If you’re planning on passing money or assets to your loved ones when you’re gone, your heirs could face inheritance tax bill bigger than ever before. According to the Office for Budget Responsibility, families will pay an extra £900 million in inheritance tax over the next five years.

But what does inheritance tax actually mean? Who is responsible? And how can you gift money without being taxed? Ellis Bates answer some common questions on the inheritance tax threshold, including how your family may be liable.

• What is inheritance tax?
• How much is the inheritance tax threshold?
• Does my property effect my inheritance tax?
• How do I gift property without being taxed?
• Who pays the inheritance tax bill?
• How does the RNRB differ from the NRB?
• Beat the taxman legally
• What does the future look like for inheritance tax?
• How can I help my family?

What is inheritance tax?

Inheritance Tax (IHT) is the tax that your beneficiaries may have to pay if your estate (or everything you own) exceeds a certain amount. Inheritance tax is usually a one-off payment, due after your death. It’s payable on all assets you owned during your lifetime, unless there is the benefit of any relief such as business property or agricultural relief.

How much is the inheritance tax threshold?

The current basic inheritance tax threshold is £325,000 for an individual. If the value of your estate exceeds this amount and does not have the benefit of any tax reliefs, inheritance tax will be payable at 40% on the amount that exceeds the threshold. So, for example, if your assets and savings add up to £500,000, the inheritance tax bill will be paid on £175,000 (£500,000 – £325,000). At 40%, that adds up to a bill of £70,000 to the Government – if you haven’t been savvy with your arrangements, that is!

The threshold can be transferred to the estate of a surviving spouse. So, a married couple or civil partner benefits from a combined basic inheritance tax threshold of £650,000. (Which means, in the example above, if your assets and savings add up to £500,000, no IHT needs to be paid).

The Government chose to introduce a complex piece of legislation called the Residential Nil Rate Band (RNRB) as of 6^th April 2017. This is available for residences inherited by children or grandchildren in addition to the existing nil rate band (NRB).

Does my property affect my inheritance tax threshold?

If the value of your estate is above the nil rate band (NRB), then the part of your estate that is above this threshold will be liable for tax at the rate of 40%. This means that larger estates can incur a large bill.

The residential nil rate band (RNRB) currently adds a further £175,000 to the NRB. Each person will therefore have a maximum allowance of £500,000, with surviving spouses potentially having an allowance of £1 million to transfer to children or grandchildren when they die.

Should you pass a property onto your spouse or civil partner when you die, there is no inheritance tax to pay. However, leaving a property to another person – including children or grandchildren – in your will counts towards the value of your estate.

In addition, if your child has lived with you as a tenant before you die – and has paid you rent, or has evidence that they pay some bills – your property may be exempt from IHT. Speak to a financial advisor for more in-depth help about this.

How do I gift money without being taxed?

Any money gifted more than seven years before you die doesn’t fall under IHT. You can also make up to £3,000 worth of gifts in any tax year to relatives without incurring a IHT charge. This allowance carries through to the next year if you haven’t used the previous year’s allowance. You can give as many gifts of £250 or less to unrelated friends as you like each year.

You can also gift one-off payments to your children up to £5,000 and £2,500 to grandchildren for life events, like getting married.

Be very careful, however, about giving money away if you’re planning to move into long-term residential care soon. Giving away lots of money before you move is ‘deprivation of capital’ and that affects your entitlement to state help for your (or your spouse’s) care.

Who pays the inheritance tax bill?

The most common method of paying inheritance tax is from the estate – or everything you own minus mortgage debt, and funeral expenses. However, if the tax is due on the gifts you made during the last seven years of your life, the people who receive the gifts must pay the amount due.

The only time inheritance tax is paid at all is if your estate (that’s your property, belongings, cars, other houses, stocks and shares – everything you own) adds up to more than the inheritance tax threshold.

How does the RNRB differ from the NRB?

The RNRB differs from the NRB in that it doesn’t apply to lifetime transfers, such as transfers into trusts or gifts given by an individual within a period of seven years before they died. This means that whilst the NRB could potentially be consumed through gift-giving in the last seven years of a person’s life, the RNRB would still be fully available.

Beat the taxman legally

There are various ways in which you can avoid paying inheritance tax.

MAKE A WILL!

Just do it…go on, you know you want to…well, all right, you don’t really. But if you don’t do it, whatever age you are, a large chunk of the money you have will go to the Government in one form or another. If you die intestate (without a will), you can’t control who gets your money. So, if your only living family is your long-lost auntie you never speak to, but you want to leave it all to your best friend, make a will!

For more information on how to go about it and how to do your own will if you’d like to go that route you can read our easy guide for getting a will written here.

Transfer assets to your partner

Asset transfers between spouses and civil partners are exempt from IHT. Whatever your partner inherits from you is tax-free. This doesn’t count if you’re only co-habiting, though: they must be a registered civil partner or spouse.

Give what you can before you die

Why wait to leave your loved ones financial help until you die? Giving them money now means you get to enjoy it with them! You could also spend your cash in other ways – such as taking your family on a holiday-of-a-lifetime to create memories they’ll hold forever. This way, you all benefit, and the tax man won’t grab your hard-earned (already-paid-tax-on-when-you-earned-it) money.

Leave money to charity in your will

If you have surplus in your estate, considering leaving a legacy in your will to a favourite charity or two. Go to Rememberacharity for more information on how to do this. You can also pay a reduce rate of 36% inheritance tax if anything is left to charity.

Invest in AIM shares

Until April 2026, shares listed on the Alternative Investment Market get 100% IHT relief if the money is held in the shares for more than two years. This changes to a 20% IHT rate after April 2026. The AIM is where most small companies first list shares, before transferring to the FTSE stock market when they’re more established.

AIM companies are unquoted, meaning they receive 100% IHT relief. Some aren’t unquoted though – specifically, those that are for investment companies and ones investing in property for rental yields. Make sure you’re investing in the right shares by speaking to an independent financial adviser first. Go to Unbiased for local financial advisers and the Chartered Institute of Taxation (CIT) for tax advisers.

Set up a trust

This is a written arrangement whereby an appointed trustee is given money or assets to hold and manage on behalf of the person you want to benefit. They’re a useful, if sometimes complex, way of giving money, property or shares to others while ensuring that someone you trust (hence the name) is overseeing them.

The most common set up is this: you pay 20% IHT on assets over your £325,000 limit when you pay into the trust. Then every 10 years, the value of the trust is re-evaluated and you pay 6% tax. Finally, when you die and the assets are taken from the trust, a further 6% is paid. So, if you put assets into the trust, live 12 years, then your trustees inherit, it’s a total of 32% tax paid instead of 40%.

Trusts are useful in situations such as remarriage, as your spouse can continue to benefit from the income of assets (such as rental properties) without being able to sell the assets themselves. If you want to leave your children from your first marriage a protected inheritance, this is one way to do so. Or, you can set up a trust where the trustees decide how the assets and money are split. So, if you make your children the trustees and grandchildren beneficiaries of the trust, your children decide how the money is divided.

You can create a trust while you’re alive by a formal trust deed (or ‘settlement’) or you can create one in your will (a ‘will trust’). You will need advice on this so find out about local experts from the Society of Trust & Estate Practitioners (STEP).

What does the future look like for inheritance tax?

Although the threshold remains steady, the property market is continuing to rise. This means that many families will continue to face larger inheritance tax payments. Those in the south of England, where property prices have risen dramatically over the past 20 years, will undoubtedly feel ensnared by the 40 per cent charge.

