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Fergus will be back on BBC on Wednesday this week on the John Beattie Show on BBC Radio Scotland just after the 1pm News with some great tips to help organise your money and understand your consumer rights. Catch up on previous shows here

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Have a look at the first part of our new series on how musicians can best maximise and protect their income from their own words and music.

Any Questions?

We’re going to use this page to answer the questions you send us at Moneysucks? What bothers you about your money and what annoys you as a consumer? What should you do with that huge lump sum that’s burning a hole in your bank account, or which loan should you pay off first? What’s the best way to sort our your monthly budget or how can you retire at 40? Which retailers offer great service and which ones couldn’t spell the word? What do you do when your brand new laptop breaks down after a week or your Blackberry won’t let you send text messages any more. Whatever your money and consumer issues we want to help.

Here’s a selection of your questions and comments from the last time we tried this:

Q. I have a question on the link between child benefit and the state pension. At the moment it is my understanding that a person receiving child benefit receives NI credit towards the 30 years required for a full state pension. As you know the child benefit will be removed for the person receiving child benefit if her husband/wife is a higher rate taxpayer- this seems unfair to have the wife/husband penalised in retirement for the spouse’s income. It may even be that when the carer retires she/he is not even married to the same person but has been penalised- do you know if that is the case- if so Money sucks!!

A. Good question David. My initial response would be that it’s not as simple as saying that someone receiving child benefit will automatically receive NI credit towards the 30 years required for a full state pension. There are other requirements that need to be satisfied before receiving NUI credit and these other requirements will vary from person to person. To be on the safe side I have asked the Department of Work and Pensions to look at your question and come back with a fuller answer so hopefully I’ll be able to get back to you soon. I know that there is a large scale review of the benefit system going on at the moment and it may be that any answer from DWP will reflect that but I should be in a position to answer you more fully next week.

Colin Kennedy asks a question about renting out a room in his property:

Q. I work in Crawley during the week but live in Scotland at weekends. I have a second home in Crawley and I rent out 3 rooms. I have a business which is dormant, but could I use this business as a vehicle to purchase my house in Crawley and rent it out to my tenants and myself? What benefits would I derive from this? Love the website and looking forward to your insight!

A. You could certainly use your business to purchase the property that you already own and then rent it out to others although presumably your business, if it is dormant, will not have the required funds and so effectively you would need to look at the transfer of the property to company ownership rather than your own unless your business can raise the funds to purchase the property from you.
Either way the first issue for you is that you are personally disposing of the asset and may be creating a capital gains tax liability for you since it is not your main residence.
Whether it makes sense for you or the company to own the property is in no small way dependent on your tax position. If you own the property then any rental from your tenants, after deduction of allowable expenses, will potentially be taxed at your highest rate. If the company owns the property then any profit will be liable to Corporation Tax but you may decide to retain the rest in the company until you need it. This avoids any further personal tax but means that you can’t use the money.
A further complication may be that if you transfer the property to your company, and you are a Director and employee of that company, then you may find that HMRC argue that you living in the property is a benefit in kind and that may have tax implications for you.
I hope you find this information useful but please come back to me if you have any further queries.

Jack Fraser asks an ISA question:

Q. I am the student who asked about the pension, but I would like to answer just another quick question on a different matter! If I use up my full cash ISA allowance with cash this tax year, does any interest gained on that count towards the allowance?

A. Very simple answer to this question – no! The allowance relates to cash invested in the ISA – whether Cash ISA or Stocks and Shares AIS and any interest or growth in the value of your ISA won’t mean that you are exceeding your allowance, or eat into the next year’s allowance either.

Margaret Cunningham has come into some money and wants to know what to do with it.

Q. I have just inherited £22,000. The money is sitting in the Royal Bank of Scotland at the moment. Can you give me some advice how I should invest it, please?

Thanks and greetings from Germany

A. The answer to this one could go on forever and depends on so many different questions that I don’t know the answer to at the moment. These questions would include, in no particular order of importance:

Are you living in Germany and is the money in Germany or the UK?

Do you have debt that you could do with paying off?

How long will it be before you need the money?

How much risk do you want to take with your investment – are you an under the pillow type or is the 2.30pm at Cheltenham more your style?

Do you have other investments?

Could your pension do with a boost?

What is your income tax position?

So as you see it’s not an exact science. And these are only a sample of the questions you would want to consider before making a decision. The starting point is to examine your current situation and for you to decide what it is you would like the money to do for you. If you have any debt – mortgage or non-mortgage – then it might makes sense to pay that off since it might be costing you more in interest than you will receive on money you invest. If you have no debt and you want to put it away somewhere for a ‘rainy day’ then it would be a case of looking at how to do that tax efficiently and with a level or ‘risk’ that is acceptable to you and for a length of time that suits.

And Cathy Austin has a question on the finances of long-term care.

Q. I saw the piece you did on financial advice on long-term care on BBC the other night. My father is in a care home in Scotland. He pays his care-home fees from his “savings” (house sale!) The bank manager told us that it is possible for him to gift £3000 to each of his children & £1500 to each grandchild, each year, which would obviously reduce his capital, without the authorities being able to question this. Do you know if this is the case? We don’t want to do anything dodgy, just want to know if this is correct.

