02/08/2019
August 2019
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Estate Planning- IHT shake-up on the cards?
IHT- Inheritance tax could be due a major overhaul, with a new report recommending sweeping changes to gifting rules, life insurance policies and even who pays the bill.
After a request from the Chancellor of the Exchequer, the Office of Tax Simplification (OTS) conducted an extensive review into inheritance tax.
Its new reports sets out clear recommendations for reforming the rules, which the government must now respond to.
You won’t necessarily have to pay inheritance tax, as the first £325,000 of an estate is tax-free. And if your home passes to your child or grandchild, the estate can be worth up to £475,000 in 2019-20 before tax is payable, (figure includes the £150 000 Residential Nil rate Band)
Indeed, last year just 24,500 estates were landed with a tax bill, accounting for around 4% of all deaths in the UK.
Yet while the number of people affected is small, the bills can be enormous, with a tax charge of 40%. Whether you’re planning your legacy, or dealing with an inheritance, it’s vital to know how the rules work
Proposed changes include:
1. Shortening the time limit for taxable gifts
2. Changing who pays inheritance tax on gifts
3. Reforming IHT exemptions to gifts
4. Exempt all life insurance policies from inheritance tax
5. Remove the capital gains tax uplift
6. Review treatment of businesses and farms
Home owner / investor
Homeowners could reduce their mortgage rate, save money on their energy bills and reduce emissions from their homes under new government proposals.
A £5m fund has been launched by the Department for Business, Energy and Industrial Strategy (BEIS) to the financial sector to increase the number of ‘green’ mortgages available.
Households that successfully upgrade the energy rating of their home will be rewarded with access to discounted ‘green’ mortgage rates.
The government has committed to producing net zero emissions by 2050, and essential to this will be improving the energy efficiency of the 17 million homes currently with an Energy Performance Certificate below band C
Currently, green mortgages favour homeowners in new properties who find it easier to make their homes more ‘green’.
Older properties can be a challenge to make more environmentally friendly with homeowners unable to increase their rating sufficiently to make any meaningful savings on their mortgage.
BEIS has said that a separate £10m innovation fund will be launched to help the industry find ways to retrofit older properties with environmentally friendly technology, with minimum disruption to homeowners.
Green mortgages have been available for several years, but have not yet reached the ‘mainstream’, remaining a niche product.
They tend to be available from smaller lenders such as the Ecology Building Society, which rewards customers with a 1% discount on their borrowing if it is used to make ‘green’ improvements such as having their loft insulated or solar panels installed.
Barclays launched a green mortgage last year, but it is limited to giving buyers of new-build energy efficient homes access to lower interest rates and is not available to homeowners that improve the energy efficiency of their existing home.
And BNP Paribas working in partnership with Eon are developing a green mortgage plan to enable homeowners to extend borrowing on their mortgages with a linked ‘energy efficient home improvement’ loan.
Saver / Investor
A golden opportunity?
When one of the world's leading fund managers, renowned for his passion for equities, says every investor's portfolio should have a heavy dose of exposure to gold, it is time to sit up and listen.
That is exactly what happened last week when veteran manager Mark Mobius, a long-time investor in emerging markets, said he 'loved' gold and that investors should have at least 10% of their assets in the precious metal.
His comments came as its price climbed to a six-year high of more than $1,413 (£1,125) an ounce. According to experts at trader BullionVault, gold prices for UK savers have only ever been higher on 20 other occasions throughout history.
It confidently predicts that by the end of the year, the all-time peak of £1,195 – reached in the summer of 2011 when debt crises were sweeping across Europe and the United States – could look 'cheap'.
The surge in gold prices has been fuelled by a number of factors including mounting geopolitical tensions in the Middle East, the continued trade war between the United States and China, and downward pressure on interest rates.
This basket of concerns has highlighted gold's status as a store of value and a safe haven during times of uncertainty.
Commentators believe that over the next decade deflation will dominate the economies of the United States and Europe, resulting in suppressed interest rates.
In times of deflation, he says gold is a 'good asset diversifier' and proves popular as investors search for real, physical financial assets.
UK house prices up
British house prices rose at the fastest annual rate since early 2017 in the three months to the end of June, mortgage lender Halifax said on Friday, adding to other signs that the housing market has stabilized after weakening on Brexit worries.
House prices were up by 5.7% in the three months to June compared with the same period a year ago after rising by 5.2% in the three months to May, Halifax said on Friday. A Reuters poll of economists had pointed to a 5.9% rise.
Halifax cautioned that the annual increase was flattered by weak price growth in the corresponding period in 2018. In monthly terms, prices fell by 0.3% after a rise of 0.4% in May. Commentators said the housing market was displaying a reasonable degree of resilience in the face of political and economic uncertainty.
Other measures of house prices have shown smaller increases than Halifax recently — with prices in London falling — but have also suggested a bottoming out in the market after a slowdown linked to worries about Brexit.
Halifax’s measure of annual house price growth had been growing by nearly 10% a year at the time of the 2016 referendum.
However, the expectation is that If the UK ultimately leaves the EU without a deal - be it on Oct. 31 or some other time - house prices could quickly drop around 5% amid heightened uncertainty and weakened economic activity.
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