Client access Client access

Month: February 2024

Child Benefit claims can now be made online

Child Benefit claims can now be made online

Any parent that claims Child Benefit will automatically get National Insurance Credits applied to their State Pension. This credit ensures that for the time you are out of work while bringing up your family, a completed year is added to your National Insurance record, so you have a better chance of reaching a full State Pension entitlement when the time comes.

There is no limit to the number of children Child Benefit can be claimed for, and it will be paid to those responsible for bringing up a child under 16, or under 20 if they remain in approved education or training.

HMRC states on Gov.uk: “Education must be full-time (more than an average of 12 hours a week supervised study or course-related work experience) and can include:

  • A levels or similar, for example Pre-U, International Baccalaureate
  • T levels
  • Scottish Highers
  • NVQs and most vocational qualifications up to level 3– not including advanced apprenticeships
  • home education – if it started before your child turned 16 or after 16 if they have special needs
  • traineeships in England

“Your child must be accepted onto the course before they turn 19.”

Source: Gov.uk

You can tell HMRC that your child is staying in approved education or training using the CH297 online form. To apply online, you will need a Government Gateway account, a passport and other proofs of ID. HMRC will then send you an activation code on email, which you can use to apply for Child Benefit online.

Let us help you

If you need any help with accessing Child Benefit, or you want to make sure you are claiming any additional benefits that you are eligible for, then please get in touch and we will be happy to offer you the help and guidance you need.

February 26, 2024

The cost of divorce – what to do if you decide to split up

The cost of divorce – what to do if you decide to split up

More people file for divorce in January than any other month of the year, probably because the stress of being together for an extended period over Christmas and New Year brings any cracks in a relationship bubbling to the surface. Or it could be that people want to start the New Year afresh and were reluctant to start divorce proceedings in the months leading up to Christmas. Either way, January sees a considerable spike in contact with family lawyers and divorce proceedings starting.

However, interestingly this year it seems that a lot of people are delaying their divorce because of the cost-of-living crisis, which is making it hard for them to afford to split. Around 272,000 couples have delayed their decision to divorce this year, according to research from insurer Legal & General. It is little wonder, given nearly half (48%) saw their incomes shrink by an average of 31% in the year following their divorce, leaving people around £9,700 worse off.

The importance of a Clean Break Order

The research also found that just under one third (31%) of couples signed what is known as a Clean Break Order, preventing future claims from their spouse. This means that 69% of couples are open to future claims from their exes, something most people wouldn’t want to contemplate, and which could become costly further down the line.

Paula Llewellyn, Managing Director (Direct), Legal & General Retail: “When people divorce, money is always an important factor especially during the challenges of the cost-of-living crisis. However, as our research shows a separation can have long-term implications for people’s finances. Many couples have not even sorted the necessary paperwork to ensure they have a clean break from their financial obligation to one another. By consulting a financial adviser people increase the likelihood of a divorce being fair and equal. While the number of people seeking out this support has increased in recent years, we need to encourage more couples to take this step.”

All your assets are up for grabs

Remember, it isn’t just your everyday assets that are considered when a couple decides to split. Any pension entitlements you have could be part of the deal too, so if one partner has a much larger pension pot than the other, then that spouse might have to offset that pension pot with another asset, such as the house, or give a share of that pension to their ex-spouse as part of the divorce.

This is something that is often ignored or actively waived by divorcing spouses, according to the Legal & General research, but it could be a considerable part of the settlement if it is taken into consideration.

You need to be open and honest about your assets during any part of the legal proceedings, as hiding assets could lead to problems further down the line. Divorce is a highly emotional time, but if you can try to be amicable about the split, the chances are it will be less painful, less drawn out, and less costly for all involved.

We can help you meet your obligations

If you are unlucky enough to be going through a divorce, or you’re thinking about ending your marriage, then please get in touch with us and we can explain what you need to know.

February 19, 2024

Mortgage lenders start a price war – what this means for you

Mortgage lenders start a price war – what this means for you

Interest rates went up significantly in the last year, to the current Bank of England base rate of 5.25%, but in a change that is welcome for those looking to buy a house or remortgage, some lenders have begun a price war. Halifax and HSBC were two of the first lenders to start bringing their mortgage rates down, but have now been joined by some other lenders, including Nationwide.

The UK’s largest building society has recently brought out a five-year fixed rate deal which is at the top of the best buy tables, at 3.88% on a 60% loan-to-value (LTV) – considerably lower than some of its rivals. The closest five-year fixed rate mortgage offered on the same basis is with Yorkshire Building Society at 3.99%, according to Moneyfactscompare.co.uk.

It is estimated that around 1.6m borrowers will be looking for new deals this year, with many being significantly more expensive than their current deals, which may have been taken out several years ago when the base rate was very low.

What about shorter-term fixed rates?

Perhaps surprisingly, the shorter-term fixed rate deals are more expensive. Nationwide still had the cheapest two-year fixed rate deal on a 60% LTV at the time of writing, at 4.37%, with Yorkshire Building Society again the closest rival, at the slightly higher rate of 4.49%.

For a three-year fix, you can get 4.44% again with Nationwide, and 4.49% again with Yorkshire Building Society, again on a 60% LTV. These are more expensive deals than the longer five-year fixed rates, which means if you are happy to tie yourself into a longer deal, you could be better off. This is because when you are looking at how much your mortgage will cost you overall, you also need to bear in mind that each time you change or rearrange your mortgage, you may have to pay fees on top that could reduce the benefit of the lower interest rate you can qualify for. So, it might pay to go for a longer-term fixed rate at a lower rate. But you would need to take specific mortgage advice to find out what the best solution would be for you.

Can you reduce the risk taken on a mortgage deal?