How can I help my family?

Making sure your will is up to date and tax efficient, you can maximise the amount loved ones may receive. However, as each person’s circumstances can greatly differ, it’s important to seek professional guidance on all inheritance tax matters. Ensure you are taking all the steps you need to minimise your inheritance tax bill after you pass.  If you’re think of equity release as an option, find out more here.

The post What is the Inheritance Tax Threshold? appeared first on MoneyMagpie.

What Are Payments on Account?

When you’ve earned enough in a tax year as a self employed worker that means your tax bill is over £1000, you’ll need to pay Payments on Account. This is when you pay your current tax bill plus 50% of that amount in January, with the further 50% due on 31st July.

The aim of PoA is to help freelancers stay ahead of their tax bill. In theory, by the July payment, they should have paid their taxes for the following tax return period. This should make January’s payment easier, as after that first hard year with a 150% January bill, you should (in theory) be paying only half of your next tax bill in advance rather than a full year’s tax in one go.

Check out our full guide here.

But I Didn’t Earn As Much As Last Year

You can apply to reduce your PoA. If you do this at the time of submitting your Self Assessment in January, but then end up earning the same amount or more, you need to pay the outstanding tax PLUS interest on the difference. That’s why it’s really important to only appeal to lower or cancel your PoA if you know you won’t earn as much in the next tax year. For example, if you have taken a long break from work or are winding up your business, you’ll know your income won’t be as much.

If you don’t submit your Self Assessment until January, you will also have a clearer picture of what you’ve earned in the current tax year. If it is significantly lower than the previous year, and you’re unlikely to make up the difference between Jan-April, you can apply to lower or cancel PoA. Just remember that if you earn more and have declared you won’t, you will pay interest on the difference.

It is often better to keep the PoA amount the same and apply for a tax refund, if you’re unsure about whether you will earn the same or more than the previous tax year. If you do get a refund, it’s a good idea to put that cash into a tax savings account to cover your next PoA, if you can.

I Earned More Than Last Year – Does My July Payment Increase?

If you had a great year for 2024/25, and have earned more than your 2023/24 year, you don’t have to pay more than your already-established July PoA. You will pay the difference in January, though – so if you want to budget your taxes you can pay the difference at any time. You won’t be charged interest on the difference if you had not applied to reduce your PoA.

How Much Will Payments on Account Cost?

Your July PoA will be 50% of your last tax bill (not counting the 50% you paid in January). For example, if your last Self Assessment revealed you needed to pay £2000 in tax, you will have paid £3000 total. That is the £2000 tax, plus £1000 which is 50% for your first PoA. Your July payment will be the second 50% – so another £1000.

I Can’t Afford My July Payment on Account

If your July PoA is due but you haven’t been able to save enough money to pay it, don’t delay acting right now. Get in touch with HMRC and speak to them about arranging a payment plan – this could even be arranged interest-free in some cases, and is often set over 12 months.

Do NOT ignore the payment, or only pay some of it without speaking to HMRC. This will incur fines and daily interest charges, only increasing your tax bill and causing more debt.

There are still six weeks (from time of writing) to find extra cash to pay your tax bill. Check out our Make Money section for lots of ideas, from selling your clutter to earning cash with surveys.

How to Pay Your Payment on Account

You can pay HMRC in several ways.

• Opt for a Direct Debit so you don’t miss the payment deadline
• Pay online through your Self Assessment account
• By cheque (allow plenty of time for processing)
• By direct online payment through BACS

If you want to pay through your online banking app or BACS, you can use one of two HMRC bank account details. Make sure you have your Unique Taxpayer Reference, followed by the letter K, as your payment reference. Choose one of these bank accounts:

• Sort code – 08 32 10
• Account number – 12001039
• Account name – HMRC Cumbernauld
• Sort code – 08 32 10
• Account number – 12001020
• Account name – HMRC Shipley

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If you’re agonising over these questions, then you’ve come to the right place. We’ve put together the definitive guide to filing your tax return on time.

It might not be fun, but if you’re self-employed then it’s got to be done. You may even find you’re due a refund!

• What Is Self Assessment?
• Does It Apply to Me?
• Before Getting Started
• What Do I Need to Fill In?
• When Is the Tax Return Deadline?
• How Can I Send It?
• On Completing Your Tax Return…

What is Self Assessment?

Self Assessment is a system for working out and paying tax on your income, operated by HMRC (HM Revenue & Customs – formerly known as the Inland Revenue). You only need to do a Self Assessment form if you do not pay tax on your salary through PAYE.

Self-Assessment tax return forms are issued every April, covering the previous 12 months (i.e. the tax year to 5 April just passed). For example, the Self Assessment tax return due on the 31 January 2021 is for the previous year’s work from April 2019 to April 2020.

Does it apply to me?

If you only have one PAYE job, and no income from anywhere else, you’ll probably never need to fill out one of these forms. HMRC will usually send you a tax return reminder when you need to send one – once you’ve registered for it once. However, if you realise you do need one and they haven’t cottoned on, it’s your responsibility to ask for it.

There are several reasons why Self Assessment may apply to you. Here are the main ones:

• You’re self-employed and have earned more than £1,000 this year from your self-employment
• You have income from letting any property or land you own
• You’re a company director
• You receive other untaxed income, or significant capital gains, and the tax due on it cannot be collected through a PAYE tax code
• You’re a member of Lloyd’s of London insurance and reinsurance market
• You receive annual income from a trust or settlement, or any income from the estate of a deceased person, and further tax is due on that income
• You have taxable foreign income, even if you’re claiming that you are not normally resident in the UK
• You’re a minister of religion.

For many people, their first brush with Self Assessment will be when they become self-employed. If you’re about to take that step, this guide from GOV.UK should point you in the right direction.

Before getting started

Before you begin, gather all the paperwork you need. You don’t want to get three-quarters of the way through to discover that you’ve lost a crucial piece of data. This will most certainly try your patience!

And apart from anything else, if you’re required to fill in a tax return, keeping your paperwork up-to-date is actually a legal requirement. You’re required to keep a record of your income (and any capital gains) for at least 22 months after the end of the tax year.

However, if you’re in business and are self-employed as a sole trader or a partner, or have rental income, you need to keep the records for at least five years after the end of the tax year.

What you’ll need

You may be wondering what forms you’ll need in order to file your self-assessment. HRMC have published a comprehensive list of the required documentation, which can be found here.

But we’ve also made our own quick breakdown of the paper work you need:

• Your P60
• Details of any pay and taxable expenses and benefits received from your employer
• Bank and building society statements
• Cheque and paying-in book stubs
• Any dividend vouchers you have
• Your self-employment accounts
• Documentation about any capital gains that have been realised
• Information on other income including investments, savings, pensions, property or benefits you receive
• Paperwork on anything you can claim for, like self-employed expenses or charitable donations.

You don’t normally need to send any documents with your Self Assessment form. However, HRMC may ask to see these documents at a later date. To avoid any stress, make sure you keep a photocopy or digital copy and keep your records organised.

If you’re asked to send across any documents, send the photocopy and keep the original in a safe place.

You should now be ready to fill in those all-important forms!

What do I need to fill in?

Every HMRC Self Assessment includes the core tax return SA100 form. On top on this, the chances are you’ll have to fill in one or more additional sections.

The extra pages you’ll need to complete will depend on your circumstances. For example, self-employed status, capital gains and rental income all require different extra forms to be completed, so fill in those that apply to you and ignore the rest.

