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Commercial Property

Thursday, 03 September 2015 08:00

We all know Britain is a nation of property lovers. But what do we know about buying and investing in commercial property?

In 2008, commercial property prices fell by an unprecedented 44 per cent almost overnight when the US sub-prime mortgage crisis hit and it’s only recently that we see prices outside of London starting to regain their lost ground.

Since the banking crisis in 2007, the market has gradually regained confidence and is becoming an increasingly attractive investment again.

Experts point out that while the price of property, in such as London, have mostly recovered, but there could still be value in the other outer areas, with good potential rental incomes and capital growth.

The commercial property market consists of shops, industrial buildings, warehouses and offices. You can typically invest directly by investing in a fund which holds actual physical property in its portfolio or by buying a property yourself, or indirectly by investing in funds exposed to property companies, developers and house builders, for example a Real Estate Investment Trust (REIT).

‘Direct’ property investment funds or trusts buy these units, whether new or existing and rent them out to other businesses on long leases, making a profit from the rental income as well as capital growth in the price of the property. This makes them popular with income seekers, as rental income typically rises in line with inflation.

Many investors invest in commercial property via a collective investment scheme. Property funds on the whole are a cheap and easy way to gain exposure to commercial property as an asset class.

Investment funds and trusts providing entry into this commercial sector are divided into two types. A traditional bricks and mortar fund will invest in the property directly and is structured as an open-ended fund or a closed-end investment trust. This fund will physically buy the property and be responsible for its maintenance and rent collection as well as having the added benefit of a regular rental income. However, as offices and warehouses are not easily bought or sold, the liquidity can be very slow. The second type is a property securities fund which invests in the shares of listed property companies and therefore is much more liquid, but is exposed to the ups and downs of the stock market.

Investors can also buy shares directly in a REIT (Real Estate Investment Trust), which runs a portfolio of properties, although this is a far less diverse way to invest as it’s just one company. Those with plenty of capital can also buy a property outright and lease it back to companies themselves, although this is without question a labour and capital-intensive, not to mention risky, way to gain access to the sector.

What to look out for

A large risk in the commercial property sector is finding tenants for empty buildings and recently we have seen the market split into two categories of property in good-quality locations, which continues to be investable and those properties in poorer, secondary locations that are often un-fundable and provide a poor return.

Property investors should be wary of three key areas: volatility, diversification and liquidity. On the upside, property funds can be less volatile than those focused on other assets, but direct property funds in particular are much less liquid because you are selling an actual property. It can be especially hard to sell when the property market is in decline. Also note that open-ended funds are particularly sticky because the fund manager has to cash in units, meaning selling property. Closed ended funds like investment trusts are more liquid because you just need to sell the shares in the trust, not the underlying assets.

Investors should ensure they take a well-diversified approach, by having a good spread of properties across retail, office and industrial. The main disadvantage of commercial property is that the location and management of the property is ‘everything’. Get this wrong and commercial property can be unforgiving. It’s also worth remembering that commercial property funds can be slightly more expensive than funds invested in other assets.

For advice contact me on 01896 757734 or email This email address is being protected from spambots. You need JavaScript enabled to view it. - Fraser Brydon - Money Matters

Life, income & health

Wednesday, 26 August 2015 08:00

If we insure ourselves in our car, why don’t we carry the same protection for our lives when we are not in them? It’s not nice to think about personal injury or indeed death, but insurance can provide welcome protection at the most important time, however working out which type you need and can afford can be tricky.

Income Protection

Income Protection (IP) insurance will pay you a regular income if you are unable to workbecause of an accident or illness.

Normally, IP policies pay between half and two-thirds of your income until you return to work, reach retirement age or die. Cheaper, shorter-term policies are available, that pay out for a set period, which is typically one or two years.

How long you will have to wait to receive your payout will depend on your policy; generally the longer you wait, the cheaper it is.

What to look out for

Ensure you study the details of a policy before you sign up, because different providers have different definitions of being unable to work.