The difficulty with mortgages is that if you have a deal ending in, say, September, you need to start the process of remortgaging to get a new deal at least two to three months before the other one ends. But there is always a chance that we could see a big change in interest rates between now and then, or even during the period that your mortgage application is being considered. They could go up, or down.

However, depending on when you start the process of arranging your mortgage, you could use the term that the offer is valid for to your advantage. For example, if you know you go onto your lender’s standard variable rate (SVR) in September when your current mortgage deal ends, you should start the process of getting a new mortgage offer sooner rather than later to give you the best options. A broker could be best placed to help you with this, especially if you’re not confident about finding the best mortgage deal for yourself.

The main reason to start sooner is that a lot of mortgage lenders will make you an offer that will be valid for up to six months. This means you can lock in an interest rate in March and be guaranteed to get it should you choose to take up the offer before your current deal ends in September. This protects you from rates rising in the six months from when you get the offer to when you need to accept the offer.

If rates fall though, you can disregard that offer and take up a lower rate with a different lender if it suits you better. To check whether this is a good idea, you need to consider all costs associated with the mortgage offer you got first. You may find that, when all costs are taken into consideration, it isn’t worth changing. But you do have the option by being smart and applying early.

Check the fees carefully

When you apply for a mortgage, you will usually be charged a product fee by the lender, and these can vary considerably. For example, Nationwide’s five-year fixed rate at 3.88% comes with a hefty fee of £999. But its 4.09% five-year fixed rate comes with no fees, so depending on how much you need to borrow, you might find it is cheaper going with a slightly higher rate and no product fee than a lower rate with a meatier fee.

If you want to benefit from the six-month offer, then the lower the fee you pay to get this, the better because if you then choose to change to another mortgage if rates fall, it could result in another fee. So, it is important that you check the fees carefully and work with your accountant or a mortgage broker, to make sure you’re not losing out when you take the fees and the interest due on the mortgage for the period of the deal into account.

We can help you

If you want to find out how to make the most of any new mortgage offer ahead of when your existing mortgage deal runs out, then please get in touch with us and we will be happy to help you.

February 12, 2024

Rumours circulate over HMRC crackdown on eBay and Etsy sales

Rumours circulate over HMRC crackdown on eBay and Etsy sales

Rumours have been circulating online that HMRC is set to crack down on tax avoidance on sales of goods on the likes of eBay and Etsy, but the basic rules haven’t changed, and anyone who was trading on one of these sites should always have been declaring their earnings to the taxman.

What has changed is that from January 1, 2024, these sites are obliged to provide information to HMRC on sellers operating through the site before January 2025. So, if you have been using these sites to sell items and generating income that should have been taxed, you should get in touch with your accountant to find out what you need to do as soon as possible.

Confusion arises because many people will sell items they no longer want or need on eBay, for example, and in most of these cases there is no tax to be paid. But if you buy goods with the intention of selling them, or you make a capital gain on what you’re selling, then there could be tax to pay.

When would you need to pay tax?

In a useful update, HMRC has outlined the various scenarios that you may find yourself in if you are selling items on one of these sites, and when you would be most likely to need to pay tax. For example, if you are selling items that you own – perhaps because you are clearing out a shed or an attic – then this is likely to be a one-off activity, and you will most probably sell the items for the same or less than you bought them for. In this case, you wouldn’t need to pay tax.

However, let’s say you sold some unwanted clothes or other items you had in the house online to either raise money or simply reduce clutter in your home. You find that you are quite good at getting a good price for these items and decide to start buying items at car boot sales or elsewhere, and then sell them online for a profit. The original sale wouldn’t be considered trading, but the later sales would as you’re deliberately buying goods to sell. In this case, you could be liable to pay tax.

You would also be considered trading if you buy and then sell model cars – another HMRC example – or other items, or you import goods to sell online for a profit. You would even be trading if you make homemade gift cards that you sell online regularly with the intention of making a profit from them.

What other ways might you be liable to tax online?

There are other ways you might be selling that could leave you open to a tax charge. One would be if you are selling online services, such as teaching a language over Zoom or Teams, for instance, or if you generate revenue by offering other services online, such as proofreading. This may not be a service you offer through the likes of eBay or Etsy, but you would be liable to pay tax on income you generate from it just the same.

In fact, any online marketplace – which includes a website or a mobile phone app – would be considered as such by HMRC if any kind of transactional trading takes place on it. These online marketplaces will soon be generating copies of your transaction history that you can get hold of to check your liabilities yourself, but that will also be sent to HMRC directly under a wide-ranging set of internationally agreed guidelines. So, make sure you know if you are expected to pay tax on these transactions, and prepare for it accordingly so you don’t have any nasty surprises.

Are there any allowances?

One thing to consider is that there are certain allowances you might be able to benefit from if you are selling goods online. For example, if your total income from selling goods or services online was less than £1,000 before you take off any costs or expenses, then you wouldn’t need to tell HMRC about it or pay any tax on this.

This is because that amount comes under the Trading and Miscellaneous Income Allowance – which also gives you a £1,000 allowance for any property income under the same legislation. But if the amount you generate is above this, then you would need to inform HMRC and pay any tax due.

Remember though, you also have the Personal Allowance, which for the 2023/24 tax year is £12,570 per year. If you don’t have a full-time job, or you earn less than this across all the ways you generate income each year, then you would still have no tax to pay. But you must still register with HMRC and file a self-assessment return each year.

If you don’t know how to do this, or need to register and file a self-assessment return, you can find more information on Gov.uk

Contact us

If you are unsure whether any of your activities could generate a tax liability, then please get in touch with us and we would be delighted to help you understand your tax position.

February 5, 2024