Over the past dozen years or so, the way household bills has changed dramatically.

In an attempt to reduce the ‘paper mountain’ (and to be more environmentally friendly), everyone has the opportunity to electronic billing. This means reminders by email and check bills online.

Programmed payments

Another big change is the way to pay bills these days.

These days, regular bills are paid by direct debit, standing order or via continuous payment authority (CPA) from a credit card.

The bonus of paying bills by CPA is that you can have  a cashback credit card that pays a yearly rebate of 1% of spending. Hence, by paying bills with a credit card, a small refund each year.

As for direct debits and standing orders, I much prefer the former, as paying by direct debit can produce big savings on your bills. For example, by paying for gas and electricity by direct debit, a 5% reduction from your bill. In fact, more than 300 different providers provide discounts to customers paying by direct debit.

What’s more, choosing to have a paper bill and not paying by direct debit can be expensive. For instance, Virgin Media charges an extra £21 for paper bills, plus a whopping £60 a year for payment other than by direct debit.

Learn to love your bills

The way this process works is simple: When a bill arrives, scrutinise it closely. Check it against previous monthly, quarterly or yearly bills, to see whether this expense has risen or fallen. If the cost has gone down, cheer.

However, if the cost has risen (which is usually the case), then  look into the bill in more detail, so as to establish why this expense is rising. On almost every occasion, increases are down to price hikes by providers. In some cases, these price hikes are well ahead of inflation (the general increase in the cost of living). Immediately start shopping around online for cheaper alternatives.

10 bills to kill

The bills you should keep the closest eye on will vary depending on your own personal circumstances.

1. Mortgage (especially if you haven’t switched rate or lender in the past three years);
2. Credit card (why pay interest at, say, 20% APR, when you could have a 0% balance transfer?);
3. Car insurance (premiums are soaring, so never stay loyal to one provider);
4. Home insurance (never renew your policy without shopping around and haggling first);
5. Travel insurance (The worst policies can cost five times as much as market leaders);
6. Gas and electricity (energy bills have risen dramatically in the past two years);
7. Home telephone (Providers keep hiking their landline rental and call costs);
8. Broadband internet (switching provider could save you £200+ a year);
9. Digital television (BT, Sky and Virgin are battling to win your custom); and
10. Mobile phone (are you on the ideal tariff for your calls, texts and data usage?)

Be sure to cancel any ongoing payments that you no longer need, such as unwanted gym memberships, magazine subscriptions, old insurance policies and the like.

The reason for the increase in the ISA allowance is to keep it in line with inflation. This is based on the Consumer Price Index (CPI).

An advantage of putting money into an ISA is that the interest earned is tax-free.

If you pay regularly into an ISA, you may want to review the amount that you put into it, as you can put more in regularly. For example, if you have been putting £890 into your ISA each month (giving a yearly total of £10,680), you will be able to increase this to £940 per month (totalling £11,280). Junior ISAs remain at the £3600pa (you can read some more about Junior ISAs at this link www.mraltd.com).

What is an ISA

An ISA or an Individual Savings Account is a tax-efficient way to save or invest. The beauty of ISAs is that they don’t end when the tax year does. You can take it with you into the new tax year meaning each year you get the tax benefits on the cumulative amount. You can keep adding to your ISA and the sooner you do this in the new tax year the more you maximise the tax benefits ISAs give you.

ISAs were created by the government to encourage people to save. The ISA is effectively a tax wrapper like a pension, so you can choose the underlying investments your money is invested in. Various non-cash assets can be held in a stocks and shares ISA, including unit trusts, investment trusts, open ended investment companies, bonds, individual shares and exchange traded funds.

According to www.money.co.uk over 2 million Isa owners believe that transferring to another Isa will use up their yearly allowance. This is not however the case, as you can transfer an Isa to another one without using up your allowance. www.moneyadviceservice.org.uk have warned that Isa rates may go down after 12 months due to introductory offers coming to an end. Transferring funds may allow you to maintain a high rate.