Ask your employer if they offer any kind of income protection-type benefit, which might make buying your own policy unnecessary. Remember that income protection insurance is particularly useful for freelance or selfemployed workers.

Check whether your policy covers self employed occupations, or if it is based on your ability to do a ‘suited occupation’, a similar role but not necessarily the one you’re currently in.

More generic policies will be list-based in definition, typically a list of six tasks, such as lifting a pen and getting dressed; the claimant would have to be unable to do three of them to be classified as unable to work.

Life Assurance

Life cover actually pays out a lump sum upon your death.

There are different types of life assurance: ‘set term’ which will for a pre-determined period, or ‘whole of life’ which continues until you die, providing you pay your premiums.

Whole of life cover can be taken on an income basis too, so that when you die your family will receive a monthly amount rather than one lump sum.

What to look out for

You should put your policy in trust, which sounds complicated but in reality it’s just like filling in a form, and it means the money passes quickly to the right people in the event of your death.

Single policies are preferable to joint plans, as the cost is invariably the same and yet they offer double protection because there will be a payout on each person’s death, rather than just upon the death of the second spouse. Index-linking your policy is also worth considering: the price of your premium will rise slightly each year but so will the level of your cover.

Critical Illness Cover

This type of insurance policy pays out a lump sum in the event that you are diagnosed with one of a specified set of illnesses and conditions set out in the policy. Typically such policies cover around 30 to 40 conditions, ranging from heart attacks and cancers to less common illnesses.

What to look out for

Most critical illness policies are bought alongside life cover. Some people might be put off by Critical Illness Cover (CIC) as it tends to be more expensive than life assurance, but there is a reason for that: you’re much more likely to use it. Insurers have a waiting period of usually 21 days written into the policy, which means that if the policyholder passes away during that time, it is treated as a death claim rather than a critical illness claim.

Never think it won’t happen to me

Research suggests protection products are some of the hardest for customers to understand, but it’s important to understand that although these policies sound similar to each other, they insure against different life events and thus their suitability will depend on personal circumstances.

Before taking out any form of protection it is important to decide what type of cover you want and how much cover you will need, to ensure you don’t end up under or over-insured.

Ideally you should review your policies regularly to ensure they are appropriate for today and that they cover you to an acceptable level.

For advice contact me on 01896 757734 or email This email address is being protected from spambots. You need JavaScript enabled to view it. - Fraser Brydon - Money Matters

When taking benefits from a pension, 25% is usually tax-free and the rest is added to other income in that tax year and subject to income tax. For those planning to take large lump sums out, this could push income into a higher tax bracket. At the extreme, someone could instantly become a top rate taxpayer (45%).

One option to reduce tax is to spread withdrawals over a number of years. Investors - perhaps basic or non-taxpayers, might even consider taking some this tax year.

Although the new rules don’t take effect until 6 April, pensioners can already use income drawdown to take tax-free cash and some taxable withdrawals. Until April most people are restricted on the amounts they take out. From April the limits are effectively removed.

Please remember, a pension is intended to provide income for a retirement potentially lasting 20 years or more. Taking excessive withdrawals increases the risk of running out of money later and could have a significant impact on lifestyle. In income drawdown the pension fund remains invested so will rise and fall in value. It is a high risk option so will not be suitable for everyone and income is not secure. Tax treatment and pension rules will change over time and will depend on individual circumstances.

For advice contact me on 01896 757734 or email This email address is being protected from spambots. You need JavaScript enabled to view it. - Fraser Brydon - Money Matters

Financial Planning

Thursday, 23 April 2015 08:00

1. Pension freedoms

Pension savers are eagerly awaiting the advantages of the new pension reforms in April 2015. An estimated half a million people will be able to take advantage of these increased pension options when considering alternatives to annuities for their retirement income.

This means it has never been more important to consider how best to mix guaranteed income from the likes of state pension, final salary pensions and annuities with more flexible, riskier options such as drawdown.

The right approach will suit an individual’s attitude to investment risk and whilst trying to mitigate the potential tax traps of large withdrawals, keeping in mind that only 25% of a pension can be taken tax-free, with the rest being subject to income tax at your personal rate.