At the moment, you can choose a paper or online tax return. In the near future, all but the biggest exceptions (such as living in a rural area with no internet) will need to file online. If you want a paper copy, HMRC no longer send this to you. You must download the SA100 form from the website. When you file online, you’ll be asked questions that help determine which section of the return you need to fill out. Then, you’ll only be shown those relevant pages – so that helps eliminate a lot of confusion!

If you need help filling anything in, call HMRC’s Self Assessment helpline on 0300 200 3310. It’s open Monday to Friday from 8am to 8pm and on Saturdays from 9am to 5pm. You can also find them on X  @HMRCcustomers or on the web chat. They provide general advice on Self Assessment and they’ll answer any questions you may have.

If any of your personal details change, or if you find that you or the tax office have made a mistake, let HMRC know as soon as possible.

You can only be penalised if your return is incorrect through carelessness or you’re deliberately misstating the figures.

Remember! You can be criminally convicted if you try to cheat the tax system.

When is the tax return deadline?

The tax year starts on 6 April and lasts until 5 April the following year. After 6th April in any year, you can file your tax return – and doing it early doesn’t mean you HAVE to pay the tax owed immediately (but can help you to know how much you need to set aside by the deadline to pay). The deadline varies depending on how you plan on filing your return:

• If you’re sending your completed paper form back by post, your deadline is 31 October
• If you’re completing an online tax return, you have until 31 January the following year
• Any tax owing must be paid by 31 January (many Self Assessment taxpayers also have to make payments on account by 31 January and 31 July).

If you miss the deadline by just one day you could face a £100 penalty, regardless of whether you have no taxes to pay or have paid the tax you owe.

If you don’t settle your bill immediately, you’ll also start paying further penalties and interest charges. Surcharges – effectively penalties – can apply if you’re significantly late. But if you pay all your tax on time, that can eliminate any late-filing penalty.

These are just a few of the good reasons not to leave your tax return until the last minute. If you do, there will also be no time to correct any mistakes, or to ask for help if you run into problems. Get started early; it’ll mean much less hassle for you in the long run!

How can I send it?

Most people file their tax return online. However, you can also send it by post.

By post

If you want to send your forms by snail mail, remember that the deadline is 31 October, so allow plenty of time.

Double-check that you’ve signed and dated everything, and that you’ve included all additional pages.

And finally, remember to take a photocopy of the whole thing, in case it gets lost in the post. HMRC won’t acknowledge receipt, although it will let you know when your form’s been processed. You can also send via recorded delivery if you want to make sure you have proof of sending and tracked receipt.

If you get your paper returns to HMRC by 31 October, they can calculate your tax for you.

They’ll also let you know the amount you need to pay by the following 31 January, and if you owe less than £2,000, they may be able to collect the money through your tax code rather than as one lump sum.

Online

There is a big push by the government to ‘Make Tax Digital‘, and the first step is online filing. The advantages of completing the form online are clear:

• There’s no hassle with paperwork
• Your forms won’t get lost in the post
• You’ll also buy yourself an extra three months, with a 31 January deadline
• You’ll receive an immediate acknowledgement that your form has been filed
• There’s an option to save the form, so you don’t have to complete the form in one sitting
• The HMRC software will automatically calculate your tax for you
• If you are owed any money by HMRC, you’re more likely to get it sooner because your form should be processed quicker!

To file your return in this way, you’ll need to register online and request an ‘activation PIN’ from the HMRC website. To do this, you’ll need your Unique Taxpayer Reference (UTR), which you’ll find on form SA100 of your tax return, and your National Insurance Number or postcode.

It can take up to a week to receive your account password and become fully registered, so don’t wait until the last minute! For information on how to do it, check out the HMRC website.

Once you’ve completed your form, just make sure you print a copy off or save one on your computer, so you can still refer back to it if necessary.

Making Tax Digital is now being rolled out, so most people will need to fill out a quarterly tax return (if they turn over more than £20,000) by 2028. This will need to be done by approved third party software, so make sure you’re prepared and start researching now – and keeping records – to ensure the transition is smooth.

On completing your tax return…

Make sure you’ve included all the relevant pages. Once you’ve done this, send it off and wait for it to be processed to see if you owe money or are owed money.

Now you can sit back, relax, and enjoy a cuppa knowing your tax return is done and out of the way for this year.

If, however, you are finding the process less forgiving and are pulling your hair out trying to get to grips with all of those figures, get a professional to help.

The Chartered Institute of Taxation (CIOT) and the Institute of Chartered Accountants of Scotland (ICAS) have online directories of certified number crunchers. Look for someone who specialises in your area. For example, if you’re a freelancer, you need an accountant who specialises in advising freelancers. Ask around for recommendations too. Other freelancers in your industry may know someone who they can recommend.

The post URGENT: Self Assessment Online – The Definitive Guide to Filing Your Tax Return appeared first on MoneyMagpie.

There’s no doubt that one of the greatest sources of financial distress for the newly self-employed is the sudden realisation that their first tax bill is much larger than expected. Payments on Account (POA) was devised to allow self-employed people to spread out their tax bill over a year. However, POA is also one of the most commonly misunderstood elements of the Self Assessment process, and many newly self-employed are unaware that it exists altogether.

As we enter a new financial tax year, perhaps now is the best time to get a headstart and really keep on top of your finances. So here’s everything you need to know about Payments on Account, and how you can ensure you are best prepared for your next tax return.

• What are Payments on Account?
• How does it work?
• Tips to keep on top of tax payments
• Keep digital reminders
• Set up direct debits
• Remember to save money for Payments on Account
• Got questions about freelancing?

What are Payments on Account?

Simply, they are a way of paying off some of your tax bill in advance. You’ll pay two separate installments throughout the year, calculated based on your previous year’s tax bill. The first installment is due on 31st January, and the second is due on 31st July, with each of these two payments worth 50% of your previous tax bill.

There are some circumstances in which a POA will not be due. If your last tax bill was less than £1,000, or if more than 80% of your earnings are subject to PAYE, then you will be exempt from the POA system entirely.

It’s likely that payments on account will apply to the majority of self-employed people. Failure to pay the full amount may result in penalty fines and interest, so it’s certainly worth getting your head around the ins and outs of the POA system and how it works.

How does it work and how do I calculate my POA?

The reason it causes so much confusion among newly self-employed is because the first instalment on 31 January is due on the same day as your ‘balancing payment’ (which clears your tax bill from the previous year). If it’s your first time making a POA, you’ll essentially need to pay 150% of your tax bill in one go.

For example, if your tax bill for 2018/19 was £3,000. Your total tax bill on 31st January 2020 would have been £4,500, including the balancing payment of £3,000 and an additional advance payment of £1,500 (50% of £3,000) at the same time. Then, on 31st July 2020, you would have to pay another £1,500.

However, this means that when you file your return for the following financial year, you’ll already have paid £3,000 towards it. If your bill for the 2019/20 tax year is more than £3,000, you will simply need to make a balancing payment on 31st January 2021 and your POA will increase accordingly.

For example, if your tax bill for 2019/20 is £5,000, on 31st January 2021 you will need to pay the balancing payment of £2,000, and the first installment of your Payment on Account, worth £2,500 (50% of £5,000). The total amount due on the 31st January would be £4,500, and an additional £2,500 due on 31st July 2021.