Only 17% of people have transferred their Isa to get better rates. Transferring money may seem a long and pointless process, but if you get better interest rates, then it’s no waste of time.

In 2010, the government promised that ISAs will be increased each year in line with Retail Price Index (RPI) to keep pace with inflation (to see the difference between CPI and RPI go to www.moneyweek.com). In the year to September 2010, the RPI rose by 4.6%, and therefore the ISA allowance was increased accordingly. This tax year sees the change from RPI to CPI. As a result, the allowance will increase at a slower yearly rate.

Another advantage is even though interest rates are currently low, they will increase in the future. Using the yearly allowance will help you build up a tidy sum.

Investing your money into ISAs early can be more beneficiary as you can save on tax for the whole year, compared to leaving it to the last minute.

If you would like help setting up a an ISA, don’t hesitate and call us at 01424 777156 to book a 1 hour free consultation.

Brits saved £21 billion in the third quarter of last year, according to figures from the Savings Brake report, published by Unbiased.co.uk. At the start of 2010, this was only £18 billion. The question is how best to save. Are you willing to take a degree of risk with your money and what other downsides should be considered?

Before starting to tuck money away on a regular basis there is a very important job to complete, according to Andy Gadd, head of research at Lighthouse Group. You will need to pay off any existing debts, especially those expensive credit card bills. “Anyone who chooses to save rather than paying off debts will need to earn a return [after tax] from their savings that is greater than the interest they are paying on those debts,” he explains. “An analysis of both will need to be carried out. Those who are married and/or have a family should also consider the various types of insurance that is available to safeguard their family’s future – particularly life cover and critical [injury] insurance – before they start saving their cash.”

The first step is to put together a rainy day fund, according to Mark Dampier, head of research at Hargreaves Lansdown, who recommends everyone has between three to six months’ worth of salary saved as a safety net in an easily accessible account. “People underestimate the importance of having cash behind them,” he explains. “They may feel [financially] well off, but the acid test is what would happen if they lost their job. Would they be able to survive financially until they found employment?”

The average Briton should live to almost 80, according to the Office for National Statistics, which is five years longer than was being predicted in the early Nineties. The question, however, is how to fund these extra years. Proposed changes to pension regulations also mean people will have to work longer and harder before they can reap the rewards of their hard work – which is why it’s so important that we all start planning our retirement now.
The priority as far as longer-term saving is concerned should be a personal pension, because this is still the most tax efficient way of funding your retirement even though you won’t be able to access to until your mid-fifties.
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Regardless of where you want to put your money, a good method of investing it is to put it away monthly, suggests Darius McDermott, managing director of Chelsea Financial Services. This is known as “pound cost averaging” and sees investors paying a set amount each month to buy units of a fund – at whatever price they are available. “If you regularly invest £200 into the fund and have been buying units at £8 each, when they fall down to £6 you will get more units for your money,” he explains. “You get an averaging effect and it’s a great savings discipline.”

According to Aviva (www.aviva.com), 60% of parents admit to spending too much on their children. Expecting parents spend a whopping £1370 preparing for the new arrival. 6/10 people have said they have bought things that is not needed or used. First time parents spend around £435million each year preparing for their first baby. This equates to £1,370 per family.

The cost of raising a child has risen by 3.3% according to the annual Cost of a Child report from LV (www.lv.com). It shows that Pocket money has risen by 4.8%(£4337 costs for this year) from last year. LV have also supplied a cost of child chart at this link: www.lv.com to see how much your child will cost.

You can save on your child care costs and here are a few tips on how:

Register for Childcare Vouchers

It might be a good idea to get these if your employer offers them. You can use the childcare vouchers for numerous different costs, such as nursery, after school activities or boarding school. Your employer might take this as a salary sacrifice.

Free childcare for 3-4 year olds

Your child is entitled to free learning just so long as they are there for a minimum of 12.5 hours per week and are there for 38 weeks of the year. This can be for nurseries, play groups, preschool or a child minder.

