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Reading Time | < 1 min 22 Apr 2016

Pension annual allowance reduced

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People saving towards their pension could miss out on the tax relief due to confusion around the new pensions tapered annual allowance, according to the Alliance Trust Savings.

From 6 April 2016, people with adjusted income over £150,000 will see their annual allowance reduced by £1 for every £2 of excess income, subject to a maximum reduction of £30,000.

People with adjusted income of £210,000 or more will have their annual allowance reduced down to the minimum of £10,000 for that tax year.

Additional rate taxpayers affected by the tapered allowance will be able to carry forward any unused allowance from the previous 3 years to increase their tax relief.

For example, an individual earning £210,000 or more making a contribution of £8,000 will benefit from a £2,000 basic rate tax relief, giving a gross payment into their pension of £10,000.

This will include a further £2,500 tax relief through self-assessment as their top rate of income tax is 45%.

Brian Davidson, senior pensions proposition manager at Alliance Trust Savings, said:

“The tax rules around pensions can be complex and with so much radical change to pensions over the last few years, some savers could easily miss out on tax relief in the new tax year. When the unclaimed tax relief could be as high as £58,500, it can make a substantial difference to retirement savings.

“When people realise that they are affected by the tapered annual allowance they could be forgiven for assuming that the carry forward rules will not apply which could be a costly error.”

Talk to us today to discuss your retirement planning.

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Reading Time | < 1 min 21 Apr 2016

‘Granny flat’ exempt from SDLT surcharge

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Annexes for older relatives (colloquially known as “granny flats”) will be exempt from the new stamp duty land tax (SDLT) when applied to purchasing a second home.

The government announced the change following the introduction of a 3% SDLT surcharge on additional property sales, but will reconsider the rules in the upcoming Finance Bill in July for anyone buying a home that includes a qualifying annex.

Any annex that is valued at less than one third of the total property value will no longer qualify for the extra charge.

New rates for SDLT on purchases of additional residential properties such as second homes and buy-to-let properties came into force on 1 April 2016. 

The higher rates will be a 3% surcharge above the current SDLT rates:

Thresholds Existing SDLT rates New SDLT rates
£0 - £125,000 0% 3%
£125,001 - £250,000 2% 5%
£250,001 - £925,000 5% 8%
£925,001 - £1,500,000 10% 13%
Over £1,500,000 12% 15%

David Gauke, the financial secretary to the Treasury, told the House of Commons:

“I have been made aware that the Bill as drafted might lead to some main houses with an annexe for older relatives attracting the higher rates of SDLT intended to apply to additional properties.

“I am happy to reassure the House that that is not our intention and the government will table an amendment in Committee to correct the error and ensure fair treatment for annexes”

Talk to us today to found out more on SDLT.

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Reading Time | 3 mins 20 Apr 2016

Warranty & Indemnity Insurance – Q&A

Reading Time • 3 minsWarranty and Indemnity (“W&I”) insurance is one of the many risk management options available to those carrying out merger and acquisition type transactions. We have seen an increase in the use of W&I insurance on transactions that we have worked on and more generally in the lower mid-market.
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Reading Time | < 1 min 20 Apr 2016

Firms cutting staff perks to fund National Living Wage

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Chancellor George Osborne has warned businesses on cutting staff perks and overtime pay rates to cover the costs of the national living wage (NLW).

The chancellor was responding to reports on employers taking action to fund NLW including reducing overtime rates, lunch breaks and removing staff discounts. 

Speaking on ITV’s The Agenda, Osborne stated that employers should be “more careful about their reputation and much more aware of their social responsibility to their workforce.”

The NLW came into force on 1 April 2016, setting the new wage of £7.20 an hour for workers aged 25 and over.

Charles Cotton, performance and reward adviser at the CIPD, said he had sympathy for employers struggling to meet the new NLW, especially smaller companies: 

“This was sort of sprung on employers – they only had about 12 months to prepare, and it’s an additional cost on top of the apprenticeship levy and auto-enrolment. I would have liked to have seen some form of government help to manage the costs, especially for smaller firms.”

However, Cotton added that with wages reaching up to £9 by 2020, all employers should “start seeing staff payroll as an investment rather than a cost. Axing benefits that enjoyed low-take up and focusing on productivity would be a more sustainable way to address cost issues.”

Talk to us today to discuss the NLW.

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Reading Time | < 1 min 19 Apr 2016

ABI seeks to simplify pension language for customers

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A new pensions language guide has been launched by the Association of British Insurers (ABI) to help reduce the level of jargon that may be impacting an individual’s ability to make the best decision regarding their pension pots. 

The guide aims to make pensions terminology simple and consistent in order to help people better understand their retirement options.

Research on current terminology by Money Advice Service and ComRes found:

  • ‘flexi-access’ drawdown and ‘uncrystallised’ pension funds are confusing terms and should be removed
  • terms ‘taking cash’ or ‘chunks’ are seen as informal
  • tax and fees should be outlined upfront
  • people want pensions language to help improve their financial management by encouraging them to take responsibility.

Known as the ‘Making Retirement Choices Clear’ guide, ABI has proposed retirement options to be explained as:

  • keeping pension savings where they are
  • taking your whole pension pot in one go
  • taking your pension pot as a number of lump sums
  • flexible retirement income
  • guaranteed income for life
  • choosing more than one option and mixing them.