It’s worth noting that if you think that your income for the next tax year will be lower than in the previous tax year, you can apply to have your POA reduced. However, if it transpires that you have underpaid your POA, you will have to pay interest on the outstanding amount, which could turn out into a hefty tax bill.

4 tips to help you keep on top of your tax payments

Keep ahead of your payments on account with these top tips.

1. Use a digital platform

Technology has been simplifying processes for decades, and when it comes to staying on top of your finances, it can be the ultimate assistant. For small businesses, invoicing software streamlines financial operations and ensures timely and accurate billing.

Downloading a free bookkeeping app is one way of ensuring that you regularly update your accounts. It also helps you to prepare for the two payments on account you are need to make to HMRC each year. In fact, HMRC is seeking to digitise most of the taxpaying process, so it is encouraging taxpayers to file and make payments online via software.

2. Jog your memory with calendar reminders

With the financial calendar starting and ending on April 6th, remembering all the financial dates and deadlines can be difficult. Fortunately, when it comes to ensuring payments are punctual, calendar reminders can be a real asset. Here are a few ways to ensure that you fully utilise them:

• Make sure to set repeat annual reminders well in advance of both POA deadlines. This’ll reduce panic near the deadline!
• Add in additional notes alongside reminders. This can be anything you like, but it is worth routinely reviewing your finances to check if you are earning more or less than the previous year, as this will impact your POA.

3. Set up direct debits

Setting up a direct debit specifically for your tax payments is a useful way to ensure that you don’t miss the POA deadlines, and therefore avoid paying a £100 late payment fine. Once set up, be sure to check that the direct debit account contains enough capital to cover the bi-annual payments.

If for any reason your POA is increased, or you have to reduce it, then be sure to update the value of your direct debit payment accordingly.

4. Put aside money for POA

If you are newly self-employed, the costs of running and managing your own activities can be a surprisingly time-consuming and costly practice, so making sure that you are budgeting effectively for your POA expenditure is important.

Putting money aside is something most of us are familiar with. So, whether you’re saving for a car, house or pension, applying the same philosophy to POA is a good way to ensure that money is left available when the time comes. Save a portion of earnings per week or month specifically for your tax payments, and you’ll be surprised how quickly funds build up.

Dan Stopp is the UK Accounting Manager at Bokio, an AI-based accounting tool helping freelancers, sole traders and small businesses save time and money.

Got Questions About Freelancing?

If you’re new to freelancing, considering going freelance, or have questions about your established business, hop on over to our forum! There’s a special board just for self-employed people and small business owners. Get stuck in!

Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.

The post Payments on Account: A freelancer’s guide to keeping on top of your finances appeared first on MoneyMagpie.

We’re strong believers in voting for principles over personality, so hope that this easy to digest article will help you compare each party’s financial promises side-by-side. We will cover the nationally recognised parties: Conservative, Labour, Liberal Democrat, Reform UK and Green Party, as regional parties are not accessible to everyone in the UK to vote for (someone in England can’t vote for the SNP, for example).

Income, Taxes, and Jobs

Pensions

Property

Transport

Energy

Children and Families

Benefits

Read Manifestos in Full

Income, Taxes, and Jobs

There are very common claims across all four party manifestos about stimulating the economy by creating new jobs. It’s something that is promised at every election, so while we like to see commitments to increase training and skills for people, it’s tough to say which will actually happen and/or have an impact. So, we’re going to look at the hard facts of what each party says about job rights and taxes, and how that could impact your take-home income.

Conservative Party

The Conservative party haven’t announced anything groundbreaking compared to what they’re already doing for the jobs market, or planned to do. They insist:

• They’ll continue with the plans for another 2p National Insurance cut, putting someone on an average £35,000 salary around £1500 better off each year (not taking into account fiscal drag – see below)
• They plan to abolish main National Insurance for self-employed people ‘by the next Government’, which is a slow commitment compared to the PAYE National Insurance changes
• Income Tax thresholds will continue to be frozen until at least 2028

An example of fiscal drag can be seen here: the next National Insurance cost is supposed to put more money into people’s pockets. However, as wages go up with inflation (or close to it), the frozen tax thresholds mean more people will be pushed into a higher tax bracket. Those who previously didn’t pay any tax (earning under £12,750 a year) may now pay tax if they get a pay rise yet still be a low earner – taking them from 0% tax to 20%. Similarly, those in the higher bracket could easily be pushed over into the additional rate bracket – meaning they not only lose out more to tax but also lose out on the annual personal allowance, tax-free savings allowance and more.

Labour

Labour haven’t committed to much in terms of concrete assurances in their manifesto, but the key points in terms of income taxes are:

• They promise to end the non-dom loophole for tax evaders who are technically domiciled offshore. This would impact around 70,000 of the highest earners in the UK.
• Just as the Conservatives, Labour will freeze the income tax threshold to at least 2028
• A clampdown on Inheritance Tax and Capital Gains Tax avoidance to recoup some money

Liberal Democrats

The Liberal Democrat manifesto has many more concrete and specific claims than the other three. They promise to:

• Counter tax changes that currently burden individuals to instead create larger taxes on the big banks and a windfall tax on oil and gas profits
• Instate a 20% higher National Minimum Wage for those on zero hours contracts, to counter the unreliability of such work and encourage employers to create more fixed-hour contracts
• Provide Statutory Sick Pay at National Minimum wage rates, from the first day of sickness rather than the fourth.

Reform UK

The Reform party is new and entering its first General Election (it was formerly the Brexit UK party). They want to:

• Increase the Income Tax threshold to £20,000 which would take 7 million people out of paying tax and leave most workers £1500 better off
• Boost the higher rate tax threshold to £70,000 from £50,271
• Remove Inheritance Tax for estates worth up to £2million, with estates over that threshold paying at 20% or donating to charity instead

Green Party

The Green Party want to ‘make work fair’. As such, they say they would:

• Limit a maximum 10:1 pay ratio for public and private sector organisations (the highest earner cannot earn more than ten times the lowest earner)
• Increase National Minimum Wage to £15 for all ages
• Offset the increase of NMW costs for small businesses with tax reliefs
• Introduce a four-day working week
• Ensure all employment rights are day-one rights and include gig workers and zero hours contract workers
• Longer term, introduce a Universal Basic Income for everybody
• 

Pensions

Pensions impact not just those in retirement or soon to retire – everyone planning for a comfortable retirement, even if it’s decades away, should be interested in the plans for pensions. Small changes now could impact your retirement fund thirty years away, so it’s important to know what’s what. However, there isn’t much in the manifestos which stands out to be glaringly different or surprising.

Conservatives want to introduce a Triple Lock Plus, which protects the Triple Lock and introduces a new personal allowance that also rises with inflation for pensioners

Labour will protect the Triple Lock

Liberal Democrats will also protect the Triple Lock. They will also tackle the problem of the ‘WASPI women’ born in the 1950s who have been unfairly affected by the increase in the State Pension Age, as well as review rules to help the self-employed in the gig economy access the same support as PAYE workers.

Reform UK make no mention of protecting the Triple Lock, instead claiming they will ‘review pension provision’ looking at models in other countries like Australia. They will end the Mineworkers Pension Scandal, also.

Green Party say they will reform pensions taxes and, while not using the words Triple Lock, would guarantee a similar system of inflation rise guarantee.

Property

Property is a big one in terms of the impact on the economy. That, in turn, affects things like local economies and job markets, as well as industries such as hospitality and education. All major parties have committed to building new houses, though some more than others.