Check if you are entitled to tax credits

Verify if you’re eligible for the childcare element of the Working Tax Credit. If you are, you could receive help towards the costs of a number of childcare services. Some forms of tax credits are: Income Support, Working Tax Credit, Child Tax Credit, and Child Benefit.

Long Term Picture

When considering ways to ease the family budget, it is important that you keep in mind he long term picture. Cancelling life cover or income protection, for instance, as a short term measure to save money can have catastrophic implications if either parent were unable to work or weren’t around in future.

Parents don’t begrudge the money

Despite an uncertain UK economy forcing more pressure on the family budget, it’s clear that parents don’t begrudge the money they spend on their children, and would rather do without themselves than radically cut back on what they can provide for their children.

If you need help on saving some money, MRA can help you. Just give us a call to book a 1 hour free consultation at 01424 777156.

Everyone will love to pay less tax, but either do not know how to or just do not do it. According to mirror.co.uk, £12.6 billion will be paid in unnecessary tax. £2.45 Billion of that figure is wasted on people not using their pension allowance.

These are some of the areas where clever pension planning between now and 5^th April 2012 could provide tax advantageous solutions for you to achieve the retirement you want.

Subject to 50 per cent income tax – pay personal contributions within 100 per cent of relevant earnings threshold to reduce taxable income below the 50 per cent threshold.

Adjusted relevant income over £114,950 – pay personal contributions to registered schemes to reduce taxable income below £100,000, enabling your full personal allowance to be regained and providing marginal rate tax relief of 60 per cent on contributions paid between £114,950 and £100,000.

Carry forward of unused annual allowances from 2008/09 – this will be lost if not used. You must ensure the full £50,000 annual allowance for the 2011/12 tax year is used first, ensuring the pension input period for this contribution ends no later than 5 April 2012.

Employer contributions to reduce taxable profits in trading periods ending before 5 April 2012 – these can be used for carry forward of unused annual allowances, for the current annual allowance and for the 2012/13 tax year.

Registering for fixed protection – this must be completed no later than 5 April 2012. 2011/12 is the last tax year in which money purchase contributions can be paid if fixed protection is to apply. Maximise this year’s annual allowance plus carry forward of unused relief for pension input periods ending in 2008/09 to 2010/11 tax years. Clever use of pension input period planning will allow funding of 2012/13 annual allowance this tax year to maximise input.

Recycling of unused income withdrawals as allowable contributions – minimum £3,600 but could be higher if you have relevant savings.

Gifting income using ‘normal expenditure’ from drawdown funds – reduces potential 55 per cent tax charge on death from drawdown fund, while ensuring future growth is with the beneficiary and not part of taxable drawdown fund. Funding third-party contributions to pension arrangements of children or grandchildren is an option.

Early crystallisation – for some people aged over 55 crystallising benefits this tax year while the lifetime allowance is £1.8m will create higher retained lifetime allowance for future use.

Pension are hard to understand and for most people they are a mine field, if you think you have a problem or would like to discuss your retirement and pension planning with a specialist or would like help in getting through the mine field, why not give us a call.  We offer a 1 hour free consultation with one of our advisers call now for an appointment on, 01424 777156, you wont be disappointed.

Which? has also stated that 85% of people haven’t done anything about reducing the amount of tax in the past 12 months. 27% of people do not even know where to start to be tax efficient.

Here are some tips that could help you de-spell paying unnecessary tax.

Tax code

Review your tax code each year that is indicated on your payslip. Mistakes can arise with your code as the code shown is an estimate and will vary according to your individual circumstances. If you find that your tax code is wrong, you need to contact HMRC so they can correct it. Here is a link to contact HMRC.

ISA Allowance

The ISA allowance is tax free. The limit that you can invest into an ISA for this year is £10,680 (2011/2012). This can be put all into a Stocks & Shares ISA or £5,340 into cash ISA and the rest into a Stocks & Shares ISA. In a Shares ISA, there is no Capital Gains Tax to be paid on the profit.