2. Reduce your tax burden

Following this year’s general election most expect the new Government to increase taxation. Effective tax planning is the utmost importance now.

• Couples should now plan ahead and set themselves up for a minimum of £21,200 of tax-free income (from April 2015) by making best use of tax bands and personal allowances.

• With the current ISA allowance of £15,000 to use by 5 April and a new allowance of £15,240 from 6 April, a couple can shelter up to £60,480 from further taxes over the next four months. It is also possible to shelter up to £40,000 each tax year in a pension and benefit from tax relief. Those who do not already use this allowance through a work pension including employer contributions, can top-up by contributing to a private pension such as a stakeholder or a SIPP. High earners can carry forward unused allowances from previous years to shelter a total of up to £190,000 in pensions this tax year. Remember tax rules can change and the value of any benefits depends on individual circumstances.

3. Rethinking estate tax planning

The new April rules will make ISAs transferable to the surviving spouse and pensions will be completely tax-free if death occurs before age 75.

As with all planning, you should regularly review to check that plans are on track to achieve their goals, taking into account rule changes such as these. These new changes to the tax treatment of pensions and ISAs on death will mean many pension investors will be rewriting and revisiting their Wills, inheritance tax and estate plans this year.

4. Beating low interest rates

Every portfolio should have an element of cash available, enough should be held to meet short-term spending needs.

Over the long term the low returns offered by cash are often eroded by inflation, and that’s why other assets, such as shares and bonds, could be considered for the rest of an investment portfolio.

Generally, past performance shows that cash is highly unlikely to beat the returns from the stock market over the long term, but unlike cash the market will have its risks.

5. Always seek professional advice

Working out how to arrange a portfolio for maximum tax efficiency can be complicated. Making the most of inheritance tax planning strategies and deciding how much cash to commit to the stock market are all important financial decisions. It is important to conduct detailed research and your professional financial adviser can offer help and guidance to ensure you meet your financial goals.

For advice contact me on 01896 757734 or email This email address is being protected from spambots. You need JavaScript enabled to view it. - Fraser Brydon - Money Matters

Before the 5th April and the end of the tax year, you need to think about maximising your saving opportunities before they disappear for good!

1. Flexible Pension Preparation and Contributions

Your pension contributions need checking annually. Contributing to your pension is often a good way to manage your tax liabilities, although it should be done with your full financial plan in mind. You will need to consider the pension lifetime allowance, which is currently £1.25 million. Anything above this level within your pension can currently be taxed, thus potentially altering your tax planning, so it’s worth checking the size of your pension pot, remembering to allow for its natural growth, if you’re considering extra contributions. Whilst you’re looking at your pension, consider preparing for its new flexibility: the new rules announced during the 2014 Budget come into force at the turn of the tax year.

2. Watch out for the Budget

The 2015 Budget Statement will be delivered by George Osborne on Wednesday 18th March. Look out for any ‘instant’ changes, such as the change to Stamp Duty announced during the December 2014 Autumn Statement, which are a regular occurrence. This is also the Budget prior to May’s UK General Election, so it is likely to have some fairly major announcements designed to appeal to voters that could come into force at the start of the 2015/2016 tax year.

3. Capital Gains Tax Allowance

Many forget the ‘gift’ from the taxman, the Capital Gains Tax Allowance is £11,000 for the current tax year. This means that you pay no tax on Capital Gains up to that this threshold. It is also an individual allowance, meaning that a couple can shelter up to £22,000 and genuine gifts from a spouse or civil partner do not count towards the allowance. There are various other exemptions and careful planning can again really help your tax position.

4. Junior ISAs and Children’s Savings

Junior ISAs for this tax year are £4,000; their Capital Gains Tax Allowance is set at the same rate as adults and they can also make pension contributions.

