity release schemes do not require proof of income or affordability.

With the most common type of equity release (a lifetime mortgage), a loan is approved against the property and used to repay the existing interest-only mortgage. Find out more about how equity release works in our previous blog here.

What are the benefits of equity release?

Here are some of the benefits of using equity release to pay off an interest-only mortgage.

• You get to stay in your existing home
• Your outgoings will be reduced
• You’ll have no more worry about letters from your mortgage lender asking about repayment
• There is flexibility around repayments – you can make regular payments on a suitable plan if you wish, or make no payments at all and allow interest to roll-up
•  Any money released from your home using equity release is tax free
• The no-negative equity guarantee (offered by all Equity Release Council approved schemes) means that any debt you create with equity release, plus added interest, will never be more than the value of your home when you die or go into long-term care.

Equity release isn’t suitable for everyone. If you would like to know more about equity release, call John Whyte on 01903 890 660 for an initial free discussion on suitability. You may also like to read our previous blog on 4 common questions about equity release here.

A lifetime mortgage is a type of loan secured against your property. It is one way of boosting income in later life. Unlike a conventional mortgage, which runs for a fixed term; lifetime mortgages, as the name suggests, run for the rest of your life. They are the most popular form of equity release plan, enabling you to unlock cash from your home.

 

What is a lifetime mortgage and how does it work?

The idea of a lifetime mortgage is to enable you as a homeowner to take out a loan secured against your property which doesn’t require repayment until you die or go into long-term care. You are essentially borrowing a proportion of your home’s value and nothing has to be paid back while you are still living there.

A lifetime mortgage is one way of accessing the wealth tied up in your property in later life, without the need to downsize or move to an area where property is cheaper. It gives you tax-free cash to spend as you choose, while still enabling you to keep ownership of your home.

When you take out a lifetime mortgage your home still belongs to you and you are still responsible for its upkeep. You can only take out a lifetime mortgage if you are aged 55 or over.

So, what is the difference between equity release and a lifetime mortgage?

Equity release allows homeowners to access the money they have invested in their home. Read more about why people choose equity release in our previous blog post here. Equity release enables you to obtain a lump sum of money or a steady stream of income, or a combination of both.

A lifetime mortgage is one of the two main types of equity release products, the other is a reverse mortgage.

What is the difference between a lifetime mortgage and a residential mortgage?

There are several key differences between a lifetime mortgage and a conventional residential mortgage. Here are the most common ones:

Term of loan – there isn’t a fixed duration for a lifetime mortgage, whereas residential mortgages are for a set period of term (usually 25 years).

Monthly payments – there are no monthly repayments with a lifetime mortgage (the loan is repaid when your property is sold when your die or go into long-term care). With a residential mortgage, monthly payments are required until the end of the term of the loan.

Interest rates – lifetime mortgages have a fixed interest rate throughout the term. There are a variety of options from fixed through to variable with a residential mortgage.

How interest is charged – on a lifetime mortgage, interest is added to the amount you owe each month (known as ‘rolled-up’ or ‘compound’ interest). Residential mortgages are either repayment (monthly repayments include the interest charged) or interest-only (monthly payments only cover the interest charged).

Affordability – there are no affordability checks if you choose not to make monthly payments with a lifetime mortgage. For residential mortgages income and outgoings are assessed to ensure you can afford the mortgage repayments.

Want to know whether a lifetime mortgage is right for you? Read more in our blog post here, or contact us on 01903 890 660 for an informal chat, free of charge.