When Will King Charles Money Be Released?

When Will Queen Elizabeth Money Stop Being Legal Tender?

What Happens If You Have Old Money?

When Will King Charles Money Be Released?

The first notes with King Charles on them will release on 5th June 2024. All four bank notes will be updated, which includes £5, £10, £20 and £50 notes – but the other designs on the reverse will stay the same.

You may not have noticed, but your wallet is probably full of King Charles III already! Coins with his face on were first rolled out in December 2022 on the 50p coin. All new coins are now minted with King Charles’ face.

When Will Queen Elizabeth Money Stop Being Legal Tender?

The good news is that there is currently no hard stop date for Queen Elizabeth money. Just as you’ve got both QEII and King Charles coins mingling in your purse, it’ll be the same for notes for the foreseeable future.

This is to ensure money production is as sustainable as possible, both for the environment and financially (printing money costs money!). So, new King Charles notes will only be created to replace old, worn Queen Elizabeth notes. There’s no mass rollout where QEII notes stop being legal tender for you to use in a shop – unlike when we switched from paper to polymer notes.

What Happens If You Have Old Money?

When the time eventually comes that Queen Elizabeth money is declared no longer legal tender (if that ever happens – it’s likely that it will be allowed to phase out over a very long period of time instead), your money won’t be worthless. Just as when we switched to polymer notes, there will be plenty of notice given to spend your final QEII notes. If you still have some (or find them down the back of your sofa years later), you haven’t lost your cash! You can take them into banks to exchange for current money.

But many people don’t know you can also deposit old notes into a Post Office account and they still count as legal currency. If you don’t have a Post Office account, you can still exchange up to £300 of old notes for new ones as long as you have photo ID.

You can also change very old notes (yes, even VERY old currency like pound notes!) with the Bank of England. You can do this by post (definitely get secure tracked postage) using the bank note exchange form, copies of ID, and address evidence. Or, you can also exchange in person at the Bank of England itself – which is a good idea if you have a LOT of notes to exchange.

Whichever option you choose when exchanging with the Bank of England, you can opt for a notes exchange or a payment into a bank account that accepts sterling payments.

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ISA usage has grown in popularity recently, after losing customers when the Personal Savings Allowance was launched in 2016. After that tax break was introduced, ISA use dropped by 13% in a year. Finally, the number of ISA accounts opened has finally risen above pre-2016 levels as a total of 13m ISA accounts were opened in the year.

Laura Suter, head of personal finance at AJ Bell, comments:

“ISAs are still underused, with the amount subscribed to them remaining below pre-2016 levels. In 2015-16 a total of £80bn was put into ISAs and the latest figure show that £75bn was paid in*. And that’s despite a soaring ISA allowance, which jumped to £20,000 in 2017/18.

“The Personal Savings Allowance is still sufficient for many people to save and be protected from tax. It means basic-rate taxpayers can earn £1,000 in savings interest before they have to pay tax, while higher rate payer can earn £500 before tax is due. That means if their savings are in cash and earning interest of 0.5% a basic-rate taxpayer could have £200,000 in savings and still be covered by the allowance, while a higher rate payer could have £100,000 before tax was due. However, there are six key groups of people who would definitely benefit from using an ISA – from those due a payrise to people saving for their first property. These people face either higher tax bills or a hit to their savings potential (or both) if they shun ISAs.”

Jasmine Birtles Says:

MoneyMagpie’s Jasmine says, “The ISA landscape is now quite confusing with quite a few different types of ISAs to choose from. However, it does mean that there’s ’something for everyone’ and I particularly recommend that those between 19-39 years-old open up a LISA so that they can get the delicious 25% extra that the Government gives out for free on top of any money invested. That means that you already increase your investment even before whatever you have put the money into (ideally socks and shares) increases in value.

“I’m also a big fan of Junior ISAs, again, ideally invested in stocks and shares rather than cash, at least until your kids are in their mid-teens. Investing this way will give them a handy next-egg when they are eighteen or provide them with a good start for saving for a home or to setting themselves up in business later on.

“Given the fact that we will be paying more tax from April onwards, thanks to the increase in National Insurance contributions and the freezing of the income tax thresholds, it’s becoming ever more important that we make the most of any tax-saving vehicles like ISAs and pensions. Put in as much as you can afford before the end of the tax year on April 5th.”

 

The six types of people who could benefit from opening an ISA

 

First-Time Buyer

 

People buying their first home can benefit from an ISA giving them free Government money. A Lifetime ISA nets you a 25% Government bonus on the money you pay in, which contributes to your first home with a competitive interest rate.

Payrise Seekers

People looking to increase wages are a good audiencea ccording to AJ Bell.

 

If your job or pay is changing, people need to see if they’re moving into the next tax bracket needs to watch out, which will affect their Personal Savings Allowance cut or even disappear altogether.

“For example, if you change from the basic to higher-rate tax band you’ll face a £200 tax bill on that £500 of savings interest that’s no longer protected by the allowance. And if you move from the higher to the additional rate band you’ll face a tax bill rise of £225. If you’re close to these tax band it could be a good idea to move some of your money into an ISA, and reduce your future tax bill.”

 

Income Investors

Investors will be faced with an even higher tax bill on their dividends from April, as the new Health and Social Care Levy will add 1.25 percentage points onto dividend tax rates. It’s the latest increase, with recent years seeing successive changes to the dividend tax allowance raising bills. If you move some of your money into an ISA then it will be free of income tax – to be clear, carrying out your investigation depending on what your personal dividends are is always a good idea – but you could see your tax bill cut.

 

Future Income Withdrawers

If you plan to take an income from your savings in future years, you should one aware of how this is taxed, outside of an ISA or pension. ISA withdrawals are free of tax, so you can draw an entirely tax-free income off the investment pot.

 

Supersized Gains Investors

 

 

If you have well-performing non-ISA investments perform, they could attract hefty capital gains. Investments outside of an ISA will incur capital gains tax of 10% or 20% on any gains above the tax-free allowance, depending on the income tax bracket. You can make use of your capital gains tax allowance to bank some gains and move them into an ISA.

 

The Big Hitters

ISA Usage for those with considerable savings

 

The larger your non-ISA savings are, the longer it will take to move it into an ISA. The ISA allowance is currently £20,000 per year, but is at the mercy of future Governments changing the tax rules on savings, scrapping the personal savings allowance or even reducing the annual amount you can save into an ISA. People were caught out by this before with the cut to the dividend tax allowance and many were hit with a large tax bill. If it will take several years’ worth of allowances to move your money into an ISA, think about starting before the end of this tax year.

To read MoneyMagpie’s entire series on ISA click the link here and learn more about ISA usage, types and ways to invest.

The post ISA Usage and What Types of Investor Can really Benefit from an ISA appeared first on MoneyMagpie.