5. ISA Contributions

Finally the ‘big one’, the amount you can invest into an Individual Savings Account (ISA) resets at the tax year end and if you don’t use it, you lose it. This tax year, following the changes announced in the 2014 budget, the ISA limit was increased to £15,000, up from £11,520 in 2013/2014, which means that many of us may not have increased to the maximum allowance. There’s also no longer a limit on how much you can put into a cash ISA, so your entire £15,000 could be invested in that way, if you so wish.

Monitor your tax code

Check your pay slip or ask your tax office for a coding notice. This details your allowances and any deductions due to state benefits or taxable employee benefits. Errors will affect how much tax you pay and could result in a large tax demand if you have underpaid. You could also be paying too much if, for example, where employment changed and your correct tax code wasn’t applied or you have more than one job. You can claim back overpaid tax for up to four years.

Use all of your personal allowances

Ensure that you are making the most of your individual tax-free personal allowance (PA), which is £10,000 for 2014/15 (£10,600 for 2015/16 tax year) for people aged under 65. For the over 65s, the age-related allowances which are worth up to £10,660 assuming your maximum income doesn’t exceed £26,100, after which your PA would reduce by £1 for each £2 earned above this figure, until it reached £9,440.

Remember to transfer any unused allowances to your spouse or registered civil partner, if they have little or no income, to ensure that they are able to make full use of their PA. Care should be taken to avoid falling foul of the settlements legislation governing ‘income shifting’. Transfers must be an outright gift.

The value of your investment and the income from it can go down as well as up and you may not get back the original amount invested. Past performance is not a reliable indicator for future results. Please contact us for further information or if you are in any doubt as to the suitability of an investment.

For advice contact me on 01896 757734 or email This email address is being protected from spambots. You need JavaScript enabled to view it.. Fraser Brydon - Money Matters

Income Drawdown

Thursday, 12 February 2015 08:00

The alternative to buying an annuity at retirement is Income Drawdown. You draw a variable income directly from the pension fund and the balance stays invested as you choose.

Being in total control of the pension fund is what gives income drawdown its appeal, but it comes with considerable risks, because it’s you who decides where to invest, and how much income to take.

Many are now choosing income drawdown for a variety of reasons. We look at some potential investment strategies to consider.

Take tax-free cash with no income

Pensions normally allow 25% to be taken tax-free as cash from your pension, leaving the rest invested in income drawdown. There is no requirement to take an income if you don’t need it.

A option could be to wait for the more flexible pension rules to come into effect in April 2015.

If you don’t intend to take an income until later in retirement, you can probably afford to be a little more aggressive in your investment approach, keeping the fund invested in the stock market via investment funds, or if you have the appetite, directly in shares. Retirement can last 20-30 years, over this period of time shares have historically out-performed other asset classes such as cash, or gilts (Government bonds). Remember, though, there are no guarantees and any investments can fall in value as well as rise so you could get back less than what you invest.

Take a regular income

If your plan is to take an income from your drawdown fund then your investments need to keep pace with your withdrawals, or you may exhaust your fund. If you take too much and investments don’t do as well as you thought, your fund value and future income will fall. Investing solely in cash will protect the value of the fund short term, but isn’t so suitable long term as it is much less likely to produce the level of returns required to sustain your withdrawals.

An option would be to draw the income generated by your investments, leaving the investments themselves intact to grow over time. This is called drawing the ‘natural yield’. Should markets fall, you should still receive an income whilst you wait for the capital to recover.

Use Diversification

Smoothing the volatility of shares can be found by an exposure through a collection of equity income funds. These aim to invest in firms that have the potential for rising dividends over the long term, whilst offering potential for your capital to grow. The fund manager spreads your money across a range of dividend-paying companies, spreading risk.

Additionally, to diversify your income further you could also consider bond funds, both corporate and Government bonds. The income they provide is still reasonably attractive in the current low interest rate environment, keeping in mind an unexpected jump in interest rates or rising inflation expectations would generally result in prices falling but, the income should remain the same.

With such a consideration an option could be strategic bond funds, where the manager has the freedom to seek out the best opportunities, while also having the ability to offer some shelter in tougher times.

Looking to maximise income

Capital withdrawals provide big injections of income but there are inherent risks with this approach, withdrawing capital when your portfolio is in decline will compound your losses.

