Podcast Summary
UK's HMRC to Scrutinize High Earners' Tax Affairs: High earners in the UK, including those on six-figure salaries, should brace for increased tax authority scrutiny. The HMRC aims to recoup up to £7 billion and expand its investigation beyond the top 5,000 earners.
High earners in the UK should be prepared for increased scrutiny from the tax authorities regarding their tax affairs. The UK's Revenue and Customs (HMRC) is expanding its investigation into tax avoidance and evasion to include all 150,000 individuals who pay the new 50pence rate of tax on earnings over £150,000 a year. This could potentially affect those on six-figure salaries. While the exact details of what will be scrutinized have not been released, private client wealth managers suggest that people are trying to use tax avoidance schemes more carefully. The aim of the crackdown is to recoup up to £7 billion, and the HMRC's high net worth unit, initially set up to investigate the 5,000 highest earners, will now broaden its scope. This development underscores the importance of being aware of tax regulations and seeking professional advice to ensure compliance. Elsewhere, online shopping for unique engagement rings at bloonile.com offers convenience and quality. Sleep Number smart beds cater to individualized comfort, and the JD Power-ranked limited edition smart bed is currently available at a 40% discount. In the financial world, the focus is also on pensions. With the investigation into high earners' tax bills, there is growing interest in transferring personal pensions. However, exit charges can significantly impact the decision. Tune in to the FT Money Show for more insights on these topics and more.
High earners under scrutiny for tax avoidance schemes: High earners should exercise caution when considering tax avoidance schemes like EBTs, EFRBS, and QROPS due to increased HMRC scrutiny. Seek professional advice before making decisions.
Tax avoidance schemes, particularly those used by high earners such as Employee Benefit Trusts (EBTs), Employer-Funded Retirement Benefit Schemes (EFRBS), and Qualifying Recognized Overseas Pension Schemes (QROPS), are under increased scrutiny from HMRC due to anti-avoidance measures put in place since 2004. While some schemes like EFRBS may become more mainstream due to government crackdowns on pensions for high earners, others like QROPS are also raising concerns. Despite the potential risks, it's unlikely that people will stop offering new versions of these schemes until there's clarity on their tax status. Overall, high earners should exercise caution when considering tax avoidance schemes and seek professional advice before making any decisions. For more information on the current status of various tax-efficient schemes, tune in to Alice's story in the FT money section this weekend and online at ft.com/forward/money. Additionally, while competition has driven down charges for some fund investments, personal pensions can still come with hefty costs. Stay tuned for more on buy-to-let mortgages and pension charges.
Pension charges impact growth significantly: Pension charges can reduce a pension fund's growth by up to 40% over 25 years for expensive pensions, and 20-30% for cost-efficient ones. Competition in the market has led to some reduction, but it's essential to ensure good quality investment management for the charges paid.
Pension charges can significantly impact the growth of a pension fund over time. The most expensive personal pensions can reduce a projected pension fund by up to 40% over 25 years. However, even the most cost-efficient retail pensions, including Self-Invested Personal Pensions (SIPs), will reduce the overall return by 20-30% due to charges. It's essential to understand that charges are a part of the deal, and you're paying for trustees, management, security, and efficient management of your money. However, the competition in the SIP market has led to some reduction in charges in recent years. Providers like Hargreaves Lansdown, Standard Life, and AJ Bell have pioneered low-cost SIPs. But, not all providers are following suit, and some, like Standard Life, are introducing new charges or increasing existing ones. The market is still evolving, and it remains to be seen if charges have reached their lowest point. The key is to ensure that you're getting good quality investment management for the charges you pay.
SIP charges decreasing but competition continues to change the market: Investors benefit from decreasing SIP charges, but competition and pension landscape changes may impact them. Be aware of exit charges and lending restrictions in buy-to-let mortgages.
SIP (Self-Invested Personal Pension) charges have been decreasing, which is beneficial for investors. However, they may have leveled off, and competition is expected to continue changing the market. The pension landscape is also evolving, which will impact charges. The Financial Services Authority is working with the industry to establish approved standards for disclosing charges. Transparency is crucial, as some investors have been unaware of certain charges. Standard Life, for instance, is upfront about its £750 exit charge, but exit charges can be viewed as a way for firms to retain investors and prevent them from moving to more competitive vehicles. It's essential to be aware of these charges when deciding whether a SIP meets your investment needs. In the realm of buy-to-let mortgages, lenders like Lloyds Banking Group have introduced stricter lending conditions, limiting loans to three properties or £2,000,000 worth of lending. With falling house prices, there are concerns that other buy-to-let lenders may follow suit and restrict lending to borrowers.
Lloyds Banking Group Reduces Maximum LTV for Buy-to-Let Mortgages: Lloyds Banking Group decreases maximum LTV for buy-to-let mortgages to 65%, while The Mortgage Works increases its max LTV to 80% and reduces rates, potentially attracting more investors and taking market share from Lloyds.
Lloyds Banking Group, which includes BM Solutions, has recently reduced its maximum loan-to-value ratio for buy-to-let mortgages from 75% to 65%, while The Mortgage Works, part of the Nationwide Building Society, has been increasing its maximum LTV and reducing rates to be more competitive in the market. This shift could significantly impact buy-to-let investors with larger portfolios or higher-value properties, as they may no longer be able to remortgage with BM Solutions and could be forced to look elsewhere. The Mortgage Works has shown aggression in the market, increasing its maximum LTV to 80% for select products and reducing rates, indicating a commitment to the buy-to-let market and potentially aiming to take a larger share from Lloyds Banking Group. Other lenders, such as Lloyds, may be stepping back from the buy-to-let market due to concerns over potential arrears and being overweight in buy-to-let lending. This change primarily affects semi-professional and professional buy-to-let investors.
Considering different lenders for buying to let mortgages: Explore private banks and commercial lenders for diverse offerings and unique requirements, but research thoroughly before making a decision.
When it comes to buying to let mortgages, it's important to consider a variety of lenders beyond just the high street options. Some high street lenders have maximum limits on the number of properties you can have within their portfolio, as well as restrictions on the type of loan they offer. Private banks and commercial lenders may have different offerings, such as no limits on the number of properties and capital repayment loans, respectively. However, they may also have different requirements for clients and terms and conditions. It's crucial to do thorough research and consider all options before making a decision. Additionally, some high street lenders may consider your entire portfolio, not just the properties you're looking to add with them, when determining your eligibility for a mortgage.