Saving when you’re broke and over 50 may seem impossible. You’re either still in work and trying to put whatever you can into your pension pot, or already drawing down from your pension for an income much lower than you’re used to.

Having no savings and a small income, and knowing your retirement is coming up, leaves many over-50s worrying about how they can save for a rainy day. We’ve come up with some solutions to help you build a savings pot even when you think you’re broke.

• Get the over-50s benefits you’re entitled to
• Put off retiring
• Create some over-50s savings
• Invest for the medium-term
• Pick up some over-50s extra earners
• Make extra savings
• Consider equity release

So, you’re over 50, feeling poor and see no hope of improving the situation? Stop right there because you have a lot more time – and opportunities – to turn this around than you might think. Don’t imagine that this is a time for you to slow down. No way – there’s too much of life to enjoy and, frankly, profit from.

Get started with our ideas on how to save if you’re broke and start building up that nest egg!

Get the Over-50s Benefits You’re Entitled To

Go to the benefits information website Turn2Us and fill in your details. It works out what benefits you should be getting. It also shows you how to apply for what you’re entitled to.

Also go to the benefits section of Gov.uk. They have a good list of the benefits and tax credits you could be entitled to. You could be getting tax credits if you’re not earning enough, or extra help if you’re caring for someone or have a disability. Get in now while you can – who knows how long these benefits and tax credits will continue!

Most benefits are now paid via the Universal Credit system. This means you need to apply online to get the benefits. If you’re not confident on a computer, make an appointment with your local Citizen’s Advice Bureau and they’ll help you. The DWP also has a Visiting Team who can come out to your home if you’re housebound or unable to claim your benefits online. They’ll make sure you’re getting everything you’re entitled to.

While you’re at it, it’s a good idea to check on your state pension situation. Do you have enough National Insurance credits to get the full pension? You need 30 years’ worth of contributions to qualify for the full state pension. Also, if you’ve been a carer or taken time off to look after children you will probably have National Insurance credits for those years. Find out what your situation is here.

Delay Your Retirement

This may not have you jumping for joy but you’re going to have to face it now: if you don’t have enough savings put by, you’re much better off working for a few more years than trying to live off the State Pension alone. The current full State Pension is £221.20 a week (£11,502 a year), and a recent report suggested a retired person needs a minimum of £14,400 a year and £31,300 a year to live comfortably.

Working more years gives you time to add to your pension pot – and means you’re not eating into your pension savings while you’re still working, too, leaving more for when you do retire!

There are various advantages to working longer anyway:

• You are more likely to live longer. Seriously. This is particularly true for men. Staying in work – or at least staying active and interested in life (which often comes with having to go out to work) helps keep us healthy. A study by BUPA found that survival rates improve with increasing age at retirement for people from all socio-economic groups.
• It’s a great way to meet people. Again, getting out of the house and into contact with others will cut down on feelings of loneliness, isolation or worthlessness which can be common in retirement.
• You could find a whole new lease of life. You don’t have to carry on doing whatever job it is that you do now. This is a great time to find a new career path and do something you’ve always wanted to do. For women fifty-plus, being a doula, for example, is a great new career. For men fifty-plus, one idea is to get into adult education, teaching the skills you’ve been using (and are probably still using) for all your career.
• You get to earn more. Once you’re over 65 you have a higher tax threshold and you don’t pay National Insurance contributions. This means that you get to take home more actual, real money from your salary. The Government doesn’t pilfer so much of it!
• Putting off claiming your State Pension means you could get a larger weekly amount when you do take it. Your weekly pension increases by 5.8% for every year you defer.
• Alternatively, you can choose to take a cash lump sum with interest instead, as long as you have deferred it for more than a year.

Don’t think that working past retirement age means you have to stay in the 9-5 rat race. Lots of shops and small businesses offer part-time work.

• Finally, claim your State Pension at the same time as working to boost your income. You can also use your State Pension to keep the same amount of money coming in each month but reduce the hours you work. Check your State Pension age to find out when

Go to this section on Gov.uk to find out about other benefits of putting off retirement.

Saving When You’re Broke: The Importance of Investments

Now this is the important part. At this stage of your life you need to be creating a stable savings base. You do have time to invest in more risky, volatile investments that should bring in a decent return year-on-year (see below for more information on how to do that) but at this point you primarily need stability.

Saving when you’re broke means working out where you can make cuts in your existing expenditure, or finding new ways to earn money. Even saving a small amount each month quickly adds up! Keep reading for tips on how to earn more money when you’re over 50.

This means that you should be concentrating on putting regular amounts of money (however small) into savings accounts and probably into gilts too. Check out our article on investing when you’re 50+ for more details – or keep reading for the quick guide below.

FIRST:

If you have no extra money each week/month to put into a savings account: take a look at our article on 26 ways to save with simple changes to your spending habits.

THEN –

Set up a monthly standing order from your current account into a savings account: Even if it’s just £20 a month, it’s still something going into a savings scheme for you. Choosing a regular savings account is a good option; the best ones offer a 12-month fixed rate of about 5% interest and won’t allow withdrawals – a good way to stop you being tempted to dip into your money!

FINALLY –

Don’t forget about your ISA allowance: you have £20,000 to save tax-free every year so make the most of it! Read on for information about investing in a stocks and shares ISA.

P. S.

There’s also gilts: That’s government bonds to you and me. These are effectively loans to the government where they promise to pay a fixed amount of interest each year in return for borrowing your money to pay for… well, goodness knows what they’re using it for right now!

The point about gilts as an investment is that they are also stable, like savings accounts, and although (like savings accounts) they don’t give a huge return, at least you know that your money is in relatively safe hands.

It’s not going to go up and down wildly in the short term like the stock market can do, but you could make fairly decent returns. Read our article on gilts here.

Do You Receive Universal Credit?

If you’re in receipt of Universal Credit, you could be eligible for their Help to Save account. If you are, it’s one of the best ways to squirrel away some extra cash – and get up to £1200 FREE CASH topped up by the Government. Read our article about Help to Save to find out if it’s something that you’re eligible for and how to apply.

Invest for the Medium-Term

If you have decided to put off retirement until you’re about 70 then you have a decent amount of time for slightly riskier investments to grow.

A word of warning! You have to be careful here. Although you have a good few years for your investments to grow and to take in the ups and downs of more volatile markets than, say, savings accounts and gilts, as you’re not in your twenties any longer you need to make sure that only a relatively small percentage of your money is going into these riskier products.

Saving when you’re broke and over 50 means the majority of your money should go into the stable savings, particularly if you are close to, or well into, your sixties now.

Stocks and shares: It’s still worth looking at stocks and shares if you’re in your fifties. Use all or part of your ISA allowance to invest in stocks and shares ISAs. Invest in a nice, cheap, easy index-tracking fund (tracker) such as the Legal & General FTSE 100 or FTSE All Share index tracker.