Child Trust Funds (CTF)/Junior ISA

You can use these to avoid getting taxed on the money gifts you give to your children. You can put a maximum of £3600 a year into both of these. Your child will be entitled to a CTF if they were born between 1^st September 2002 and 1^st August 2010 and will be given £250 from the government, with a further £250 if you claim child tax credit. You must also have an income of less than £16,190. If your child was born outside this date, then they are entitled to a Junior ISA.

Children’s savings

You can save tax for your children, by filling out a R85 form on their behalf. Children paying tax may be rare as children have the same tax allowance as adults, meaning that they will only pay tax if their income exceeds £7450 in a tax year. Their allowance is also applied to their income from other sources, such as savings and investments.

If the return they get on their savings and investments is less than the personal allowance they won’t have to pay tax.

Paying into a company pension scheme

This usually works by the employer taking your contribution from your wage before tax is taken (The employer may also match your contribution). This is called salary sacrifice and there are other benefits that you can use salary sacrifice for, such as Car expenses, Childcare vouchers, etc. (depends on what your employer offers).

Landlord’s energy-saving allowance

As a landlord, you can claim an allowance of up to £1500 for insulation, draught proofing and installing a hot water system.

Rent a Room

You can get up to £4,250 in rent from a lodger a year and this is tax free. you have to let out a fully furnished residential accommodation in your only home or main residence is the way to qualify for this allowance. Letting out for business purposes, does not qualify for this scheme.

Anything you charge your tenants for meals, cleaning, laundry and so on must be added to the rent received when you calculate your gross rents, and you can’t deduct expenses.

Age Related Allowance

If you are aged 65 or over, you could be entitled to an increased personal allowance. Meaning you could pay lower income tax rate. If you’re aged between 65 and 74 and your income is below a certain limit, your tax free allowance for 2011-12 its £9,940 and if you’re 75 or over its £10,090. These higher allowances are income-dependant, however not everyone over 65 is able to claim them.

For more information or for help with your tax, why not give us a call and book a free 1 hour consultation with one of our advisers on 01424 777156.

These are urgent questions Mark Hoban, Financial Secretary to the Treasury, http://www.markhoban.com must answer if he remains adamant on defending new rules which are impoverishing tens of thousands of pensioners. Their predicament is all the more tantalising because they have the funds to pay for a comfortable old age – but, since April, the Government Actuary’s Department (GAD) http://www.gad.gov.uk/ has made it more difficult for them to get their hands on their own money.

Pension Changes

Complex changes to pensions rules have created a new way to avoid inheritance tax which experts describe as a “wheeze for the rich to beat IHT” while the squeezed middle suffer.

Most people outside final salary or defined contribution pensions will continue to buy an annuity – a form of guaranteed income for life – with most of their fund when they retire because of the security this provides. But a minority of pensioners choose to live off the income from the underlying fund, despite punitive taxes of up to 82pc which used to apply to the remainder of the fund if they died after the age of 75.

Since last April 2011, annuity purchase has no longer been compulsory at any age and the tax rate applied to income drawdown funds left unspent by pensioners who die at any age has been reduced to from 82 to 55pc. Great News!

The pensioners who are affected are those with income drawdown pensions, where savers set out to live off dividends from shares or other assets held in these schemes, rather than buying an annuity or guaranteed income for life.  Instead of irrevocably giving away at least three quarters of their pension savings to an insurance company to buy that guaranteed income for life, they retain ownership of their capital in the hope of receiving better returns – albeit at much higher risk.

Instead of being allowed to draw income equal to a maximum of 120pc of what they could have expected from a conventional fixed annuity, the GAD has restricted this to 100pc since April. That may sound like a small difference but the impact on these pensioners’ income is dramatic because it multiplies the effect of falling annuity and gilt yields – which are both near historic lows.

Now there is a way of using the new rules to maximise the portion of pension savings which can be passed tax-free to heirs but which will only be useful to those with very substantial funds. People aged over 55 who can show they have a ‘secure income’ of at least £20,000 a year can do what they like with their pension fund under a new facility known as ‘flexible income’.