There are steps you can take to reduce this risk. The first is to ensure your portfolio is diversified and not entirely dependent on the performance of the stock market. Funds have the potential to perform in a variety of market conditions.

Consider holding at least a year’s required income in cash. If markets fall, having a cash buffer to draw upon allows you to watch market trends, whilst still receiving an income.

Reducing or stopping income withdrawals temporarily whilst the markets are in turmoil is also a strategy you can adopt, thus preserving your funds longer term.

Mixing your income

The main point to income drawdown is the income is variable and not secure. Yet in retirement, it’s good to have some level of secure income to cover basic living expenses and bills.

You could use some of your pension to provide the security of an annuity with income drawdown. This option can offer the best of both worlds.

The value of your investment and the income from it can go down as well as up and you may not get back the original amount invested. Past performance is not a reliable indicator for future results. Please contact us for further information or if you are in any doubt as to the suitability of an investment.

For advice contact me on 01896 757734 or email This email address is being protected from spambots. You need JavaScript enabled to view it.. Fraser Brydon - Money Matters

It's a numbers game

Monday, 05 January 2015 08:00

The world of finance is always on the move, knowing the key numbers that change is essential. Just when we have got used to one set of allowances and tax breaks along comes the Government and shakes everything up again.

Budgets set by the Chancellor George Osborne always deliver a series of changes that leave people overwhelmed and confused. We look at the key numbers to hopefully encourage you to save more or avoid any hits that will eat into your pocket.

There are 1128 tax reliefs available to individuals and businesses, according to the latest report by the National Audit Office. Most of the popular including ISAs, pensions and the inheritance tax nil-rate band threshold are shown below.


You can save £15,000 into an ISA each year from July 1 2014. It is the maximum amount you can save into a taxadvantaged each tax year (from April 6 to April 5).

The maximum ISA allowance of £15,000 will be universal. You can put it all in cash, all in stocks or shares or a mix of them both.

305 months

It would take 305 months to save £1 million in a stocks and shares ISA, according to calculations by investment manager Fidelity. This assumes an investment today of the £15,000 limit. This example assumes the ISA limit is frozen for the next tax year of 2015-16 and then rises in line with inflation, then averaging 2.5 %, and 5% growth a year. This is only a model, but it does show the strength of constant saving.

£1.25 million

Lifetime Allowance does put the bar onto how much you can save into a pension, this limit is on the amount of tax relief you are allowed. Break through this £1.25m limit, without protecting yourself and you will pay a tax change of 55% on any excess.

Individual protection is available if the value of your pension benefits at April 5 2104 exceeded £1.25 million. This provides you withyour own personal lifetime allowance equal to your existing savings at the time, subject to a maximum of £1.5 million.


By leaving it late you would have to invest £26,750 each year of your current salary if you started a pension at the age of 50 to be able to achieve a retirement income at 65 of £20,000 per year, assuming a growth rate of 5.5% and inflation at 2.5%.


Inheritance tax is charged at 40% on the value of an individual’s estate over the nil-rate band threshold, which is £325,000 for an individual.

However, IHT is not payable when an estate passes between a husband and wife or from one civil partner to another. Married couples or civil partners can transfer the unused element of their IHT-free allowance to their spouse when they die. A couple would therefore have a total useable tax allowance of £650,000 by doubling up their allowance this financial year.


Capital Gains Tax (CGT) is an allowance that offers everyone the ability to make a profit of up to £11,000 in this tax year without paying CGT and the tax does not apply to transfers of assets between married couples or civil partners. Careful management means a couple can, therefore, make a profit of £22,000 and pay nothing. Beyond this basic rate taxpayers pay 18%, while higher rate payers pay 28%.


Selling personal possessions, including books, furniture, old coins, paintings, etc, for less than £6,000, any profit is tax-free. The sale is CGT exempt, if the objects are owned and sold by a married couple, the exemption increases to £12,000.