These go up and down with the stock market according to a clever computer programme. Trackers don’t charge much in the way of management fees because they’re run by computer so you get to keep more of the profits.

Pensions: Your employer now has to offer a pension scheme by law. You’ll have been auto-enrolled if you meet the minimum requirements – make sure to check you’re taking this pension scheme if you can!

The Government tops up your pension contributions, and your savings are put into the pot before tax – unlike money you choose to save from your pay cheque.

If you don’t have access to a company pension scheme, such as if you’re self-employed, you could set up your own private pension or two. The best types of private pensions are either stakeholders (cheap, easy, open to anyone) or SIPPs, Self-Invested Personal Pension (rather cleverer but a great idea if you have the confidence).

You don’t have to put any money in a pension but as it’s a good idea to spread your money around a few different kinds of products, it’s worth considering pensions as one of them.

Do remember that there are whole chapters on investing in stocks and shares, gilts, bonds, pensions and savings accounts in Jasmine’s ebook ‘Beat the Banks’.

Pick Up Some Over-50s Extra Earners

It’s all very well investing your money if you have some cash to spare, but what can you do if you don’t? Luckily there are plenty of things that over-50s can do to make extra cash on the side to make saving when you’re broke possible.

Tutoring

Can you play an instrument? Speak another language? Or have specialist knowledge of science or maths? If so then you can make money by teaching high school, college or even university students. Here at Moneymagpie we know this is a good way to make money, and we have known people who have made up to £35 an hour by tutoring GCSE students.
Consider placing an advert in your local community such as on NextDoor, or with a specialist website like FindTutors. Using an online site like this to advertise your services also means you can check out how other tutors are pricing themselves so that you know what to charge.

Become a doula

A doula is a someone who is paid to help a woman through her pregnancy and during her first few months after the baby is born. You do not need any qualifications to become a doula, but to give yourself some credibility you may want to join up to a website or agency that has a good reputation, such as British Doulas or the Scottish Doula Network. To learn more about becoming a doula read our article here.

Rent your spare room

If your children have all moved out, gone to university or you simply have a lovely big house, then you can make some extra money by renting out your spare rooms. You don’t have to turn your house into a hotel or B&B, just clear some cupboard and fridge space and make room for another toothbrush in the bathroom. Lodgers don’t have the same protections as tenants living in let properties, so you don’t need to worry about squatters or whether you can end an agreement early with your tenant if it’s not working out.

You could rent to students during term time if you live near a university, or to commuters Monday to Fridays if you live in a big city. If you live in a desirable area you could also rent rooms to tourists during the summer or at Christmas.

Spareroom is a really easy site to use and their basic package is free, just place an advert and wait for people to contact you. You can select what age and profession you would like your tenant to be so people don’t waste your time applying if they do not fit your specification. Of course, you can also do this through Air BnB, but the fees are notoriously large and it means a very high turnover compared to taking in a lodger.

Renting a room means you can earn up to £7,500 per year tax-free. Couples share this allowance, so won’t get twice the allowance for the same property. You can’t use this scheme if you’ve converted part of your home into a separate annexe: it has to be used for lodgers sharing facilities with you such as kitchens and living areas.

Rent other parts of your home

Make money from renting other parts of your home! If you have a large garden that you don’t or can’t manage, consider renting it to a local greenfingers as an allotment space. Your driveway and garage also earn cash when you put them up for rent on JustPark, Parklet and your local version of Gumtree or NextDoor.

Finally, with the rise of remote workers comes a rise in ‘digital nomads’ and ‘vanlifers’. You could rent out your living room as a remote working space for people who are travelling – make sure you have a comfortable desk and chair, and fast internet, and you’ll make cash while having some company around. It’s a double-whammy if you look for people who live the ‘van life’ as they tour the country, as you could rent out your drive for their overnight parking as well as your spare room to work from.

Become a house sitter

House sitting is, basically, looking after someone’s home while they are away. You get to stay in a house; to keep it clean, tidy, take phone messages and collect post, perhaps look after pets, and sometimes house owners are willing to pay you to stay.

This is where the over 50s and 60s can cash in. Websites like Trustedhousesitters ONLY let mature people sign up to their websites, as they want to reassure their customers that their house sitters are reliable.

So, even if you aren’t being paid to look after a house, it’s a good way to save money if you want to go on holiday, as you will be saving yourself the cost of accommodation.

Trusted housesitters also have houses all over the world, not just in the UK. So if you fancy a holiday abroad, you could save yourselves a lot of money by offering to house sit.

Saving When You’re Broke: How to Find Easy Savings

There are also lots of things you can do day to day that will save you money in and around your home.

Switch (or ditch) the car

Trade in the family car for a smaller, more wallet-friendly model. You’ll save money on petrol and insurance that way too. If you’ve ever been a member of the armed forces or health services, you could also be entitled to a special discount on a new car! Remember to shop around for your insurance each year too – don’t just accept the premium rise of your existing provider, as it can be easy to knock up to a few hundred quid off with some comparison and neogtiating!

Or, you could be brave and ditch the car altogether. Over-50s get discounts on public transport and if you really need a car for something, you could rent one with a scheme like Zipcar or Enterprise Car Club for cities outside of London

Shopping

Using a price comparison website like MySupermarketCompare can save you big money on your weekly food shop. In fact, MySupermarket says that they can help you save an average of £18 a week by comparing the contents of your basket to other leading supermarket stores.

Just pick your preferred supermarket from a choice of Tesco, Asda, Sainsbury’s and Ocado and start shopping. As you add items to your basket, the website will let you know how much you could save by switching to a different brand or product.

As your basket grows, MySupermarket also keeps a running total of how much you are spending, and how much it would be costing you at the three other supermarkets. So if a shop in Tesco were £10 cheaper than Sainsbury’s you could switch trolleys – genius!

Saving When You’re Broke is Easy with Cashback sites

While we’re talking about shopping, consider signing up to cashback sites like Topcashback and Quidco.

These companies are paid to drive traffic to retailers’ websites. You snag a share of that payment when you visit the online store you want by going via your cashback site first. For example, if you want to order your Marks and Spencer Christmas turkey online, log into your Topcashback site, search Marks and Spencer, and click the link. It’ll take you to the M&S website where you just shop as normal.

The cashback comes into your account a few weeks later. If you do this throughout the year for all of your online shopping activity, you can easily rack up a few hundred pounds of cashback without trying! You can pay out to your bank account or use the cashback to buy vouchers to spend online.

Become a mystery shopper

Get paid to eat, drink, shop, and go to the cinema (yes, really!).

All you have to do is sign up online and you will be sent details of where your next assignment will be.

It is your job to check that the standard of service is up to scratch, and write a short report about your experience.