Conservatives

The Conservatives focus on ownership with most of their property policies. They want to:

• Restart the Help to Buy scheme for first time homeowners
• Build 1.6million homes over 5 years
• Ban no-fault evictions (this was a 2019 policy)
• Introduce a ‘local connection’ and ‘UK connection’ test for social housing applicants
• Keep the developer-funded cladding remedial projects
• Improve planning processes to speed up development and build of houses, with a focus on increasing density in London

Labour

The Labour party have promised to:

• Ban leaseholds and turn all to commonholds
• Introduce a Freedom to Buy scheme, including an extension of the existing Mortgage Guarantee Scheme
• Raise an additional Stamp Duty Land Tax fee on all non-UK resident property purchasers
• Abolish Section 21 ‘No Fault’ evictions
• Build 1.5million new homes over their tenure
• Review Right to Buy and focus on building social housing and repurposing existing stock
• ‘Tackle’ ground rent
• Improve planning processes to speed up the release of land for developers

Liberal Democrats

The Lib Dems have focused on both private ownership and social housing in their manifesto with quite a lot of detail about their plans. They say they will:

• Introduce Rent to Own which will give social housing tenants increasing equity in their property to full ownership after 30 years, and abolish Right to Buy
• Create a Home Energy Upgrade Programme to provide grants for improving energy efficiency in homes
• Abolish leaseholds and cap ground rents
• Give new powers to local authorities to allow them to charge up to 500% council tax on second homes
• Scrap the bedroom tax
• Introduce a non-UK resident Stamp Duty Land Tax surcharge
• Pay for cladding repairs so costs don’t fall to property owners caught in the problem
• Build ten new garden cities
• Build  380,000 new homes a year (including 150,000 social housing) with all new builds being zero carbon

Reform UK

Reform want to focus on home ownership. They say they would:

• Introduce a 0% stamp duty on purchases up to £750,000, 2% thereafter to £1.5million, and 4% over £1.5million
• Scrap 2019 SDLT on landlords
• Allow landlords to claim finance costs and mortgage interest as expenses
• Review planning processes and speed planning with ‘pre-approved’ guidelines
• Abolish the Renters’ Reform Bill, as they say existing and previous legislation provided enough protection for tenants
• Insist on clarity of leasehold charges and ground rents (but not cap or abolish them)

Green Party

The Green Party say they would:

• Scrap the bedroom tax
• Build or repurpose 150,000 social homes each year
• Remove individual right to buy and introduce community-based right-to-buy
• Introduce rent controls to limit how much rent can be increased

Transport

While rather thin on the ground for detail in each manifesto, transport can have an impact on broader financial changes. Infrastructure directs where new houses are built, for example, and that in turn leads to where people will find jobs and schools.

Conservatives

The word ‘transport’ only appears five times in the 80-page manifesto. The existing policies, such as the £2 bus fare cap for low income and young people, free bus passes for pensioners, and fuel duty freeze, remain. There is also a promise for local authorities to receive pothole repair funding.

Labour

As well as promising to fix one million potholes, Labour says it will:

• Tackle increasing car insurance costs
• Reform the railways into public ownership
• Improve electric vehicle infrastructure

Liberal Democrats

The Liberal Democrats promise to:

1. Reinstate the zero emission vehicle rule for new cars and vans from 2030
2. Built electric infrastructure to support more electric vehicles on the road
3. Cut VAT on public electric vehicle charging to 5%
4. Freeze rail fares
5. Simplify rail ticketing
6. Review HS2 and the cancelled plans to see if an alternative could be created
7. Introduce a Young Person’s Bus Card for 19-25 year olds for reduced bus fares (like Railcards provide)

Reform UK

While the other three parties are focused on improving rail infrastructure and improving carbon-zero or electric opportunities, Reform support drivers. They say they’ll:

• Lower fuel duty by 20p a litre
• Scrap the ULEZ charge
• End the planned ban on selling petrol and diesel cars
• Scrap HS2 altogether
• Bring 50% of each transport network into public ownership

Green Party

As the name might suggest, the Green Party are invested in improving the environmentally friendly options of transport. They would:

• Introduce free bus travel for all under-18s
• Renationalise the railways

Energy

We’ve all seen our energy bills rocket while the suppliers report record profits and huge bonuses. Here’s how each party intends on tackling the challenges with energy costs across the UK.

Conservatives

The Tories have overseen the highest rise in domestic energy bills in recent decades. On a larger scale they will invest in nuclear power and more renewables. They say they will also:

• Continue the windfall tax on oil and gas companies until 2028 unless prices fall back to normal sooner
• Reduce green levies on domestic energy bills
• Keep and ‘evolve’ the Energy Price Cap
• Introduce an energy efficiency voucher scheme for people to improve the energy efficiency of their homes

Labour

Labour want to focus on boosting clean energy and addressing the rising costs. They promise to:

• Create a publicly-owned energy company to boost energy security (created by a one-off windfall tax on oil and gas profits)
• Review standing charges with regulators
• Provide grants and low-interest loans for homeowners to improve energy efficiency and reduce their bills

Liberal Democrats

The Liberal Democrats have a strong focus on clean energy, carbon zero, and improved energy infrastructure. They want to:

• Introduce a ten-year home upgrade programme including grants for energy efficient home improvements
• Requiring landlords to bring properties up to EPC C or higher
• Boost incentives for households to have solar panels and profit selling energy back to the grid
• Introduce a social tariff for energy costs for the poorest households
• Help with domestic energy bills with a one-off windfall tax on oil and gas profits
• Abolishing regional energy price differences

Reform UK

Reform UK have very brief energy details in their manifesto but it is clear they are the only party focused on developing more oil and gas infrastructure rather than clean energy. They say they want to:

• Scrap VAT on energy bills
• Reduce household bills by £500 a year
• Scrap energy levies

Green Party

The Green Party want to move towards carbon zero, remove nuclear power, and want wind to produce 70% of the UK’s power by 2030. They would:

• Invest £42billion for homeowner and landlord energy efficiency incentives and grants

There is no mention of domestic energy bill discounts, levies, or cuts.

Children and Families

From parental leave to free childcare, each party has a stance on improving the income of families with children.

Conservatives

The Tories will continue their existing plan for 15 hours of free childcare a week for children up to 2, rising to 30 hours for children age 3-4. They will also:

• Raise the free childcare hours to 30 a week for all under-5s in 2025 which they say will save families an average of £6,900 a year
• Change Child Benefit so that it is household-linked income not individual
• Raise household income limit for Child Benefit to £120,000 a year

Labour

Labour’s policy is similar to the Conservatives’. They say they’ll:

• Not change the existing free childcare plan as outlined above
• For free childcare, parents must not individually earn more than £100,000 a year (and must earn more than £9518)
• Ensure breakfast clubs in every primary school

Liberal Democrats

The Lib Dems have expanded on existing parental and family rights in their manifesto. They promise to:

• Introduce paid neonatal care leave
• Give free access to sign language lessons for parents and guardians of d/Deaf children
• Double statutory maternity and shared parental pay to £350 a week
• Introduce an extra use-it-or-lose-it month for fathers at 90% of earnings
• Ensure parental leave and rights will be a day-one right and include the self employed
• Deliver free school meals to families in poverty, eventually extend to all children
• Remove the two-child limit and the benefit cap

Reform UK

Reform are focused on ‘traditional family values’. As such, they want to:

• Incentivise marriage by allowing 25% tax allowance transfer between spouses
• Provide tax relief for private schools with no VAT on school fees to reward families who can afford private education

There is no mention in the manifesto of childcare hours, Child Benefit, or parental leave changes.

