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Alistair Darling gives his third Budget speech.
ISAs From next month, the annual ISA limit will rise from £7,200 to £10,200 and ISA limits will increase annually in line with inflation.
Special points of interest:
Budget Announcements Equity Release Schemes Crossword Contact details Nest Update
Stamp duty The stamp duty limit for first-time buyers will be doubled from midnight 24th March 2010 to £250,000 for next two years, to be funded through an increase in Stamp Duty to 5% for houses worth over £1m from April 2011.
Alcohol Duty on cider will increase by 10% above inflation from midnight on Sunday. Duty on beer, wine and spirits will increase as planned from midnight on Sunday.
Business Business rates will be cut for one year from October, meaning a tax reduction for over 500,000 small businesses in England. Small businesses will be helped to expand by doubling the annual investment allowance to £100,000.
March saw Alistair Darling deliver his final Budget before the general election. However much of what the Chancellor announced could be unpicked, reversed, amended, or delayed should the Conservatives gain power at the Election either with a majority, or as a minority Government. The Election is expected to take place in six weeks, and the Tories have said they would have "an emergency Budget" within seven weeks of that - so it is worth bearing in mind that the measures below could be valid for barely three months.
Lifetime Financial Services Ltd
THE 2010 BUDGET BULLETIN
New changes announced (that we didn't know about) include: " A doubling of the "lifetime limit" for entrepreneurs' relief from £1m to £2m. " Lots more (fairly intricate) anti-avoidance provisions. " A freezing of the IHT nil rate band at £325,000 for four years. " A doubling of the Annual Investment Allowance delivering a 100% corporation tax " deduction for qualifying purchases of plant and machinery.
We didn't get any change to the CGT flat rate of 18%.
The following is what we already knew about: " The continued removal of higher rate tax relief for pension contributions for those " with relevant income of £130,000 or more through the imposition of a special " allowance charge. " The introduction, from 2010/11, of a 50% income tax rate (and 42.5% rate on " dividends) for those with taxable income of £150,000 or more. " The gradual reduction, from 2010/11, of the basic personal allowance for those with " an income over £100,000. " The increase of the trust tax rate to 50% and 42.5% for dividends - regardless of trust " income levels. " The increase of the annual ISA allowance to £10,200 from 2010/11 for all qualifying " individuals. " The retention of the small companies' corporation tax at 21% for another year.
There have been no significant changes in this Budget Statement yesterday other than changes to stamp duty. First time buyers won't pay stamp duty on properties under £250,000, and a new rate of 5 per cent of Stamp Duty is set for £1 million properties. Inheritance Tax is frozen at previous levels, i.e. 40% tax on estate value in excess of £325,000. For married couples, unused relief on the first death is carried over to the surviving spouse in proportion to the amount used at the first death and based on the allowance at time of the first death. All personal and age-related Income Tax allowances are to be frozen in 2010-11. See up-to-date tables enclosed. From April 2010 a new rate of Income Tax of 50 per cent will apply to income over £150,000. The UK currently faces a very real and pressing savings gap, and the Government yesterday missed the opportunity to do something about it. While we welcome the increased ISA limit and commitment to index-linking, we do not believe that this in itself will encourage new saving from those who most need to save. The government must do much more to foster a real savings culture amongst all British people . We were therefore disappointed that higher-rate tax relief restrictions on pension contributions will remain, having a negative impact on pensions saving in the UK, and sending the wrong message to those who are saving for retirement. Today's budget only tells half the story for the future of the economy. The real question of how to address the current Government deficit will only be tackled after the election, when there will be a spending review (should Labour win) or an emergency budget (should the Tories win.)
We will be bringing you information about other matters which we think may be relevant to you but if you have a specific query or just want a full report (69 pages) please call.
An Information Series part 1.
EQUITY RELEASE SCHEMES
Over the next four Newsletters I will be including information regarding Equity Release schemes. I will explain the different schemes available, how you can qualify, and important advice, finally a question and answer sheet will help answer any niggling queries you have on this important subject. Please forward any questions you wish answered to me, Celia Plowden, Should you require assistance in the meantime, please telephone 01424 772444
With a lifetime mortgage you: • take out a loan that is secured on your home (that is, the lender The equity (value) you have in knows they can get their money your home is its open market value less any mortgage or other back by selling your home); • continue to own your home, aldebt held against it. though you will have to pay back Equity release is a way of getting cash from the value of your the mortgage on it; home without having to move out • repay the mortgage from the proceeds of the sale of your of it. There are two main types of eq- home when you die, or if you move out of it (perhaps to a care uity release scheme – lifetime mortgages and home reversions. home). With an equity release scheme, you: • have to be over a certain age (typically over 50) and own your own home; • can get a cash lump sum, a regular income, or both, to use as you wish; • continue to live in your home; and • continue to be responsible for maintaining your home. With a home reversion you: • sell all or part of your home to a reversion company or an individual; • no longer own your home, but continue to live there as a tenant of the reversion company or individual. The home is sold when you die, or if you move out of it (perhaps to a care home). How do you get your money? You will normally get your money
as a cash lump sum to use as you wish. However, if you want an income, you have various options: • You can invest the lump sum in an annuity or some other investment to provide a regular income (with some schemes the provider does this for you). • Your scheme may provide a regular income that is not linked to an annuity or investment. • Other schemes provide an income (or lump sum) only when you need it, on a drawdown basis. • Some schemes combine these features. For example, you can take a lump sum at the start, and then draw down income later.