ABI Director of Policy, Long Term Savings and Protection, Dr Yvonne Braun, said:

“This guide to making retirement choices clear could make a real difference by helping people to better understand their options. But we need the wider sector to contribute to the consultation and implement the guide so that simple language can be used consistently across the whole market and by all those talking to people about their retirement income options.”

Talk to us today to discuss retirement planning.

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Reading Time | < 1 min 18 Apr 2016

Data breaching risk underestimated by SMEs

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Government figures show that data breaching costs SMEs an average of £310,800, according to research by Experian UK.

The businesses surveyed estimated the average cost to be £179,990, a shortfall of over £130,000.

Almost a third of SMEs don’t have a data breach response in place, while only 29% of businesses with plans in place update them quarterly.

SMEs are underestimating the costs associated with data breaching which could damage reputation and trust for both business and consumers.

95% of consumers say they’d take action if their personal data was stolen, while 64% would discourage from using SMEs services following a data breach.

The Institute of Chartered Accountants in England and Wales (ICAEW) has identified five most common cyber attacks faced by SMEs:

  • phishing  - gaining sensitive information while posing as a trustworthy contact
  • ransomware – encrypting data and extort a ransom to release an unlock code
  • insider threat – deliberate or careless leaking of documents
  • hacking – targeting SMEs to gain valuable information e.g. bank account, credit card details
  • data leakage – portable storage devices being targets for data thieves.

Jim Steve, head of data breach at Experian UK, said:

“With high profile data breaches becoming an almost-monthly occurrence, and looming European cyber legislation that could enforce huge penalty’s, it is important that companies of all sizes to expect the unexpected and ensure they have plans in place that mitigate damage to their customers – and, ultimately, their reputation.”

Talk to us today to discuss about protecting your business.

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Reading Time | < 1 min 15 Apr 2016

HMRC tax fraud strategy criticised by committee

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HMRC is not doing enough to tackle tax fraud, according to a report by the Public Accounts Committee (PAC).

Findings show that tax fraud is creating losses of around £16 billion a year, almost half of the £34 billion tax gap. 

The level of tax fraud losses has remained constant over the last 5 years – accounting 3% of all tax liabilities.

The PAC has criticised the lack of strategy for dealing with tax fraud, describing the department’s reporting of its own performance as “too confusing“ and unclear.

Meg Hillier MP, chair of the PAC, said:

"The scale of tax fraud, both in cash terms and as a proportion of uncollected tax, demonstrates just how vital it is for HMRC to bring focus to its efforts in this area.

“Honest taxpayers rightly expect a tax system that works fairly for all and any perception that this is not the case undermines the public's trust in that system. Its credibility is at risk.

“The department must be far clearer with Parliament and the public about its strategy for combating tax fraud and the impact of that strategy on the tax gap. To achieve this it needs a better grasp of its own work.”

Talk to us today to discuss your tax obligations.

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Reading Time | < 1 min 14 Apr 2016

Flexible working key factor in retaining employees

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28% of working adults cite flexible working as a key factor in remaining with their current employer.

The Chartered Institute of Personnel and Development’s (CIPD) Employee Outlook April 2016 report surveyed 1,051 employees found that 54% have achieved a better work-life balance from flexible working.

29% reported that flexible working has helped them reduce the amount of stress and pressure they feel; while 25% said being able to work flexible hours has enabled them to be more productive and pursue personal interests outside of work.

CIPD also found:

  • 23% said that flexible working has helped reduce the amount of time spent commuting
  • 22% said it has enable them to manage childcare responsibilities
  • most common flexible work provided by employers include part-time (62%), flexi-time (34%) and working from home (24%).

Obstacles to employers providing flexible working arrangements to workers were also identified, with 27% based on the nature of work with their employer, 15% on negative attitudes among senior managers and attitudes towards line managers and supervisors.

David D’Souza, head of CIPD London, said:

“Flexible workers are happier workers but there is still far too much focus on traditional nine-to-five work cultures and an on-going challenge of businesses placing too much value on time spent at the desk and not enough on people’s actual outputs.”

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Reading Time | < 1 min 13 Apr 2016

Consumers failing to identify signs of pension fraud

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88% of people fail to identify common warning signs of pension fraud, according to a report by Citizens Advice. 

There is a high prevalence of pension scam activity with regards to phone calls, posts and emails. 10.9 million people received unsolicited contact about their pension in the last year.

76% of people said they are confident in identifying a pension scam but just 12% were able to do so when a scam was presented to them.

Citizens Advice also found that scammers are changing their tactics, offering high rewards and advice into tricking people out of their pension pots.

64% said they would consider an unsolicited offer and many would only consult informal sources if the approach was authentic. 

Citizens Advice has published guidance on how to identify pension fraud:

  • ignore contacts that are out of the ordinary, whether in person, online, or by phone
  • avoid promotional offers with more than 8% return on pension investment
  • avoid any offers to access your pension before 55
  • watch out for overseas based investments
  • check the Financial Conduct Authority register to identify if the company approach is legitimate
  • check the FCA ScamSmart warning list for known investment scams
  • contact current pension provider when transferring a pension to a new scheme.

Gillian Guy, chief executive of Citizens Advice said:

“It’s difficult for consumers to stay ahead of pension scams as they evolve. Many scammers use professional looking websites and leaflets to fool their victims into signing up to free pensions advice or cold call with offers of unusually high investment returns.”

Talk to us today to discuss about your retirement.

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