Green Party

The Greens want to:

• Ensure free transport for all special educational needs and disabled children to school
• Remove the two-child benefit cap
• End tuition fees for higher education
• Introduce free personal care (similar to Scotland) for the elderly and disabled

Benefits

Benefits are always a hot topic when it comes to elections. Even if you don’t need the social security safety net right now, there is never any guarantee you won’t need it in the future. Supporting those on low incomes and who are unable to work is also important to keep the economy ticking over and improve mental health outcomes.

Conservatives

The Conservatives want to focus on reforming the benefit system around long-term illness. As such, they will:

• Introduce a six-tier system for Personal Independent Payment
• Increase the time between claiming Personal Independence Payment and being assessed for it, to reduce the number of ‘short term illness’ claims (Magpie note: PIP is for those in work and out of work, is not means tested and is for people with chronic conditions, it is already not for short-term illness)
• Consider reducing ongoing cash payments for PIP and replace with one-off grants for items required to support disabled living such as wheelchairs
• Change the Access to Work process
• Crack down on people with mental health conditions claiming out of work benefits
• Change the capability for work assessments to include only the most severely ill, putting 424,000 off benefits and back to work
• Close unemployment claims for those unable to find work within 12 months

Labour

At time of writing, there is only one mention of Universal Credit in the manifesto, and no reference to specific benefits like Personal Independence Payment. Labour say they are “committed to reviewing Universal Credit so that it makes work pay and tackles poverty.”

Liberal Democrats

The Liberal Democrats have declared broader changes than other parties. They say they will:

• Increase Carers Allowance, including those in education
• Reduce the hours required to qualify for Carers Allowance
• Will not pursue punitive Carers Allowance overpayment tribunals
• Reduce the wait for Universal Credit first payments from five weeks to five days
• Restore full Universal Credit entitlement for parents of any age (removing the reduced rate for parents under the age of 25)
• Reform Personal Independence Payment assessments and bring them in-house (instead of private sector)
• Bring Work Capability Assessments in-house
• Ensure that military compensation for injury or illness is not counted as income for means-tested benefits

Reform UK

Reform UK have only a small section related to benefits in their manifesto, with their main slogan being: “In Britain, if you can work, you must work”. They say:

• Job seekers must find employment within 4 months or accept a job after two offers otherwise benefits will be withdrawn
• Work Capability Assessments and Personal Independence Payment assessments by independent (private sector) medical assessors

Green Party

The Green Party focus on reforming the current benefits system. So they would:

• Reform the intrusive PIP and WCA tests
• Introduce an immediate 5% uplift on disability benefits
• Increase Universal Credit and legacy benefits by £40 a week

Read Manifestos in Full

Of course, we have only summarised the key financial points that would impact your everyday lives in each core manifesto for comparison. Before you make your decision on who you want to vote for (or rather, which policies you want to vote for), take your time to research the manifestos in full.

Conservative Manifesto

Labour Manifesto

Liberal Democrat Manifesto

Reform UK Manifesto

Green Party Manifesto

The post Election News: What Each Major Party Promises for Your Wallet appeared first on MoneyMagpie.

Tax refunds are more common than you think, but not everyone claims what they’re owed. Read on to make sure you don’t miss out.

1. Why tax rebates happen
2. How to get a tax refund
3. Check the online gateway
4. Ask your accountant
5. Check if you can defer or cancel payments
6. Claim a tax rebate on ‘payments on account’
7. Do NOT use a company that claims to get you a refund
8. More tips

Why tax refunds happen

Tax rebates are far more common than you might think. You just don’t hear about them because HMRC try not to shout about it!

Some of the most common reasons you might be due a tax refund are:

• You started a new job and were taxed under an emergency code at the beginning.
• HMRC sent the wrong tax code to your employer or your employer does not use the correct code. This can often go back many years, so it’s worth checking retrospectively. You never know, you might be due a tax refund from 10 years ago or even longer!
• You’re a pensioner with more than one workplace pension. Your tax-free personal allowances may not have been allocated properly, meaning you might have paid too much tax.
• You have more than one job. The employer at your second job will automatically deduct tax at basic rate so you may not get the benefit of all your tax-free personal allowances. This regularly affects students and low paid workers, who could really do with the tax refund.

If you think any of these circumstances might apply to you then make sure you check if you’re eligible for a refund. And if you are, make sure you claim it!

How to get your tax refund

This is the bit everyone is dying to know. Getting your refund may sound like a complicated process, but in reality it’s very straight forward.

You should be able to do it online, without wasting hours and hours trying to make sense of the whole system. Although, if your tax affairs are more complex it might take a bit longer.

It’s really important to get it right and you could end up with a large cheque at the end of it, so make sure not to rush the process and do it properly.

Remember: asking HMRC to investigate your tax code or tax liabilities could mean they discover you actually owe MORE tax. So, be prepared for this to happen, too!

Check the HMRC online gateway

The first place to check is the government’s online gateway. If you don’t have your online portal set up yet, it can take a bit of time. You’ll need to prove your identity online and wait for a unique code to be sent to you in the post to complete the application.

You can claim your rebate here.

This portal helps you find out if you can claim a tax rebate if you paid too much due to any of the following reasons:

• Pay from your current or previous job
• Pension payments
• Income from a life or pension annuity
• A redundancy payment
• A self-assessment tax return
• Interest from savings or PPI
• Foreign income
• UK income if you live abroad
• Fuel costs or work clothing for your job

If you think you’re owed a refund for any other reason, read on…

Ask your accountant

If in doubt, ask a professional.

Asking an accountant will be a particularly good idea if you’re self-employed, have a second job, or have income from something else (like a buy-to-let property). Paying tax as a self-employed individual is much more complex, so taking advice can be a really good idea.

An accountant will probably charge you a couple of hundred pounds for their basic service, including a self assessment tax return.

A good accountant will likely spot where you can save WAY more than that on your return, so it’s always worth investing in. There’s a high chance they’ll successfully get you a tax rebate too, so you could well end up with more money than if you didn’t hire them in the first place.

Just make sure you find a reputable accountant. Sadly, some unscrupulous businesses and individuals try to take advantage of those desperate for a tax rebate.

Check online reviews before committing to an accountant or ask your friends and family for recommendations. That way, you’re far more likely to end up with a good accountant who wants to help you.

Check if you can defer or cancel payments on account

If you’re self-employed you may be able to defer or cancel payments on account. This will apply to you if you’ve earnt less this year than you originally predicted, or less than you made last year.

Another reason you might be apply to defer payments is if your tax relief entitlements go up. This would mean that the amount you owe is less than you would have expected when you made your original payments on account.

You can apply to reduce or defer your payments on account here. If you’re struggling with the online form, you can fill it out manually and post it to HMRC.

Claim a tax rebate on payments on account

You may be able to claim a tax rebate on payments on account from last year if you’ve earned less than anticipated this year. With many self-employed people seeing a decrease in earnings due to Covid-19 lockdowns, the likelihood you’ve overpaid your tax is significantly higher.

If your earnings have fallen below expectations, your previous payments may have been too high. This can be corrected before you pay the tax, by making a claim to HMRC to reduce your payments.

A lot of people don’t do this because their income is uncertain and it’s hard to plan ahead. Don’t worry if this is the case. If your final tax bill turns out to be less than the tax you have actually paid you can claim a tax rebate.