The idea behind the £20,000 threshold for flexible income is to ensure that these pensioners will never be entitled to means-tested State benefits, even if they blow the rest of their savings on wine, women and fast cars.  Once pensioners have satisfied the £20,000 de minimis requirement, they can divide the rest of their pension fund into separate segments before drawing tax-free cash equal to 25pc of each segment to maximise income and minimise IHT liabilities.

Flexible drawdown was only introduced in April 2011, and is still fairly new, with a limited number of providers offering it. Wealthy individuals could consider using flexible drawdown as a way to deliver retirement income more efficiently from their unused pension savings, avoiding a potential 55pc tax liability.

While that compares unfavourably with IHT at 40pc on estates in excess of £325,000 per person or £650,000 per married couple or civil partnership, it still beats giving 100pc of the capital to a life company in return for an annuity if you want to pass assets to heirs.

What should you do to reduce, or even eliminate, an Inheritance Tax burden?

Inheritance tax (IHT) in the UK may be one of life’s unpleasant facts but IHT planning and professional advice could help you pay less tax on your estate. With the current thresholds set to remain at £325,000 for individuals and £650,000 for married couples and registered civil partnerships until 2014, now the time to consider reviewing your potential liability and finding out what you could do to reduce, or even eliminate, this burden.

Everything you have of value

IHT is usually payable on everything you have of value when you die, including: your home, jewellery, savings and investments, works of art, cars and any other properties or land, even if their overseas.

When you die, your assets become known as your estate. Any part of your estate that is left to your spouse or registered civil partner will be exempt from IHT. The exemption is if your estate that is left to your spouse or registered civil partner is domiciled outside the UK. Then the maximum you can give them before IHT may need to be paid is £55,000. Unmarried partners, no matter how long-standing, have no automatic rights under the IHT rules.

IHT is usually payable on death but there are certain circumstances, if you put assets into certain types of trusts, for example, when IHT becomes payable earlier.

Taper Relief

Taper Relief applies where tax, or additional tax, becomes payable on your death in respect of gifts made during your lifetime. The relief works on a sliding scale up to seven years and is calculated on the number of years before your death in which a transfer is made. The relief is given against the amount of tax you’d have to pay rather than the gift is set when it’s given, not at the time of death.

Writing a will

One of the most important things you can do to help reduce the amount of IHT you may have to pay is write a will. If you die without a will, your estate is ‘divided-up’ according to the pre-set formula and you have no say over who gets what or how much tax is payable.

Gifting it away

The taxman allows you to make a number of small gits each year without creating an IHT liability. Remember, each person has their own allowance, so the amount can be doubled if each spouse or partner uses their allowance.

You can also make larger gifts but these are known as Potentially Exempt Transfers (PETs) and you could have pay IHT on their value if you die within seven years of making them. Any others gifts made during your lifetime that do not qualify as a PET will immediately be chargeable to IHT. These are called Chargeable lifetime Transfers (CLT) and an example s a gift into a Discretionary Trust.

The Taxman lets you give the following as exempt transfers:

• Up to £3,000 each year as either one or a number of gifts. If you don’t use it all up one year you can carry the remainder over to the next tax year. A tax year runs from 6^th April one year to the 5^th April in the next year.
• Gifts of up to £250 to any number of other people – but not those who received all or part of the £3,000.
• Any amount from income that is given on a regular basis provided it doesn’t reduce your standard of living. These are known as gifts made as ‘normal’ expenditure out of income.
• If your child is getting married you can gift them £5,000, is a grandchild or more distant relative is getting married £2,500, and a friend or anyone else you know £1,000

If you have any queries about Inheritance Tax, then you can get in contact with a financial adviser at 01424 777156.

What is an ISA?

An Individual Savings Account (ISA) is a tax efficient wrapper. Within an ISA, you pay no capital gains tax and no further tax on the income, making it one of the most tax efficient savings vehicles available.

What types of ISAs are there?

There are two main types of ISAs: Cash ISAs & Stocks and Shares ISAs.

