For tax year 2017/18Click to download our guide to Tax Rates 2017/18
The current best value cash savings account for £20,000 Emergency money, is an account from a well known high street bank. There is no interest on amounts above £20,000.
The account costs £5 per year to run, pays 1.5% annual interest and also pays cashback amounts.
The requirements are that you must have £500 per month going in and at least two Direct Debits (DD's) going out.
Cash back is paid 1% on Water Bills and Council Tax, 2% on Electricity and Gas bills and 3% on your Communications Bills. (BT/SKY/Mobiles etc etc).
For Example (all numbers are indicative only)
Communications Bill - £80 per month £960 Per Year @ 3% = £28.60 pa
Electric & Gas Bill - £150 per month £1,800 Per Year @ 2% = £36.00 pa
Water and Council Tax Bill - £285 per month £3,420 Per Year @ 1% = £34.20 pa
Total DD's per month £515.00. Cash Back Total £98.80. (tax free)
At 1.5% interest pa on £20,000 this amounts to £300. Basic Rate Tax payers have a tax-free interest allowance of £1,000 pa and High Rate Tax payers, £500 pa, so the interest paid is tax free. If you have enough being paid by DD you can open two accounts.
Are you eligible for the Government's Marriage Allowance?
This is £1,060 that can be transferred from a non-tax paying spouse's personal allowance to a Basic rate tax paying spouse's allowance. This saves £212 per year in tax.
If you are a high rate tax payer, then any investments not in an ISA or Pension tax Wrapper, should be in the basic rate tax payers name for tax efficiency.
Pension contributions attract tax relief from HMRC in the following amounts:
Basic Rate Tax Payers – 20% of the gross contribution which is 25% of whatever you contribute. Example – You contribute £800, HMRC contributes £200; Total £1,000.
High Rate Tax Payers – 40% of the gross contribution which is 66.66% of whatever you contribute. Example – You contribute £800, HMRC contributes £200; Total £1,000.
You then state £1,000 on your Self-Assessment return and HMRC gives you a further £200 tax relief. Net cost to you - £600 and don’t forget to put the extra £200 into your pension.
Additional Rate Tax Payers – 45% of the gross contribution which is 81.81% of whatever you contribute. Example – You contribute £800, HMRC contributes £200; Total £1,000.
You then state £1,000 on your Self-Assessment return and HMRC gives you a further £250 tax relief. Net cost to you - £550 and don’t forget to put the extra £250 into your pension.
Investment Bonds are useful for creating a tax 'deferred' income.
You invest in a suitable, risk related, investment portfolio within an Insurance Bond and HMRC allows you to take an income from the investment bond (4.5% pa after 0.5% pa fees). It is tax 'deferred' because so long as you are a basic rate tax payer, there will be no tax to pay.
On death, surrender, assignment for money or money's worth, maturity or excess withdrawals a calculation is made to see if the bond gain takes the holder into the high rate tax bracket. If so, then a 20% tax charge is made on all of the gain.
Investment Bonds pay 20% Corporation Tax on the profits within the bond and if you are a non-tax payer then an Overseas Investment Bond is better as there is no Corporation Tax to pay.
Because they are classed as 'Insurance' Bonds the value does not have to be included for Care Home cost apportionment asset calculations.
EJ FINANCIAL LTD
2nd Floor • Johnsons Building • The Broadway • Crowborough • East Sussex • TN6 1DE
01892 234884 • 020 3657 9079 • 01635 777795
EJ Financial Ltd. Registered in England and Wales No 9370740
Authorised and regulated by the Financial Conduct Authority. We are entered on the Financial Services Register No 670594 at www.fsa.gov.uk/register.
The Financial Conduct Authority does not regulate taxation and trust advice.
The value of your investment can go down as well as up and you may get back less than you have invested.
The information contained within the website is subject to the UK regulatory regime and is therefore primarily targeted at customers in the UK.
NOTE: None of the above constitutes advice, always consult a professional adviser before making any investment decisions.
Please talk to Ted on 01892 234884 or 01635 777795 for further information.
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