Pros and Cons of using a company that claims to get you a refund

PROS

Everything will be done for you and will save you a huge amount of work and admin.

Time saving.

CONS

These companies may seem tempting, particularly if you’re feeling overwhelmed and are worried about claiming your refund. Don’t fall for their clever marketing and be very careful who you select. Some will deliberately make the process seem more complicated than it is to try and get your business. All they’ll actually do is take a huge cut of any refund you get.

They won’t do anything you can’t do yourself through the HMRC portal. Doing it yourself means you’ll end up with the full refund in your pocket and won’t have to share any of it with any third parties.

Alot of these companies will charge you almost as much as you’re owed from HMRC, so you’ll barely see a penny of YOUR refund.

Remember – if something seems too good to be true, it probably is. You can almost certainly achieve a better outcome on your own.

More like this…

If you found this article useful you might also like these.

• Self Assessment Online – The Definitive Guide
• Second Job and Side Hustle Taxes Explained
• Help to Save: £1200 Tax-Free Cash From the Government

The post Are you due a tax refund? HMRC won’t tell you! appeared first on MoneyMagpie.

We’ve compiled a list of key money questions you should know the answers to. It covers things from dealing with debt to investing in the stock market. We’ve got you covered with a range of tips and starting points to help you become more financially stable.

Here’s the 8 money questions to ask yourself!

• Am I Financially Prepared for an Emergency?
• Do I Spend More Than I Earn?
• What is My Credit Card Balance?
• How Much Debt Do I Have?
• Am I Paying More For Anything Than I Need to Be?
• What Happens to a Mortgage If You Split?
• Should I be Investing on the Stock Market?
• Is Paying for a Warranty Worth It?
• More Money Questions

Am I Financially Prepared for an Emergency?

If 2023 has taught us anything it’s the importance of being prepared for an emergency! It’s hard to know exactly what you will need until the time comes, but 3 – 6 months of necessary spending is a good guide. You need the money to be in an easily accessible savings account, ready for when you need it.

However, it’s a fine line between having enough and putting too much in there. Interest rates on savings accounts are shockingly low at the moment. In fact, interest rates are lower than the rate of inflation, so if you over-inflate your emergency fund, your money will slowly be losing value instead.

As well as having an emergency fund, do you have an asset you could borrow against if you had to? It’s not always as an ideal solution, but it can save you from the larger cost of getting a personal loan or using high-interest credit cards.

Do I Spend More Than I Earn?

You may think you don’t, but there are a shocking number of Brits who regularly spend more than they earn. According to research by the Office for National Statistics, on average each UK household spent £900 more than they received in income in 2017 alone. The problem for many people is that they’re simply unaware of how much they’re spending!

Due to cards and contactless, it is so easy to lose track of how much you’ve spent. The best way is to create a regular habit of checking your bank statements and monitoring where your money goes. Take some time to sit down with your accounts and face reality. How much do you actually earn? Once all your living costs have been taken out, how much do you have left? Create a budget and stick to it! Your finances dictate the lifestyle you can afford to have, not the other way around.

what is My credit card balance? (and what are the interest rates on it?)

Credit cards are great when they’re used properly, but they have made it far too easy for us to overspend without a second thought! Only purchase something on a credit card if you know you’ll have the funds at the end of the month to pay it off. However, life sometimes does throw surprises our way. There may be a month when, for some reason, you might not be able to pay the balance off in full. In preparation for this, make sure you’re aware of your credit card interest rates, how much it’ll cost you, and always use the card with the lowest APR if you might not be able to pay the full sum.

Remember to monitor you balance carefully to make sure you’re staying on top of payments. Find out more on how to use credit cards to build your credit score here.

how much debt do I have? And How to Pay It Off

Debt can be overwhelming and if you don’t stay on top of it it can easily spiral. When asked, a lot of people tend to underestimate how much debt they really have by 25%. UK citizens actually owed £1.6 billion in debt at the end of January 2020. While the average debt total (including mortgages) per adult was £31,845, higher than the average annual income.

Prioritise your debts by paying off the ones with the highest interest rates first, or think about applying for a debt consolidation loan. Check out our article How to Stop Debt Overwhelming You for more information, and see what MoneyMagpie founder, Jasmine, has to say about paying off debt below:

Am I Paying More For Anything Than I Need to Be?

Recurring expenses are something that we don’t think about often. They just come out of our account automatically without us ever paying much real attention to them. Meaning plenty of us are left paying for products and subscriptions long after we still need them, simply because we forget to cancel.

Go through your accounts carefully and question every expense. If you’re not using something anymore, or not using it enough – cancel! You’ll obviously still have things you’ll need to continue paying for, like insurance. But it’s always worth negotiating with your provider to try and get a better deal. Never simply auto renew a policy – you can almost always get it cheaper.

What Happens to a Mortgage If You Split?

Sadly, many people who do get mortgages together, whether friends or partners, do end up going separate ways. Knowing your options in advance can help you to prepare for the worst case scenario, as managing a mortgage in a break up is no small feat.

The key thing to remember is you’re both liable for all repayments. A mortgage provider doesn’t care about your personal life, so just because your partner is no longer paying their share it doesn’t mean they’ll let you only pay half. If you fall behind on repayments it will negatively impact both your credit scores.

The options you have are:

• Sell the house – Pay off whatever remains of your mortgage and split the rest of the money. If you’re in negative equity (when the value of your house falls below your mortgage balance), then you’ll have to divide the outstanding debt between you.
• Buy the other partner out – If you can afford to, one of you could buy out the other. However, you will have to prove to your lender that you can afford to continue the repayments on your own.
• Keep a stake in the property – Buying a proportion of your partner’s stake is an option if you can’t afford to buy their whole share. This way, one of you would own most of the property but the other could keep a stake in the home. They’d also be entitled to a percentage of the value if the house is sold at a later date.

Find out more about how to handle this situation in the video below:

Check out How to Prepare for a Post-Lockdown Divorce for more details, too.

Should I be Investing on the Stock Market?

This is one of the money questions we hear a lot, and the simple answer is yes. Everyone who can afford to do so should be investing – even if it’s just £10 a month. Really, investing is the best way to save for the long term. Interest rates on savings accounts are shockingly low so investing is the only real way to see a return on your money.

To a beginner, the stock market can seem overwhelming and rather daunting. How do you get started, or even know what to do? Read 7 Investment Tips for Stock Market Beginners for all the help you’ll need on making the first step.

Is Paying for a Warranty Worth it?

You’ve bought something nice and new and you want to protect it – that’s completely fair. The trouble is, a lot of warranties don’t actually give you that much for your money. In some cases you might get a couple of extra years, but we’ve found cases where an extended warranty cost over half the price of the product itself. And you may never end up using the warranty!

Instead, if you have contents insurance, check whether your items will be covered on that policy. What’s the excess? It’s often cheaper than the cost of a warranty. It’s always worthwhile checking as there’s no point paying to cover the same thing twice.

Also, if you are considering paying extra for a warranty check with the manufacturer and retailer first. Many manufacturers guarantee their products for a minimum of 12 months, with some up to 2 or 3 years and plenty of retailers often have their own guarantees as well.

Jasmine tells you what she thinks about paying for warranties in the video below.

More Money Questions

If you have even more money questions, why not head over to our messageboards where you can ask away and also find plenty of help from fellow readers.

Or check out one of our detailed articles answering different questions below:

• Do You Need Income Protection Insurance?
• Should You Invest in Penny Shares?
• Should I Save or Pay Off Debt? How to Decide
• Are Consolidation Loans Worth It?