Cash ISAs work in the same way as normal savings accounts. You choose if you a fixed rate accounts, an easy access (or instant access) account or a regular savings account. The only difference is you don’t pay income tax on the interest you earn.

With a Stocks & Shares ISA, you can invest in individual stocks and shares or investment funds. Any profit you make is not subject to Capital Gains Tax. However, you pay 10 per cent tax on dividend earnings.

Who can save in an ISA?

Anyone who is 16 or over and a UK resident can save money in a tax-efficient Cash ISA but to save in a Stocks & Shares ISA you need to be at least 18.

How much can I invest?

As of April 2011, the ISA limit increased for everyone by £480 to £10,680 per tax year. Of this, the maximum amount you can put into a Cash ISA is £5,340, and then the remainder can be invested into a Stocks & Shares ISA.

Alternatively, you may choose to allocate the entire £10,680 into a Stocks & Shares ISA.

When should I invest?

As long as you have not exceeded the current £10,680 ISA limit you can invest in an ISA at any point during the tax year and, depending on the ISA provider, you can allocate lump sums or monthly contributions that fit around your lifestyle.

Will ISAs always be tax-efficient?

The government has promised to keep ISAs indefinitely. However, the tax treatment of ISAs may change in the future.

Can I transfer my existing ISA money?

You can transfer the money saved in a Cash ISA to a Stocks & Shares ISA, even if it saved in the previous tax years, without affecting your annual ISA allowance.

For more information regarding ISAs, Contact us and we will be happy to help.

Here are a few tips when it comes to pension planning.

1. Start saving for your pension early

It may seem really obvious but the younger you are when you start a pension, the better, because it means you’ve got more time to make contributions and there is more time for those invested contributions to grow. According to a study published in September 2010 by Aviva, in conjunction with accountants Deloitte, the UK adults now need to save an average of £10,300 every year to catch up.

2. Join your employer’s occupational pension scheme

If your employer offers membership of an occupational pension scheme, join it. These are employer-run schemes that have trustees who are responsible for the schemes being run properly, legally and fairly. If your employer has a scheme, it is almost always in your interests to join because of the employer contribution, which is in effect a tax-free benefit. More than one million people who could join company schemes don’t, according to the National Association of Pension Funds.

3. Take advantage of tax relief from HMRC

Make the most of tax breaks. Tax relief reduces your tax bill or increases your pension fund. Anyone, including children and non-taxpayers, can receive tax-relief from HM Revenue & Customs (HMRC) to help increase their pension. The way you get tax relief on pension contributions depends on whether you pay into an occupational, public, service or personal pension scheme. Contributions attract basic-rate tax relief. So £80 paid into a pension is automatically increased to £100 before costs. High earners can achieve the same effect by paying in £60, subject to complex and charging restrictions.

4. Increase the control over where you invest your money

Unlike most traditional personal pensions, a self-invested personal pension (SIPP) offers you different investment options and gives you more choice and control over where you can invest your money. There are significant tax benefits. The government contributes 20 per cent of every gross contribution you pay. If you’re a higher or additional tax ratepayer, the tax benefits could be even greater.

When you wish to withdraw the funds from your SIPP, currently between the ages of 55 and 75, you can normally take up to 25 per cent of your fund as a tax-free lump sum. The remainder is then made available to provide you with a taxable income. As with all investments, the value of the fund you have invested can go down as well as up and you may not get back as much as you invest. The increase cost and control of a SIPP will generally come with higher charges, so for individuals not requiring the additional flexibility, a traditional personal pension may be more appropriate.

5.  Pay extra National Insurance contributions

Consider paying extra National Insurance contributions (NICs) to increase the state pension. This is most likely to benefit women who have taken time off work, perhaps to bring up children. However, you need to beware of means of test. There could be risks associated with buying back missing years of your NICs and you should always obtain professional financial advice. Although buying back missing years can be a good deal, the government won’t go out of its way to tell people about this with its finances stretched.

If you have any questions, contact Mike Robertson Associates at 01424 777156.