Types of equity release schemes:
Lifetime mortgages These are the main types currently available:
The loan you get can be a regular income or a cash lump sum. Fixed or variable interest is added to the loan monthly or yearly. But you do not pay the interest until your home is sold. This could be when you die or need to go into a care home. Interest is charged on the loan and also on all the interest that has already been added. Because of this, the amount you owe can grow quickly, especially if you take a lump sum at the start – see the table over
ROLL-UP MORTGAGE TABLES
Number of years since you took out the loan Amount you owe if you take a lump sum of £45,000 at the start and if the mortgage interest rate is: 5% a year 5 10 15 20 25 £57,433 £73,301 £93,552 £119,399 £152,387 7% a year £63,115 £88,522 £124,157 £174,136 £244,235 9% a year £69,239 £106,532 £163,912 £252,199 £388,039
The other type of roll-up mortgage is a drawdown mortgage. This means that instead of taking the loan as a single lump sum at the start, you take smaller amounts over time. These amounts can be taken at regular intervals or as and when you need them. Because you are taking smaller amounts over time, the total amount you owe will grow more slowly than if you take a lump sum at the start. A roll-up mortgage may give you a higher income than a home income plan as you are not paying back interest on the loan until it is repaid.
The loan you get is a cash lump sum. You pay interest on the loan each month at a fixed or variable rate. If the interest rate is variable and your pension or other source of income is fixed, you may find it more difficult to meet your repayments when interest rates rise. The amount you originally borrowed is repaid when your home is sold.
Fixed repayment mortgage
The loan you get is a cash lump sum. Instead of being charged interest on the loan, you agree that when your home is sold you will pay the lender a higher sum than you borrowed. This higher sum is agreed at the outset. How much higher it is will depend on your age and life expectancy. The lender takes this higher sum in repayment for the mortgage when your home is sold. However, when you die, the lender may charge interest on this higher sum from the date you die until the mortgage is actually repaid.
Home income plan
The loan you get is a cash lump sum. The lump sum is used to buy an annuity that gives you a regular income, usually fixed for life. From this income you pay the interest on your loan, usually at a fixed rate, and the rest is for you to use as you wish. The amount you originally borrowed is repaid when your home is sold. The extra income you will get is fairly low if you take the annuity soon after retirement, so this type of scheme is usually only suitable if you are older. The older you are when you buy an annuity, the higher the income you’ll get, as there are fewer years over which the income will need to be paid.
Shared appreciation mortgage (SAM)
Some lifetime mortgages include a shared appreciation element. This means you agree with the lender that they can have a share in any increase in the value of your home when it is sold in return for them charging you less or no interest on the loan.
In the next newsletter information series part 2 I will cover the following subjects concerning Equity Release Schemes:
Home Reversions Explained How do I qualify?
(Please prepare any questions you may have for our information series part 4 and forward to our Battle office.)
Test your financial knowledge in this theme based crossword, answers in the next newsletter .
Across 1. 3. 5. 10. 11. 13. 15. 16. 18. 19. 20. 23. 26. 28. 29. 30. 31. Use of money for future profit (10) Venture Capital Trusts (Abbrv) (3) Stash of money? (7) Retirement pay (7) Time following end of working life (10) Official information (6) Part of company's stock (6) Birds home (4) Work done for somebody else (8) Payment for professional services (4) Investment Savings Account (Abbrev) (3) Affluence (6) Financial plan (6) Shareholders share of profit (8) Connected with money (9) Place where a person lives (4) Shares entitling holder to profits (6)
Down 2. 4. 6. 7. 8. 9. 10. (17) 12. 14. 17. 21. 22. 24. 25. 27. Enterprise Investment Scheme (Abbrv) (3) Profit from selling assets (13) Owned items (6) Legacy (11) Group of investments (9) Look after somebody or something (4) Legal authority to act for another person Permanent (7) Document promising to pay (5) Money owed (11) Length of time somebody remains alive (8) Safekeeping (8) Excise (3) Reserve of money (4) Schemes for achieving objectives (5)
Answers in next newsletter.
Lifetime Financial Services Ltd
Lifetime Financial Services Ltd commitment to you… We establish lifetime relationships with our clients by being accessible and paying attention to their needs and expectations. Where you have worries or anxieties, are swamped with information - without knowing what is relevant or suitable, we deal with your concerns: To put you in control With a clear understanding of where you are now - plus Giving you confidence for the future
Unit 3 Watch Oak Business Centre Chain Lane Battle East Sussex TN33 0GB
We pay particular attention to the elderly who may need extra time and a sympathetic ear, and welcome the association with other professionals or family attorneys. We are totally independent. “This is why many of our clients have been with us for over 20 years, also introducing us to
family and friends.” Graham Gardner,
Phone: 01424 772444
Improving Clients Wealth and Financial Confidence
You may recall in issue 2 we discussed The National Employment Savings Trust, a scheme that is aimed at low income workers without adequate retirement provision. It is being rolled out by the Personal Accounts Delivery Authority, and should be in place by 2012 . The scheme will be run by employers. The Government has recently confirmed that The National Employment Savings Trust (NEST) will charge 2% on all contributions. They say NEST will meet the Pension Commission’s ambition for a low cost scheme with an anticipated 0.3% annual management charge over the longer term. However, to meet the costs of establishing the scheme, the initial level of charges will also include a small additional charge on contributions of about 2%. The Government said it was “comparable to low charges currently being paid by members of large occupational schemes” ‘As information is available from the Government regarding ‘NEST’ we will update you accordingly’
Let me have your views and comments regarding this important subject. Will you be affected, will it be of benefit etc……. Email your questions to email@example.com or send a letter to our Battle office
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