*This is not financial or investment advice. Remember to do your own research and speak to a professional advisor before parting with any money.

The post 8 Money Questions You Should Know the Answers To appeared first on MoneyMagpie.

Like everyone else, the tax office is looking for new ways to fill its coffers so if you sell goods on Vinted, Etsy or eBay then these companies now have to pass on information about you to ensure you pay tax and declare your income through self-assessment.

The platforms will have to declare how many sales their sellers have made and the income they’ve generated. New legislation started on January 1 and they will have to automatically share information with HMRC by January 31 next year – the first lot of data-sharing will cover the 2023/24 tax year.

Changes were implemented after the UK signed up to an agreement with the Organisation for Economic Co-operation and Development (OECD) to tackle global tax evasion. Previously HMRC had access to seller information from UK based online platforms when required. The new automatic system also covers overseas platforms.

Sellers rarely turn a profit but such platforms have become a breeding ground for businesses who specialise in reselling rare and valuable items. The new rules will reduce the risk of businesses slipping through the net and avoiding tax.

Twenty eight countries have signed up to the OECD rules.

Will everyone’s information be shared?

No. Only if you are selling 30 or more items a year and have total earning £1,735. But don’t forget that you may have to pay tax on that amount. Currently you can earn £1,000 or less and you shouldn’t have to pay extra tax because you are covered by what is known as the trading allowance. The limit applies to your overall earnings across all platforms.

If you are concerned that you might owe tax on your extra income, then you should fill in a self-assessment tax return by going to gov.uk and submit it for the 2022/2023 tax year by Wednesday, January 31. Even if you submit it through self-assessment it doesn’t necessarily mean you owe any tax, depending on what allowances you are entitled to.

If you don’t think you owe tax, you don’t need to do anything.

Is this a new tax?

To be fair to HMRC, it isn’t. If you didn’t owe tax on these earnings previously, you won’t have to start paying tax on them now. What it does do is make it easier for the tax office to find out what people are making on digital platforms and that means you do need to check whether you are going to owe tax on future earnings.

The rule change will also allow HMRC to share data with tax authorities in other countries that have also signed up to the new legislation.

An HMRC spokesperson said: ‘For people selling personal possessions online, absolutely nothing has changed. the reason we’re asking digital platforms to share information with us is to ensure businesses operating via these platforms pay the correct amount of tax and do not have an unfair tax advantage over high street and other traditional businesses’.

If you are flagged by a digital platform, the company is required to send you a copy of the information that has been submitted to HMRC which should help you declare the correct income and make complying with tax obligations easier.

The trading allowance for reselling items can’t be used by sellers who already receive income elsewhere. So, if you receive income from a company you or someone connected to you controls, an employer or the employer of your spouse or civil partner, you cannot use the allowance.

Vinted’s chief executive Adam Jay said: ‘It’s actually quite a small proportion of our users who will trigger this threshold. It’s only people making a profit from selling second-hand items that might be eligible to pay tax. We’ll be actively reaching out to those sellers explaining what the new requirements are and why they exist’.

How will it affect you if you are on benefits?

You are protected by the £1,000 trading allowance, however claimants of low-income benefits like Universal Credit can be asked at any time to provide bank statements or other documents to prove the information about your financial situation is accurate. So it’s important to be clear about your earnings. If you report an income of £2,500 or more, your Universal Credit payment will automatically stop.

Many sellers on sites like Vinted, e-Bay and Depop have hit out at the rules saying that they’d already had to pay tax (VAT) on the items they are selling and described the rules as grossly unfair when we are in the grips of a cost of living crisis.

Nevertheless one tax expert from the Association of Taxation Technicians said: ‘Don’t wait for the letter to come through or for HMRC to contact you. It’s always better if you think there may be tax for you to pay to declare it upfront as there may be penalties if you don’t’.

For more information go to gov.uk to find out if these changes affect you.

The post The Side Hustle Tax: Tax on Vinted and Depop Selling Starts NOW appeared first on MoneyMagpie.

New stats from Resolution Foundation estimate the government will net £40 billion a year by 2027-28 – dramatically more than the original £8 billion a year it was meant to rake in at its peak. Higher inflation typically equals higher wages, which will push more people into the next tax bracket. Had income tax bands been linked to inflation, rather than frozen, we’d have seen a sizeable leap in the amount people could earn each year before hitting the next tax bracket. On top of the frozen allowances, the government reduced the threshold for additional rate tax, dragging more people into the top rate of tax.

MoneyMagpie founder Jasmine Birtles has said, “This is what people like me have been warning about for the last couple of years. These ’stealth taxes’ creep up on workers and eat into their income. The already struggling working people are about to suffer an even further drop and we only have the government to blame”.

Head of personal finance at AJ Bell Laura Suter has said: “These latest figures highlight the staggering impact that higher inflation will have on the amount of tax the nation is paying. The government’s decision to freeze the income tax thresholds at a time when inflation has gone off like a runaway train has boosted government coffers – but at a large cost for most UK households.

 “While Jeremy Hunt will be rejoicing at the boost to his budget, it’s costing households at a time when their budgets are already stretched. AJ Bell calculations show that someone earning £50,000 a year will pay an extra £9,000 in tax across the six years of the threshold freeze, when compared to if the tax thresholds had increased with inflation. Had the government instead increased the headline level rate of taxation, rather than implementing a tax hike by stealth, the basic rate of tax would need to have risen to an astonishing 23.5% from last tax year to generate the same total tax bill for a £50,000 earner. The tax hike for middle-earners is particularly acute because they are vulnerable to the fiscal drag effect pulling them into a higher tax band.  

Tax the Poor to Feed the Rich

The post Jeremy Hunt Announces Largest Income Tax Rise in 50 Years appeared first on MoneyMagpie.

Pay less and backdate your claim!

With a quick check, you can possibly get your council tax banding decreased by up to a few hundred pounds a year, and it can also be backdated to when you started living at your property: even way back to 1993 when council tax started to be paid!

How to find out your council tax band

Find out the Council Tax band for a home in England or Wales by looking up its address or postcode. For homes in Scotland, search on the Scottish Assessors website.

You can also use this service to challenge your Council Tax band if you think it’s wrong. You’ll need to provide evidence for your challenge. Start now on the Council Tax valuation list.

It’s well worth considering a few more factors, so first of all:

Investigate the houses in your area

Asking a neighbour is probably the quickest way to determine what band you’re supposed to be in. A sure sign that your band is incorrect is if people in your area are paying a different amount of council tax to you.

BUT do be aware that this investigation COULD lead to your council tax going up, or in very rare cases the band for your whole area being increased: this is after all a reassessment, not a guarantee of you paying less council tax.

So do some research first:

Property Values

If you have owned your property after 1991, just use the date of the sale and price paid: if you rent your property or bought it earlier, than this, you’ll have to get an estimated price. TIP: also try this process with neighbouring properties similar to yours, to see where yours compares.

Try using Rightmove, Zoopla or Nethouseprices to get fast results: just put in your street name and it’ll let you know the price of every property sold there since 2000.

You can then use this information to estimate what your property would’ve been worth back in 1991, and what band it’s in by using the Nationwide Calculator to determine all the house prices you’re after.

Other ways to apply

You can also call or email the Valuation Office Agency (VOA) to challenge your Council Tax band if you cannot use the online service.

The post Are you in the right council tax band? appeared first on MoneyMagpie.