A. Maybe is the perhaps unhelpful answer! The £3000 and £1500 limits that your bank manager talked to you about are the maximum amounts that can be ‘gifted’ to children and grandchildren annually so that they don’t form part of your father’s estate for inheritance tax purposes – and there is often confusion about the rules on Inheritance Tax and the rules that apply to care issues. The local authority is not interested in IHT rules, only that your father hasn’t given money away to ‘deliberately deprive’ his estate to save him paying for his own care. So whether your dad gifts his children £3000 or £30,000 the local authority might want to know why. It may do his case no harm if he is able to explain that it is part of a tax planning exercise.

 

5th May 2015. June is concerned about the tax implications of selling her house

I have some questions for you on private letting of houses. I’m really confused what to do for the best. I have worked really hard and now own 2 properties which currently have tenants in them and which I have lived in for a number of years. I moved out of my last house which currently has a residential mortgage last year as wanted to move areas and now I am currently a tenant myself and renting privately.

I did want to sell my house that has a residential mortgage as I don’t want to get into the dilemma of capital gains tax. My plan was to sell and buy another house for me to live in in my current area so that I no longer rent. However my issue is my income has now dropped being a single mum and it is highly unlikely I would get a mortgage.

I am trying to decide the best thing to do this year about selling. I am currently getting an income from both properties which luckily is helping me pay my rent. Also it means I am still in the property market. I am getting increasing worried that I will lose a large percentage of what I have worked hard for in capital gains tax. I have accepted the fact that I will need to pay some tax on the first property however I only moved out of my last house last year and my plan was always to sell and buy my main home in my new location. However now I am thinking maybe not to worry as it is helping me stay afloat.  I could just sell both properties and be mortgage free but I am still in my 40s and am looking at more of a long term picture.

What advice would you give? To sell or not to sell to avoid the tax conundrum!

June

 

 

You have raised some interesting questions here June. Let’s deal with Capital Gains Tax first of all. You are correct when you say that you have to pay CGT when you sell a property that is not your main residence, in other words it is an investment property. CGT will be payable at either 18% or 28% on the gain that you make when selling the property. We all have an allowance each year, an amount of money that we can make before CGT kicks in.

 

This year it is £11,100, and that is the amount of profit that you could make before you start to pay CGT. The rate that you pay tax will be dependent on your income in the year that you sell. If the profit from the property when added to your income takes you into the higher rate tax bracket then you will pay at 18%, if you are in the higher rate then you will pay tax at 28%.

 

It is important to note that you only pay tax on any profit you make, so if you have to pay 18% tax then you get to keep the other 82% of your profit, and that’s really not a bad deal. There are also expenses that can be offset against your profit before your final tax bill is calculated.

 

There are also rules in force that say that a house you currently rent but have lived in recently can be exempt from CGT. The rules are complex and I don’t know enough about your circumstances to give detailed advice at this stage but if you want to write to me again with more details of the properties and dates then I can expand on this.

 

You say that you could sell both properties and be mortgage free but you would then have to decide what to do with the equity you received and think about whether you are getting a better return being in property than you could get if you did something else with the money. You are right to be thinking long-term with your investment properties and there is no harm in having mortgage son these properties since someone else is effectively paying them for you at the moment so it is free money, and you also have the possibility of an increase in capital value in the long term.

 

I would stress that I don’t know enough about your general circumstances at this stage to give you specific advice, but from what you have said so far I wouldn’t be in a great rush to sell, unless you desperately need the money for something else.

17 Responses to Any Questions?

  • Fergus Muirhead says:

    Ray, just picked your question up, really sorry for delay. The short answer is yes that should be all it takes, although you’ve probably done it by now! Sorry, I was cleaning up a spam folder and found your question, not that it’s spam you understand!

  • Fergus Muirhead says:

    Jonathan, I’m hoping the Junior ISA rules will be relaxed this year so you should find something soon. As I understand it CTFs can be transferred into JISAs from April this year although at this point I’m unsure of the exact date. At the moment you need to find the highest paying account for children and park the money there for a couple of months. Or send your son to Ayr Racecourse or the Bookies at the weekend.

  • Beng Eunson says:

    I am in receipt of my nhs pension at the moment. Iam about to claim my deferred state pension (6 years deferred). Please advice on my tax position if I decide to take a lump sum plus the basic rate. Thank you.
    Beng

  • Catherine says:

    I have just had a recall on my Toyota car. What are my rights regarding reimbursement of expenses as I live in the Western Isles, which would mean having to take 2 days off work, a ferry fare, 2 nights accommodation as well as fuel costs. Thanks

  • Fergus Muirhead says:

    Can you just clarify where the lump sum is coming from Beng?

  • Fergus Muirhead says:

    Why is the car being recalled Catherine, and how old is it?

  • Catherine says:

    Hi Fergus

    The car is being recalled because a problem has been discovered with this Toyota engine, something to do with air intake which could cause the engine to go on fire. The car is about 18 months old, I bought it as a new pre registered in October 2013.
    Catherine

  • Fergus Muirhead says:

    Hi Beng, your lump sum is classed as taxable income and you will have to pay tax on it if your income in the year is over the personal allowance.