The value of your investment and the income from it can go down as well as up and you may not get back the original amount invested. Past performance is not a reliable indicator for future results. Please contact us for further information or if you are in any doubt as to the suitability of an investment.

For advice contact me on 01896 757734 or email This email address is being protected from spambots. You need JavaScript enabled to view it.. Fraser Brydon - Money Matters

The Million Pound Guarantee

Monday, 24 November 2014 08:00

Savers could see deposits of up to £1m guaranteed as Bank of England looks to shake up savings protection

The Bank of England recently announced a shake-up of how savers would be covered if their bank went bust. The BoE is looking for banks to deposit up to £1million as cover for certain circumstances.

Such moves are as a consequence to remove the chaotic scenes witnessed in 2007 when there was a run on the Northern Rock bank. Money would be protected for up to six months, with cash also being moved into another bank.

Presently, £85,000 is protected under the Financial Services Compensation Scheme per banking licence if a bank or building society runs into trouble, this limit is set across the EU.

The new £1million limit would apply and support money temporarily deposited in a bank, where for instance house purchase capital is in transit or a personal injury claim is in process. This would cover roughly 99% of house sales in the UK.

As it stands customers, have to wait for their money up to seven working days under the current scheme, but under the new scheme it will be automatically transferred to another financial firm to avoid any confusion or delay when a business is failing. This should enable faster access to their money.

The new bank in which the money enters would be chosen by a process that would see banks ‘bid’ for the customers.

The Bank of England has also set out plans to improve protection for insurance policies. The Introduction of 100% cover on the value of a product would be introduced, up from the current 90% figure.

This is for products where customers would be disadvantaged if they lost their cover, such as professional indemnity insurance or an annuity which is paying out. The proposed increase for savers will bear a one-off cost of £390million, a bill in which 60 to 80% would fall on the biggest banks - the Bank of England stated the annual cost to the industry would be around £50million after the initial cost.

These potential rule changes are targeted to go ahead at the end of 2016 with the consultation finishing at the start of 2015.

Andrew Bailey, Deputy Governor of the Bank of England and Chief Executive of the Prudential Regulation Authority said: ‘These proposals will allow customers to have continuous access to the money in their bank account or receive payment from the FSCS if this is not possible.’

‘Additionally, the increase in FSCS limits for certain types of insurance will mean policyholders who may find it difficult to obtain alternative cover, or who are locked into a product, have greater protection if their insurer fails.’

For advice contact me on 01896 757734 or email This email address is being protected from spambots. You need JavaScript enabled to view it. Fraser Brydon - Money Matters

The inheritance tax time BOMB

Monday, 29 September 2014 08:00

Rising house prices and the recovering economy are set to force tens of thousands more people above the death tax threshold

The number of families hit with inheritance tax bills will rise significantly, as the Treasury forecasts suggest that rising house prices and the recovering economy will push tens of thousands more people over the £325,000 threshold for paying the duty.

The Government said the continued freeze of the IHT threshold at £325,000, a level at which it has remained for more than five years - will be used to fund upcoming reforms to long-term care laws that will cap the total costs of care borne by the individual at £72,000.

Inheritance tax is levied at a rate of 40 per cent on the value of an estate above the threshold. Economists, tax experts and Tory MPs have called for radical reform, warning that growing numbers of middle-class families are being trapped as house prices rise. A typical property in London is worth more than £450,000.

Britain has some of the highest death duties of any country and it has been estimated that more than a third of home owners face the threat of inheritance tax bills because of rising house prices. The system is seen as unfair because it taxes assets such as family homes bought with income that was taxed when it was earned.

Government forecasts estimate that the number of households liable for inheritance tax will rise by more than a third this year alone, with 35,600 expected to be hit with bills, rising to 43,800 next year.

It’s estimated that some 236,000 families will have to pay the 40 per cent tax on estates left by their families over the next five years, with booming property prices in certain parts of the UK sending those with modest estates over the threshold.

The Treasury says this will be used to fund its care reforms that along with the care cost cap will see the Government contribute towards care costs when a person’s total assets are valued at below £118,000.

