July 2023 Newsletter | Cylchlythyr Misol Gorffennaf 2023
- Are you struggling with your mortgage payments? If so, an agreement made between the Chancellor, Jeremy Hunt and UK banks could help. The agreement will allow customers to switch to an interest-only mortgage for 6 months or extend their mortgage term to reduce their monthly payments and customers can switch back to their original term within the first 6 months if they choose to. Remember that this will increase the size of the overall debt, however if you are struggling, this can be helpful for the very short term.
- On the other side of the coin, as interest rates rise, we are seeing more clients receiving annual savings interest over and above the tax-free threshold (£1,000 for basic rate taxpayers; £500 for higher rate taxpayers). Ensure you utilise your annual tax-free ISA allowance of £20,000 to maximise the amount of interest that can be received tax-free.
- Apple have launched a scheme to allow close relatives / partners access to digital records held by Apple (contacts, photos, etc). Go to settings and search for Legacy Contacts so that you can authorise a loved one.
- If you are a DIY investor using sites such as Hargreaves Lansdown or Interactive Investor, ensure you review and understand the charges applied by these platforms because high charges can significantly erode investment returns over the long term. If you decide to change provider, check whether your existing provider charges an exit fee to transfer investments to another provider because the amount of exit fees may influence your decision.
- Beware of social media so-called "investment opportunities". It is very easy to create social media content overstating the potential gains or to create fraudulent schemes.
There have been notable instances recently of scams where they say that "if you invest £250 today", you can double your investment within a couple of weeks. The fraudsters then update your account within 2 weeks to show that you've doubled your money and to encourage you to invest more. If you try to withdraw any money, the fraudsters often step up their efforts even more for you to invest further amounts. Withdrawals become impossible and the scheme is revealed to be what it was from the start - a scam.
Ask Huw & Aled: both of my elderly parents have now passed away. They gifted £500,000 to me and my sister 5 years ago. As the timing is fairly close to the "7-year rule" for Inheritance Tax, does this mean there is less Inheritance Tax to pay on the gift through taper relief?
Sadly, the answer is no. Taper relief is the one of the most misunderstood of tax reliefs within Inheritance Tax legislation.
Taper relief only applies if gifts exceed the tax-free allowances. For an individual, this normally means that taper relief only applies to gifts made over £325,000 between 3 and 7 years of death. Where, as in this instance, on the second death you are eligible to claim both parents’ allowance of £325,000 each, a total of £650,000, the gifts must exceed this amount before taper reliefs apply.
Consequently, in practice only a very few, very rich estates can claim taper relief against Inheritance Tax.
