Landlords face an eye-watering effective tax rate of 66% on rental profits when mortgage interest relief changes come into full effect, figures calculated reveal.
The numbers highlight why the tax clampdown on buy-to-let has left many landlords questioning whether their property investments are still worth it given the extra financial costs they now face. Realising that they are paying such a high effective tax rate may push yet more to quit buy-to-let and push rental prices even further amid a shortage of properties, landlord organisations fear.
Chancellor Philip Hammond is allegedly considering cutting higher rate pension tax relief in a bid to find extra money for the NHS. There are reports that an unnamed senior government source has indicated that Hammond had eyed the £38 billion paid out every year in the form of pension tax relief as ‘one of the last remaining pots of gold we can raid’. However, the source added Hammond was likely to only target people who can afford to put tens of thousands of pounds into their schemes each year. This could head off the possible rebellion that stopped Hammond’s predecessor George Osborne pushing ahead with changes to tax relief in 2016. There have been no further musings or further details on how any possible cut to tax relief would work, but we know that Hammond will need to find £20 billion in his November Budget to fund extra NHS spending pledges made by Prime Minister Theresa May earlier this year. He has been given a boost of around £10 billion in the form of an unexpected surplus, but still needs to make cuts or raise taxes in other areas to make up the shortfall.
The Great Child Trust Fund Hunt!
Parents are being urged to track down lost Child Trust Funds as the first children to receive the savings accounts are set to turn 16. Up to one million of these Government-funded accounts are thought to have been lost or forgotten about. It means children are missing out on a vital savings boost as millions is left languishing in these forgotten funds. Every baby born in the UK between September 2002 and January 2011 received at least £250 in the form of a voucher from the government. Lower income families received £500. Parents, grandparents and others could then put in up to £1,200 a year, and all income and gains were tax-free. The recipients of these accounts are now aged between seven and 15, so they are reaching the age at which experts believe parents and guardians should help them to understand what this money is for, and what it is invested in. This could provide a vital early lesson in the value of long-term investment.
Slide in UK factory growth
The slide in UK factory growth has brought the City back to earth with a bump after the summer holidays. Optimism has fallen whilst job creation is virtually at a standstill, with cuts by larger businesses neutralised by job growth in SMEs. Together with export orders – also at a 25 month low despite continued sterling weakness – these figures are particularly concerning against the backdrop of global trade wars and increasing uncertainty around Brexit – both of which will be weighing on businesses.
Cash ISA sales at an 18 year low
The number of new ISA accounts fell to an 18-year low during the last tax year, figures from HM Revenue and Customs (HMRC) have revealed. The data shows that savers subscribed to 10.8 million ISA accounts during the 2017-18 tax year, down from 11.1 million in the previous tax year. This represents a fall of 10%. Cash ISAs saw the biggest decline, with the number of subscriptions down by 697,000. In contrast, Stocks and Shares ISAs rose in popularity – with 246,000 more accounts opened compared to the previous tax year. The declining interest in Cash ISAs is understandable given the abysmally low interest rates on offer at a time when inflation spiked and put household finances under pressure, meaning real returns on cash savings were negative. Also of note is the fact that, for most Britons, cash ISAs are arguably surplus to requirements; basic rate taxpayers no longer pay tax on their first £1,000 of savings interest anyway and higher rate taxpayers can earn up to £500 of interest tax free.
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