  • Fergus Muirhead says:

    Catherine, I haven’t forgotten about you, I’m waiting on Toyota coming back to me. Can you drop me an email to info@moneysucks.net

  • Laura Yule says:

    Hi Fergus, any thoughts on the most effective reporting route in respect of certain scam companies that are sending sack-loads of scam mail to my parents in their 80s, enticing them to give their bank details/mail orders at high cost for items that my parents do not need out of their hard earned pension (and high postage costs to Dublin and around Europe) on a daily basis, sadly they have taken advantage of their vulnerability – why are my parents hooked, because each scam mail promises that they are winners of thousands/millions of pounds and my parents don’t want to hear my reality checks they want to believe this? Having written to these companies without a response to date Royal Mail are now redirecting my parents mail to protect them however until these companies are reported to the right authorities and exposed they will keep taking advantage of vulnerable people – some of their envelopes/mail contain inappropriate cartoon images making fun of people. I have spoken to many families that are affected by this re their older loved ones and various local Post Offices shared that many families ask if the PO can talk their mother/grandmother out of responding to these scam people/post box numbers to protect their family money from going out of the window into the scam cycle. In light of this wondered whether Money Sucks might find some traction with its readers as this topic might not be reported enough even although it seems to be widespread? I plan to contact the Information Commissioner and Consumer Trading Standards offices, welcome any tips on getting straight to the people who can and will take action about this, welcome any investigation thanks?

  • Fergus Muirhead says:

    Sorry for the delayed reply Laura, been inundated with thoughts and questions on the budget and upcoming pension changes! Your parents can register with the Mail Preference Service here and there is some good advice from Citizens Advice here as well.

    I have also asked our readers to let me have their thoughts on this issue and I’ll pass them on to you as I receive them.

  • Some reasons why you could have been mis sold PPI include:

    it wasn’t clarified that PPI was recommended;

    you thought buying PPI was an ailment, or might increase your odds, of receiving a mortgage or other sort of credit;

    the plan was included with your loan without your understanding;

    it was not explained the PPI cover could conclude ahead of the
    mortgage or credit was repaid.
    If you’re not sure whether your coverage was
    mis sold you ought to contact the Financial Ombudsman Service.

    There are many firms that offer to send claims for mis-sold PPI, typically known as claim handlers, states firms or
    claims management firms (CMCs).

    Should you decide to use a claim handler you need to carefully consider whether to cover an upfront price before your problem is published, as there is no guarantee it’ll become successful and you
    may be left out of pocket.

    PPI claim handlers typically keep as much as
    30% of the refund, if you be given a £5,000 refund you’d must pay £1,500
    of it to some state handler.

    Should you claim oneself, you will receive each of any return you’re eligible for.

    Step 4: Complain for your bank

    It is better to produce for them providing just as much data while you could about the policy you’re complaining about and start to become obvious about
    why you believe the coverage was missold.

    The corporation or bank has ten weeks to reply, telling you whether your issue
    continues to be productive or why it needs more hours to check into
    it.

    If your mortgage was established with a company that is nolonger trading, but you consider
    it might have mis sold you PPI, you must contact the Financial Services Compensation System (FSCS) to learn steps to make a state.

    Step 5: Contact the Financial Ombudsman Service

    You are able to deliver the FOS’s free PPI claim form (doc) in their mind even though you previously
    applied it to complain to the corporation or bank that
    offered you PPI.

    It’s essential that you contact the FOS within 6 months of getting a final reaction from the organization, or even the FOS might not be able
    to deal with your complaint.

  • Carolyn says:

    Hey Fergus!

    Hope all is well! This is Carolyn over at ThePennyHoarder.com. I just wanted to give you a heads up that we just published an article about How to Get Out Of Debt. I thought it would be perfect for your blog! Here is the link:

    http://www.thepennyhoarder.com/how-to-get-out-of-debt/

    Would you be willing to mention it to your readers in an upcoming or past blog post? As a thank you, we’d be happy to share one of your blog articles on our Facebook page (we have 1 Million+ active Facebook fans).

    Let me know what you think!

    Thanks Fergus! 🙂

    Carolyn

    Carolyn
    Thepennyhoarder.com

  • Tamara says:

    Hi Fergus!

    Hope all is well.
    I’d really appreciate if you could help me with some (international) retirement advice:
    I’ve been living and working in Croatia (EU) for 8 years in academia, paying into governmental-run University pension cheme. 1,5 year ago I came to UK and have been also working in academia since and was paying into USS pension scheme throughout the whole time. However, from next year I’m starting to work in NHS, and was wondering about my pension options.
    Should I stay in USS, join the pots, transfer money into NHS? I’m not sure I understand the practical implications of such options. Can I use my Croatian 8 year pot in any way? Is there an option of joining it or paying into an UK scheme? Would that make financial sense? (I intend to live and work in UK for the next couple of years at least).

    Many thanks
    Tamara

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60 Second Tips

In a brand new series listen to and watch Fergus Muirhead here as he explains common money and consumer issues in less than one minute.
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