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Most adults have no inheritance strategy

87% of adults looking to distribute their estate to loved ones have no inheritance tax (IHT) strategy in place, according to research.

Financial adviser Drewberry polled 3,000 people and found 39% plan to leave assets to their families, while only 13% tried to find out if they had any inheritance tax liability.

42% said leaving assets to loved ones ”would be nice” but not a priority, whereas 16% don’t expect to have any assets left to pass on when they die.

Regarding their IHT liability:

  • 87% incorrectly thought their pension savings would attract IHT
  • 12% believed their house would be exempt from IHT
  • 10% mistakenly believed cash and ISA savings are also exempt from IHT.

Looking to the future, 30% expect to inherit £50,000 or more from their relatives during their lifetime.

1 in 5 people in their 40s and 50s expect to inherit assets over £100,000, while only 3.7% believe they will inherit assets in excess of £400,000.

Tom Conner, director at Drewberry, said:

“There are a host of simple planning measures that can save a fortune in inheritance tax, such as getting your will in order, keeping funds IHT-safe in your pension, moving your ISAs to IHT-free options or just giving away your excess assets while you’ve still got at least 7 more years on the clock.”

Contact us to talk about your IHT planning.

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Total cash payments down by 11%

Cash continues to be king as consumers and businesses spent a total of £15.4 billion in notes and coins last year, down 11% from £17.2 billion in 2015.

Figures from UK Finance show cash represented 44% of all payments made by consumers in 2016.

The average value of cash payments increased over the last decade – from £11.58 billion to £15.8 billion – as card payments have increasingly been used to make low-value payments.

61% of cash payments were for either £5 or less and 26% for £1 or less.

1 in 10 young adults aged 25 to 34 relied predominantly on card payments, using cash once or less each month.

In contrast, there were 2.7 million consumers (roughly 5% of the adult population) who relied solely on notes and coins to make their day-to-day payments last year.

The total number of cash payments is forecast to fall by 43% over the next decade to £8.7 billion as more consumers turn to contactless cards.

Adrian Buckle, chief economist at UK Finance, said:

“Over the past few years we have witnessed a significant shift away from cash use in this country with contactless cards causing a decrease in the use of notes and coins. 

“People will always want to choose the payment methods that best suit them and, for the foreseeable future, that will continue to be cash.”

Talk to us about your personal finances.

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Older women ‘worse off’ from state pension age change

Household incomes for more than a million women in their early 60s have fallen due to changes to the state pension age.

Research from the Institute for Fiscal Studies (IFS) found that, on average, women aged between 60 and 62 were £32 per week worse off as a result of the delays.

Women in high income homes experienced a 4% drop since the changes were made, but the biggest pinch was felt by those in low income households who were 21% poorer. 

The female state pension age has been gradually increasing, to 65 in 2018 and (along with men) 66 in 2020.

When taking other state benefits into account, women in this age group lost £4.2 billion a year on top of their previous state pension entitlements – equating to £74 per week.

Jonathan Cribb, senior research economist at the IFS, said:

“While increasing the state pension age is a coherent response to the public finance challenge posed by rising longevity, it does place a further pressure on household budgets.

 “It is important the government communicates the ongoing increases in the state pension age clearly so families can plan for their retirement as well as possible.”

Contact us to discuss your personal finances.

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Stamp duty payments reach £8.3bn

Homeowners in England and Wales paid £8.3 billion in stamp duty in 2016 – a 17% increase from £7.1 billion in 2015.

According to figures from Lloyds Bank, homeowners paid an average total of £12,693 on stamp duty as they moved up the property ladder.

Breaking this down over time, a first-time buyer would have spent on average:

  • £758 on stamp duty in March 2001
  • £1,989 for their second home in March 2009 
  • £9,946 for their final step in March 2017.

Looking at the overall costs of stamp duty in this period, homeowners in London paid a total of £40,576 – 320% more than the average for England and Wales.

In the South East, the total value of overall stamp duty paid between 2001 and 2017 was £20,133 while the lowest bills were in Wales (£4,489) and the North (£4,212).

Furthermore, the proportion of first-time buyers who paid stamp duty in the last 16 years rose from 47% in 2001 to 78% in 2017.

Andrew Mason, mortgage products director at Lloyds Bank, said:

“Rising house prices have caused stamp duty payments to continue to increase, despite the reforms that came into effect from December 2014. 

“Escalating stamp duty payments have contributed to significant increases in moving costs in recent years.”

Contact us to discuss stamp duty.

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HMRC overtaxing savers on pension withdrawals

Thousands of over-55s who have made a one-off withdrawal from their pension may have paid too much tax in 2016/17, according to a Freedom of Information request.

Research by the Telegraph suggests as many as 200,000 savers have overpaid, many of whom will be unaware they are paying over the odds.

HMRC is not proactively contacting those affected, with only 42,700 savers attempting to reclaim deductions relating to the 2016/17 tax year.

Steve Webb, a director at insurer Royal London, said:

“It cannot be acceptable to take thousands of pounds per person in excess taxes, and then expect people to have to claim that money back.

“The rules need to be changed so that only basic-rate tax is deducted and any extra tax due is collected through the normal tax return process. This would be a far fairer system.”

Savers must fill out 1 of the following forms to reclaim tax on their withdrawals, depending on whether they accessed cash from a defined benefit or defined contribution scheme.

From defined benefit schemes:

• self-assessment tax return – on lump sums
• P53 – for those who don’t fill in self-assessment tax return.

From defined contribution schemes:

• P50Z – if you withdrew your pension pot and have no other income in the tax year
• P53Z – if you withdrew your pension pot and have other sources of income in the tax year
• P55 – if you withdrew part of your pension pot and are not receiving regular payments.

Contact us if you think this affects you.