Other ways to save or make money

We have loads more great ideas in our article on money-makers for over-60s, which are all relevant for over-50s too.

Also, our entire Make Money section is full of all kinds of different ways to make money on the side or even use your hobby or interest to give you a full-time earner. Start with our 10 easy ways to make quick cash article and move on to whatever takes your fancy!

If Saving When You’re Broke Seems Impossible, Consider Equity Release

We’re not especially keen on equity release for most people here at Moneymagpie. Although the industry is much cleaner than it was, it’s still not the safest path to tread. In many cases you get nowhere near the value of your property and if you have children it does mean that their inheritance will be drastically reduced.

However, if you have no children or you have no other means of supporting your retirement, then equity release could be something you might consider for later on. Seriously, though, don’t get into it until you are at least 65. Before that time, you should be using other means to create a nest egg for yourself. Equity release is a last resort (you get more for your home the later you leave it, anyway).

Use a company that belongs to the Equity Release Council, the industry regulatory body. Read up on it for as long as it takes for you to really understand what it involves and get independent advice before you jump in.

*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 Help for over-50s: how to save if you’re broke appeared first on MoneyMagpie.

Cash ISA Changes

Innovative Finance ISA Changes

Capital Gains Changes

Energy Prices

Changes to Take-Home Pay

Childcare Support Changes

Pension Changes

Changes to Dividend Allowance

Household Bill Increases

Cash ISA Changes

One of the biggest financial changes we’ll see in the new tax year impacts anyone who wants to make the most of tax-free ISA savings. While the maximum amount you can pay in to all of your ISAs each year stays at £20,000 (£9,000 for Junior ISAs), there are a few important changes to these brilliant tax-free savings accounts.

Cash ISAs can now only be opened for those aged 18 and over, which has always been the case for Stocks and Shares ISAs.

One of the most significant changes is that you can now subscribe to (or rather, pay into) more than one of the same ISA type in each year. Previously, even if you held several Cash ISAs, for example, you had to choose one of them to pay into for that tax year. You can now pay into more than one of the same type. This is particularly handy if you’re trying to save different cash pots (such as one for a house deposit and one for a nest egg). The only ISA type you must only have one of is the Lifetime ISA.

Part of this change is that you also don’t need to ‘reapply’ for an existing ISA each tax year. In the past, if you had two Cash ISAs and paid into one (as the rules allowed), the other one would exist but need a ‘reapplication’ or renewal in new tax year. There’s no need to do this on your existing ISAs in the new tax year.

Finally, you can now internally transfer some of a Cash ISA into a new one. Up until now, if you opened a new Cash ISA and wanted to put money from a previous one in, you had to transfer the whole lot – but from April 6th, you can choose how much you want to transfer. Remember: it’s important that you transfer money between ISAs instead of withdrawing the amount, as doing that could prevent you from paying it back in thanks to the £20,000 limit. Transfers aren’t counted within that pay-in limit.

Innovative Finance ISA Changes

A less commonly known ISA, the Innovative Finance ISA allows you to invest in peer-to-peer lending opportunities and comes with a couple of reforms in the new tax year, too. First, Long-Term Asset Funds are now permitted investments in an IFISA, as long as they do not allow access to funds in 30 days or less.

Second, open-ended property funds are now allowed investments in an IFISA, if they have extended notice periods.

Capital Gains Changes

Two big financial changes lie ahead when it comes to Capital Gains tax.

First, the Capital Gains Allowance will be cut to £3,000 down from £6,000. This is a big blow to a lot of property owners who could have benefitted within the £6,000 limit – adding £300 on a CGT bill for a basic rate earner and £600 for higher rate earners.

However, the second change will be of interest to higher rate earners who own second properties. The previous CGT for a second property owned by a higher rate earner was a huge 28% – but from 6th April 2024, it’ll be 24%. For basic rate earners, this CGT remains at 18%.  (Standard capital gains tax on a primary property remain at 10% and 20% for basic and higher rate earners respectively).

Energy Prices

For the first time in what feels like an age, household energy bills are expected to drop. The Energy Price Cap drops by 12% from April, to £1690 (a reduction of £240). This is good news for those struggling with their bills – but keep an eye on your standing charges, as these don’t fall under the Energy Price Cap and may be set to rise, which could offset the average £20-a-month saving of the Price Cap.

Changes to Take-Home Pay

There will be two good-news financial changes to take-home pay from April 2024.

The National Minimum Wage will rise, benefitting low earners. For those over the age of 21, it will rise to £11.44 an hour, meaning an extra £1,856 a year for someone working 35 hours a week (meaning an annual salary of £20,820).

Something that will benefit even more people is the second National Insurance cut since 2024 began. If you earn between £12,750 and £50,270, your National Insurance contributions will drop to 8% (down from 10% in January and 12% in 2023). This will have a particularly noticeable impact for those earning above the median salary. For example, someone with an annual salary of £35,000 will be around £450 better off this tax year than the last.

National Insurance for self-employed people has changed, too. The rate for Class 4 National Insurance reduces to 6% (the same 2% decrease as for PAYE workers), and Class 2 National Insurance contributions will be completely abolished. To compare to the PAYE changes, this means a self-employed person on £35,000 a year will save about £850 compared to the previous tax year.

Childcare Support Changes

More people will be able to get Child Benefit this new tax year. If you earn between £50,000 and £80,000, you could be in for a pleasant surprise. The threshold is increasing from £50,000 to £60,000, so that means people who earn in that bracket will be due additional Child Benefit. For those earning £60,000 or above, you may now be eligible for Child Benefit when you previously weren’t, too. Remember this is based on household income, so it might be that both parents earning £50,000 will mean a household isn’t eligible, so make sure to check the details.

Another benefit that has changed is free childcare hours – but you must claim for them. Parents with a household income below £100,000 will get 15 free hours of childcare per term-time week for two-year-olds, instead of previously limiting to three-year-olds. However, those with children born in April 2022 or before must apply before March 31st to get the funding. If you’re reading this too late, don’t worry – you can apply again in September.

Pension Changes

Pension announcements are always one of the big financial changes we keep an eye on, as they often affect everybody in some way, even if you’re nowhere near pension age yet.

First: the Lifetime Allowance has been abolished. The previous maximum amount you could ever pay into your personal pension was a strangely specific £1,073,100. Now, two new allowances will replace the Lifetime Allowance.

The Lump Sum Allowance will mean you can only take a maximum of £268,275 tax-free from your pension, and then you’ll pay income tax when you take the rest. The second new allowance is the Lump Sum and Death Benefit Allowance, with a maximum of £1,073,100, which is the maximum tax-free amount you can pass on to your beneficiaries when you die.

The next big change is the State Pension 5% increase, boosting the annual income for a New State Pension recipient – someone who has been eligible to claim since April 2016 – who gets the full amount each week to £11,502.40 a year (£221.20 a week up from £203.85). Those on the ‘old’ State Pension (who claimed before April 2016) get a boost to £169.50 a week from £156.20.

Changes to Dividend Allowance

A blow to any company director or investor, the Dividend Allowance has been cut once again. This means that, from April, you can only receive £500 tax-free dividends, before paying dividend tax. This doesn’t include investments within a pension or ISA, though.

Household Bill Increases

The cost of living crisis continues as the biggest financial changes we’re going to see hit our pockets is the rise in household bills. This means that, even with changes such as the rise in National Minimum Wage and the cut to National Insurance, you might not see much benefit in real-terms as your household bills increase.

Council Tax rises will hit in April, with most increasing by the maximum 4.99%. This means a property in Band D could see their bill go up by £103 a year. If you’re on a low income, remember you might be able to get Council Tax Support so make sure you check your local authority website for more details.

Other bills are set to rise, too. You might have noticed that streamers are now offering ad-supported ‘cheaper’ subscriptions (that are still more expensive than last year’s cheapest option), while non-advert tiers rise even further. Disney+ is one example, which cost £79.99 in February 2023 but will now cost £129.99 for an annual subscription, while the TV License also rises from £159 a year to £169.50 a year.

For someone with Netflix, Disney, AppleTV, and Amazon Prime each month, the cheapest options will still mean a minimum outgoing of almost £30 a month.  One way around this is to rotate your streaming subscriptions on a monthly basis – choose one for each month and watch what you want, then cancel and pick up another service the next month. Keep an eye out for free trials, too – although these often are only available for new customers.

Your mobile phone company will have written to you recently, too – as they are permitted within your contract to raise the price each year in line with the RPI measure of inflation. As that is currently almost 9%, some providers (like O2 and Virgin Media) may increase some customer prices by that much for both phone and broadband contracts. This is a great time to get on the phone and haggle, though – even if you’re not quite at the end of your contract yet.

If you’re worried about how these financial changes will make the cost of living crisis harder for you, don’t panic. There are plenty of ways you can save money or make money on the side to top up your income – make sure you sign up to our weekly newsletter to get the latest money-savvy news!

The post Financial Changes Coming This April appeared first on MoneyMagpie.

• What is a Child Trust Fund?
• What is The Share Centre doing?
• How can your child be reunited with their account?

What is a Child Trust Fund?

CTFs are long-term tax-free savings accounts that were set up for every single child who was:

• Born between 1 September 2002 and 2 January 2011
• Born in the UK
• Not subject to immigration controls

Each account is worth up to £1,000 or sometimes even more. Around 6 million were created in total over the 9 year period, with a combined value of over £6 billion.

The problem is that over 1 million of these accounts are now classed as ‘addressee gone away’, meaning that the CTF’s owner is either unaware of their money or unable to access it. Yikes – imagine misplacing over £1 billion of young people’s money.

Even worse, a disproportionately large number of these ‘addressees gone away’ are those from the most disadvantaged of homes.

What is The Share Centre doing?

The problem, fortunately, has a solution. Working with The Share Foundation and the Tax-Incentivised Saving Association, The Share Centre is attempting to reunite each of these young people with their CTFs. Part of this campaign has been to send over 20,000 posters to head teachers around the country in order to raise awareness.

Gavin Oldham, Chairman of both The Share Centre and The Share Foundation, said:

“The Child Trust Fund was a significant initiative designed to improve social mobility, but unless the missing accounts are re-linked swiftly its impact will be lost. We are working urgently and closely with the Government and HM Revenue and Customs to re-link these accounts, most of which were ‘Revenue-allocated’ when first issued.

“Any young people who believe they could be affected are advised to visit this link here where they will be able to find out how to locate their Child Trust Fund account and guidance on next steps.”

How can your child be reunited with their account?

1. Find out where your Child Trust Fund account is held.

This can be done by filling in an online form on the HM Revenue and Customs website. You will need:

• To be the account owner or the child’s parent/legal guardian. If there is no such person registered for the child, enquiries should be directed to The Share Foundation.
• Your Government Gateway ID, which you will have if you have ever used any of the UK government’s online services. To create a new one, you will need your National Insurance number and proof of identity.

2. Contact your Child Trust Fund account provider

Once you know who to contact, do so directly by calling their customer service hotline and work with them to bring all the necessary details up to date. You can find a list of the main CTF providers here.

And that’s all! Feel free to leave comments in the section below.

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• Regular saving is the secret to long-term wealth
• Get rid of debts first before starting to save
• In light of the recent financial market problems, choose the ‘safest’ accounts with the best rates and start a monthly standing order

Step 1. Get rid of debts

If you have debts, other than those on 0% credit cards (or loans that you cannot pay off early without a penalty charge), then you have to pay those off before you start to save. It’s because the amount you get charged in interest on debts is nearly always more than the interest you would make on your savings. If you are in debt now, have a look at the articles in our Borrowing & Debt section first to find out how to get out of it in the quickest and cheapest way.

Step 2. Cut the cost of living

In order to save you need to free up some money each month. Firstly cut down your essential bills each month. Go to our comparison tables and find cheaper insurance (on everything from your car to your travel), cheaper utilities, cheaper phone and broadband and cheaper banking.

Then cut down on your general spending. If you don’t know where your money goes each month keep a spending diary for a few weeks and you’ll soon find out! Start off with just one thing that you will cut down on – perhaps you buy a coffee every morning on the way to work. Replace that with a cool flask of your own brew and you will save about £12.50 a week. Or bring sandwiches to work instead of buying them (save around £25). Or have one less takeaway a week. All these things add up and cutting back on them will free up a lot more money than you could imagine.

Step 3. Set up savings pots

Saving is for the short-term (investing is for the long-term and you can do that once you have set up a savings ‘safety net‘) and you can save for various things. However, one thing you must do is to set up a main ’safety net’ savings account. This is money you save up to cover you and your family if everything goes pear-shaped (you lose your job or get sick for example) and there’s no money coming in for a few months.

So this is what you should do:

1. Start putting money regularly into a high interest account which will be your ’safety net’ savings. Keep saving there until you have enough to cover you for three-six months if you don’t earn anything.
2. Set up another high interest account and call that your ‘big ticket’ account. This is where you will put a bit of money in each week or month to save up for big things like a new kitchen, a car, a good holiday and Christmas. In fact, you could set up a lot of different accounts for different goals if you like – nothing to stop you having a “Christmas savings account”, a “holiday savings account” and a “new kitchen savings account” etc.

Which are the best savings accounts? – Getting the right account

Once you’ve put your saving processes in place you need to get a high interest savings account to put all your money in. This sounds like a doddle. However with so many products on the market, it can be a confusing choice. Going for the highest rate isn’t always the answer. There are four main categories of savings account:

• Tax Free Savings

The first savings account everyone should get (after your savings safety net) is an ISA. These accounts are tax-free which means you do not pay tax on the interest you earn. From 6 April 2017 you can put up to £20,000 into an ISA. You can split this money between a cash ISA and a Stocks and Shares ISA any way you like.

You can get instant access cash ISAs. However you are only allowed to put in up to the amount at which the ISA allowance is set. This means if you put in £20,000 in April and then you take out £600, you can’t put it back in during that financial year as you have already exceeded your allowance.

You should always use up your ISA allowance first before opening any other savings accounts.

• Flexible Savings

The first, most basic high interest savings account is the flexible savings account. Flexible means you can put as much in and take as much out as you like. You can do it whenever you want, without having to give the bank notice.

If your funds are instant access, you will usually have a cash card that you can use to withdraw the money from an ATM. Internet accounts often don’t have cash cards, and you have to instead transfer your money into another account and then withdraw it. This can take up to three working days and so they are not called instant access. But you still can move your money around as you please – there’s just a slight delay until you get your hands on it.

To have flexibility with your savings, you have to say goodbye to the highest rates!

Regular Savings

Regular savings accounts are designed to help you put away a certain amount each month and earn interest on it. They are really good if you find yourself with some money left-over every month after you’ve paid all your bills.

With a regular savings account there will be a minimum amount you have to pay in each month and a maximum amount you are allowed to pay in. If you fail to make a payment there will be a penalty.

However, the banks will pay you well for this rigidity. The best rates for regular savings now are around the 3.00 – 4.00% AER mark. The only downside to regular savings is that the maximum deposit means you cannot save big amounts in these accounts.

• Fixed-Rate Savings

Fixed-rate savings offer juicy interest rates in exchange for keeping hold of your money for a fixed period of time. Over this period the interest rate at which you are paid is also fixed. The fixed-rate periods can be anything from six months to several years.

You can make a deposit when you first open the account and this money is then bound until the fixed-rate period comes to an end. This means you can’t touch it, whether it’s to make a withdrawal or just add to it.

Because the banks can use money to invest elsewhere and then make themselves money, they will pay you a good rate. The highest bonds around at the moment are offering around 5% AER.

However, there is an element of risk with fixed-rate accounts. If you take out an account and then interest rates fall, you are laughing as you retain your high rate. However, if you take out an account and then rates rise, you will still be lumbered with your low rate.

For more information about fixed-rate savings click here.

Other types of savings accounts that can come under these four headings are:

• Internet-only accounts

These are accounts that can only be accessed online. This means that all deposits and withdrawals have to be done electronically, via your other bank accounts. There are many different types of savings accounts available online. Because they do not have the overheads of running high street branches they often offer very competitive rates.

• Monthly Income Accounts

These are accounts that pay interest monthly, as opposed to annually or on account maturity. Different providers offer different levels of flexibility for their monthly accounts. You can get both instant and limited access accounts. For more about monthly savings accounts click here.

• Notice Savings Accounts

Notice savings accounts require you to give notice before making withdrawals. Standard notice periods are seven, 14, 30, 60 and 90 days. If you fail to give this much notice there are penalties, like losing some interest.

Although you have to give notice, this doesn’t mean that these accounts are not flexible. You can add and withdraw as much as you would like, you just need to let your bank know in advance.

Which is right for me?

The savings account that is suited to your finance depends on what you want to do with your money. Do you want to be able to access your money quickly or do you want the temptation to spend to be taken away? Do you want to be able to make quick withdrawals or are you happy to give notice? Do you want to save regularly or just here and there?

The important thing is to get the market leader for the type of account that is best for you.

Our comparison tool helps you compare different rates and see what suits best.

Things to remember

• Keep an eye on your accounts

Keep an eye on your savings accounts. Financial companies often drop their rates without warning, so if this happens to you, move to a better account.

• Protect your savings

Also, if you have more than £85,000 in savings you might consider splitting your money into different accounts with different banks as only the first £85,000 of your money is fully covered and fully refundable if the bank fails.

• Always calculate the tax

Remember to take tax into account when calculating how much you will make on your savings. Any money you make on your savings will be taxed by the government so the interest rate you see is usually not quite the amount of money you will make in the long-run, unless you have wrapped your savings in an ISA. See our comparison pages for the best cash Isa rates.

National Savings & Investments also have tax-free savings. They are a particularly safe place to put your money as they are Government-backed, but their interest rates tend to be low.

• Keep your interest in the account

What to do now…

Open up at least one high-interest savings account now!

The financial markets are unstable at the moment and we are all concerned about putting our savings into a bank that then goes bust.

First what you need to know is that the government will guarantee the savings you invest in each individual bank or building society up to £85,000. That means that even if you have £85,000 in one bank and another £85,000 in a different bank, your full £170,000 will be covered. However if you have £170,000 in one bank, only £85,000 is covered.

The only drawback with this compensation scheme is that you will have to wait for the compensation to come through and during this period your money won’t be earning interest.

So if you need your money short-term then you should invest in a ’safer’ bank – see the Moneymagpie guide to safe investment here.

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The post Saving: Best savings accounts and how to get started appeared first on MoneyMagpie.

But there’s always a catch isn’t there? The catch now is that with this extra interest you could easily be caught in the trap of savings tax. Here are the facts. You may like to move some of your cash before it gets taxed.

• What are the tax rates?
• How much tax will you have to pay on your savings?
• What counts towards the personal savings allowance?
• How to cut down on tax

What are the tax rates?

The tax rates that apply to savings income depend on what income tax you pay generally.

If your taxable savings income falls within the basic rate band after you have paid tax on your salary, benefits, rental income etc, then you will normally pay tax at 20%.

The basic rate band for 2023/24 is £37,700, which means that you’ll probably pay basic rate tax up to £50,270. After this higher rate tax of 40% is payable and the Additional rate of 45% above £125,140 (Scottish rates are different).

However, the ‘personal savings allowance’ means

• Basic rate taxpayers can earn £1,000 of interest in 2023/24 before paying tax
• Higher rate taxpayers have a lower allowance of £500.
• Additional rate taxpayers don’t receive any personal savings allowance.
• There is also an extra ‘starting rate’ for savings, which is a 0% rate of income tax for savings income of up to £5,000 for those with taxable income below £17,570 in 2023/24. You’ll only get the full starting rate amount if your income is up to the personal allowance of £12,570.

How much tax will you have to pay on your savings?

Rob Morgan of investment platform Charles Stanley says that “some people do not realise that if your income from savings and investments is over £10,000 you automatically need to register for Self Assessment. Others will have to arrange to pay tax on their savings that fall outside of the various allowances.”

For many people this can done automatically. If you’re employed or you get a pension, HMRC will work out how much interest you’ll get and change your tax code.

If you’re not employed, do not get a pension or do not complete Self Assessment, your bank or building society will tell HMRC how much interest you received at the end of the year. HMRC will then tell you if you need to pay tax and how to pay it.

What counts towards the personal savings allowance?

Income from certain investments can count towards the allowance including

• unit trusts open-ended investment companies where income is classed as interest rather than dividends,
• government bonds (gilts),
• corporate bonds,
• purchased life annuities
• some life insurance contracts.

However, savings and interest-bearing investments in tax-free accounts like Individual Savings Accounts (ISAs) and some National Savings and Investments accounts do not count towards the allowance.

Interest on fixed savings accounts

It’s worth knowing that if you opt for a fixed savings account with a term longer than one year, you’re taxed at the point you earn interest.

For example, say you opt for a two-year fixed savings account that pays interest at maturity  (so at the end of the 2nd year). The tax you pay will depend on the interest paid out to you after 24 months.

How to cut down on tax

Really the best way is to put as much of your savings and investments as possible into ISAs and pensions in order to cut down your tax liability.

You can put up to £40,000 a year into pensions and up to £20,000 a year into ISAs.

Ideally ISA and pension money should be in stocks and shares as they tend to do best in the long-term. But as Cash is doing well right now you could open Cash ISAs instead for the moment and then move them over to equities once the interest rates go down (as they are likely to do at some point).

NS&I did have some market-beating savings accounts until recently but they were clearly too popular and were pulled fairly quickly after being introduced. However, it’s worth looking at the rates they offer currently to see if, with the tax advantage, they would be good for some of your cash savings at least.

The post Watch out. Good savings rates could tip you into extra tax! appeared first on MoneyMagpie.

In an ideal world you’d have three months of compulsory spending stashed away for a rainy day – those unforeseen events and emergencies that like making a surprise dent in your dosh. 

The Bank of England has held the base rate of interest at 5.25% this month (Sept) after 14 rises on the trot, to try and curb inflation. 

After a decade of paltry rates, savers now have choice if they want to get more from their money. 

A lot depends on how quickly you might need access to your cash as to whether you put it into savings accounts, ISAs or a variety of investments. 

A savings account simply allows you to earn interest on money you put in.  Interest is tax free and most people won’t pay any tax on it at all.  Basic rate tax payers can earn £1000 per year and higher rate taxpayers £500. 

We’ve done our research to put together some of the best options out there, but click on the links and read all of the terms and conditions really carefully before committing, because everyone’s needs are different. 

Also make sure that your account is covered by the FSCS Scheme which protects your savings up to £85,000. 

Best Easy-Access Accounts: 

Like the name suggests, you can save, get interest and withdraw money whenever you want, but the rates are variable and because they can go up or down, check regularly what providers are offering so you get the best deal. 

• Leeds Building Society  pay the top rate in this category at 5.1% (Min £1,000) and you can take out money as often as you need.  But it will mature on December 1 2024 so you’ll then need to transfer your deposit to a different account or it will be moved into a maturity account which usually pays a very low interest rate. 

Those without maturity dates do have variable interest rates and in this financial climate, who knows how the rate might change in a couple of years. 

• Paragon Bank, offer interest rates of 5.05% on deposits between £1,000 and £500,000 with a maximum of two withdrawals per year, but the rate would drop to 1.5% from the third onwards.

• Secure Trust Bank, are slightly lower at 5.03% for deposits between £1000 and £85000 with interest being paid monthly.
  

• Monument Bank, also pay 5.03% monthly for deposits between £25,000 and £400,000.
  

• Shawbrook Bank, pay 5.02%either monthly or annually on savings between £1000 and £85000.  There is a minimum of £500 per withdrawal and requests for money must be received by 2.30pm to get funds on the next working day.
  

• Kent Reliance, accept deposits from £1000 to £1 million and pay 5.01% interest monthly or annually.

• Post Office,  accept savings from £1 to £2 million with their 4.7% interest account. 
• Ford Money,  offer a flexible saver with 4.95% variable interest yearly, 4.84% monthly.  You need a minimum of £1and withdrawals are permitted.

• If you are a Santander Edge current account holder or even plan to open one you can earn 7% on up to £4,000 and have unlimited withdrawals.  The account does have a £3 per month fee so look into it carefully before deciding.

• There’s also the Barclays Rainy Day Saver, which pays 5.12% on deposits of £1 to £5,000 but is for Barclays Blue Reward customers only.  There is a savings goal app to help you track your progress. 

Regular Savings Accounts: 

These tend to offer better interest rates but you do have to commit to saving a minimum amount every month.  You also have to hold another product from the same provider, more often than not, a current account.  The idea being that you can fund the regular saver by a standing order from the linked account. 

• Nationwide Flex Regular Saver, Interest rate is 8%, variable for one year with a maximum £200 a month deposit.  You are allowed three penalty free withdrawals a year and you can skip months if you are finding times are tough.

• Skipton Building Society, they are offering a one year fixed rate of 7.5% but you have to have been a member since before May 31, 2023.  You can save up to £250 a month and skip months if needed. You can’t withdraw part of your balance but you can close your account at anytime and withdraw the full balance. 
  

• First Direct, have 7% fixed for one year with a maximum £300 a month deposit with a minimum £25 a month deposit required.  You will face penalties if you withdraw money or close the account early.  So you need to be sure you won’t want to take the cash out.

• Yorkshire Building Society, also offer 7% although it is variable for one year.  You can save a maximum of £500 per month and you are allowed one withdrawal without penalties.
  

• Natwest/RBS  Interest Rate: 6.17% variable on up to £5,000 with a maximum £150 a month deposit.  Penalty free withdrawal. 

Fixed Notice Savings Accounts: 

With these accounts you have to give notice when you want to access your money.  That period can vary from 30 days up to 120 days, although beware and read the small print because some accounts require notice of 6 months to a year so don’t be caught out. 

These offer rates above the easy access and do stop impulsive withdrawals  

• Our choices are Cynergy Bank,  which offers a relatively high rate of 5.55% (AER variable) with 120 days notice.  You can deposit between £500 and £1 million.  If you give 95 days notice the interest rate falls to 5.5%. 
• Monument Bank offers 5.26% for deposits between £25,000 and £400,000 with 60 days notice or 5.15% with 35 days notice.  Interest is paid monthly.
• West Brom Building Society, offers 5.25% on a 60 day notice account for deposits of between £1 and £1 million.  

If you are a low-income worker then you can still save with a government scheme which offers a 50% savings bonus – called Help To Save –check out our detailed guide here. 

It gives earners claiming universal credit or working tax credit a chance to save between £1 and £50 a month but you don’t have to save every month.  At the end of 2 and 4 years, you’re paid a 50% bonus up to a maximum £1200.  It is easy to access and you can make withdrawals when you need them.  To qualify you need to be a UK resident. 

One last option

Finally, there is one savings account we like that does keep up with inflation although it doesn’t give you interest.  Tallymoney, www.tallymoney.com It  keeps your money in line with inflation by basing the whole account on gold. Historically gold has generally kept up with, and sometimes even outstripped, inflation, so money that is held in gold is more likely to hold its value and keep up with the rising cost of living than pounds and pence. 

With Tallymoney you transfer cash into the account then get a card to use in shops to buy anything from a coffee to a car – whatever you’d normally buy with a credit or debit card. 

It’s great to use abroad too as there’s no foreign exchange charge – you’re just paying with gold even if it’s in dollars or euros or yen at the time. 

The account does charge a fee – 0.9% a year – and there’s a small charge to set up the account at the start (£19) but other than that it is a solid alternative to savings accounts in banks, and better for keeping up with inflation. 

more useful reading

For more money management help and advice on how to look after your savings, check out more of our articles here:

• Protecting Your Savings From Mass Money Printing
• The Best Standalone Savings Apps in 2022
• Savings: Notice and No-Notice Savings Accounts

Disclaimer: Information is true at the time of publication. 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 Best Easy Access Savings Accounts in Winter 2023 appeared first on MoneyMagpie.

“Inflation has fallen a lot in recent months, and we think it will continue to do so,” said Bank governor Andrew Bailey.

There were also “increasing signs” that higher rates were starting to hurt the UK economy, the Bank said.

Jason Ferrando, CEO of easyMoney sees this altruistic inference of the actions as negligible:

“Yet another base rate increase may have been viewed as overkill due to the fact that inflation has started to ease in recent months, but it’s fair to say that the job is far from done and so many will argue that a freeze perhaps wasn’t the right path to take today.

We’re yet to see prices actually fall and it’s simply the speed of increase that has reduced. So it would be a shame for the Bank of England to fall asleep at the wheel now, just as they were starting to make some progress.”

Director of Benham and Reeves, Marc von Grundherr, commented: “Today’s freeze will be a small victory for the nation’s homebuyers who have seen the financial goal posts move constantly in recent months. But despite rates remaining unchanged there will still be a real worry for those coming to the end of a fixed rate term, having previously locked in at a relatively affordable rate when they first purchased. 

When their mortgage term does expire, they are likely to find that the cost of their monthly repayments has risen considerably and this is really the last thing anyone wants to contend with, not only with the current cost of living, but with Christmas just around the corner.”

Does this mean we are out of the woods?

It is too soon to say. Further tightening has been not ruled out if inflation remains persistently high.

CEO of MoneyMgapie, Jasmine Birtles, says:

“The Bank of England assures us that inflation will be down to 2% by 2025, or even earlier, but they are been consistently wrong in their predictions for the last few years, so I wouldn’t bet on it!

“It’s quite possible that inflation will come down gradually over the next year or so but there are a lot of imponderables, including the price of oil which is currently near $100 a barrel, the increase in fuel costs, the potential for food prices to go up because of Ukraine and the massive potential for harm of China imploding as it seems to be doing right now. All of these could mean that inflation goes up and interest rates follow.

“It’s a wait-and-see time.”

Mortgages

Danni Hewson, head of financial analysis at AJ Bell, comments on the latest Bank of England interest rate decision:

“For millions of homeowners who’ve already seen their mortgage payments increase or the half a million facing a hike in the run up to Christmas, today’s decision will be cold comfort.

“Costs have skyrocketed as ultra-low rates were left in the rear-view mirror and though competition is gradually returning to the mortgage market and the number of products available has increased*, those coming off fixed rates are facing a big cost of mortgage shock.

“A £100,000 loan taken out in September 2021 would have cost £443 in monthly repayments. The exact same borrowing today on an average two-year fix comes in at £688 a month.**

“Even factoring in some capital repayment and assuming they could secure the best two-year fix (5.61%), repayments would still be £584 on the £94,012 loan and there are sizeable products fees for that mortgage.

“For mortgage holders who chose not to fix but instead have endured the punishing standard variable rate which topped a record breaking 8.09% at the start of September, there is hope that locking into a new fix could start to look more attractive following today’s decision

“Markets think the peak has been reached with over 70% anticipating another hold at the next meeting in November. But anyone hoping that the base rate will make a swift return from whence it came is going to be sorely disappointed, as rates are expected to remain high for some time to come.”

Savings

There has been better news for savers as under pressure banks have begun offering competitive options:

• Best easy access account: 5.10%
• Best one year fixed rate bond: 6.2% (NS&I)
• Best notice accounts: 5.35% (90 days’ notice)
• By comparison, at the start of December 2021 the top easy access account was 0.75% and came with some catches regarding withdrawals*

The post Interest Rates Freeze after 14 Consecutive Rises appeared first on MoneyMagpie.

What does this mean?

It does mean that The Bank of England may not increase interest rates any further tomorrow, which comes as a surprise to world economists. Even Jeremy Hunt had predicted a “blip” in the downward path for inflation fuelled by higher petrol and diesel prices.

The surprise fall in the inflation rate to its lowest level since February last year confounded City expectations for a modest increase to 7%, so it might be that our Bank of England base rate might stay at 5.25% for another month at least. Or, if it is put up to 5.5% – as has been widely expected – that could be the peak for a while.

Does this mean things will get financially easier?

Sadly, this reduction in the inflation rate doesn’t mean that prices are falling, only that they are rising at a slower pace. While the rate of increase for the cost of food and drink cooled sharply, prices were still 13.6% higher in August compared with a year earlier, down from a peak annual rate of about 19% earlier this year.

Currently oil is $100 a barrel, twice the price that it was a year or so ago. This affects the price of petrol and diesel which has a knock-on effect on the price of pretty much any goods and services that involve transport.

Danni Hewson of AJ Bell said: “Although inflation is falling, that doesn’t mean prices are coming down, and if the Bank of England has grounds to at least skip this rate hike that’s because cracks are beginning to form.

 “This winter will still be incredibly tough for millions of households and if it’s a long, cold winter, what had been difficult choices last year may yet become impossible.”

The ONS report said the “largest impact on food and drink inflation was from milk, cheese, and eggs, where prices fell sharply between July and August but was still up by about 15% compared with a year ago. The cost of vegetables, as well as fresh, chilled and frozen fish and seafood, also fell on the month.”

Let’s remember that even with this drop in rates, the UK remains an international outlier, with the highest inflation rate among all G7 economies.

What the experts say

Rachel Reeves, Labour’s shadow chancellor, said: “The prime minister is too weak to turn things around, while his predecessor Liz Truss continues to call for the same policies that crashed the economy this time last year.

“The Conservatives have wreaked havoc and working people are paying the price.”

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