The Government said this should prevent people having to sell their homes to fund their care costs.

However this has been challenged as it emerged that the cap only covers care costs, but not associated costs such as accommodation. As such, someone could end up forking out £150,000 before they actually reach the cap.

A Treasury spokeswoman said: ‘While we are having to pay off Labour’s deficit couples can still leave £650,000 tax free and importantly, freezing the IHT threshold means we can pay to end the scandal of people having to sell their homes to pay for social care - meaning they often had no home to leave to their children and grandchildren in the first place.’

Inheritance tax remains a deeply unpopular tax among the British public and one that is the subject of regular calls for reform.

Married couples can reduce their tax liabilities by combining their allowance to £650,000 for when their assets pass to their children upon their deaths. But in some cases middle class families, particularly those living in and around London, are exceeding even the doubled allowance, such is the premium on property in the capital.

For advice contact me on 01896 757734 or email This email address is being protected from spambots. You need JavaScript enabled to view it.. Fraser Brydon- Money Matters

Is there nowhere to hide from the taxman?

Monday, 01 September 2014 08:00

HMRC’s determination is to get its pound of flesh from the middle class. How can you stay on the right side of the law but still keep your tax bills to a minimum?

The taxman is now going after the middle classes, no longer targeting just the super-rich, but everyday professionals are now feeling the pressure of this greater scrutiny with an increased likelihood that their tax returns will be challenged. HM Revenue & Customs (HMRC) has doubled the number of inquiries into taxpayers it feels are not paying enough tax over the past two years. When such inquiries become in depth investigations they can take years to conclude.

New powers have been proposed to allow HMRC to take money directly from taxpayers’ bank accounts, including joint accounts, without first obtaining a court order. If the proposals, which are subject to a consultation, are approved, there are concerns that HMRC will withdraw incorrect sums from accounts before giving taxpayers a chance to argue their case.

HMRC says that they do not plan to empty bank accounts completely as rules are in place to ensure that, after the tax owed is taken, a sum of £5,000 must remain in the individual’s bank accounts. The money can only be taken after four requests for the tax owed have been ignored.

Other existing measures, such as the creation of special “task forces” to target certain job sectors such as freelancers and buy-to-let landlords, have also helped boost the Revenue’s total tax take.

HMRC has beefed itself up by doubling its use of bailiffs and debt collection agencies over the last two years. Its focus on evasion and non-payment looks set to gather force.

One of the most controversial snooping powers the taxman uses to spy on individuals is obtaining information from third parties, including banks, credit card providers, employers and other government agencies such as the Land Registry.

The Revenue will also snoop on the websites that taxpayers use and check up on an individual’s mobile phone usage. They can use bugging or telephone tapping, but in practice they are rarely used.

This policy is seen as hitting the ‘easy’ target, using all its powers to crack down on individuals, rather than companies or other better resourced institutions. The sums involved may not be huge when compared to going after a major corporate, but individuals are a much easier target to squeeze and collectively they are now paying out a huge amount of extra tax. They are more likely to have made tax return mistakes but they are also more likely to capitulate without arguing, making HMRC confident of success.

Another aggressive tool used by HMRC is by threatening taxpayers with higher penalties as part of its tougher stance, which has helped increase tax returns for the Revenue because individuals are paying automatically to avoid receiving higher fines rather than looking at the amount owed and challenging the taxman if they think it is incorrect.

What to do if HMRC challenges your tax return

If you disagree with the amount of tax the Revenue says is owed, write to HMRC immediately. If you disagree with the amount of tax the Revenue says is owed, write to HMRC immediately. The taxman will ask to see certain documents. Don’t pass over everything, only supply them with the information they request. HMRC will write back to you and if it still believes its tax position is correct the next step is to make a tribunal date. Independently appointed tax judges will hear your case and come to an informed decision. But those taking their disputes to a tribunal face a long wait. Another option is the independent Adjudicator’s Office,which arbitrates complaints about HMRC. Telephone 0300 057 1111.

What action will HMRC follow to collect unpaid tax?

If the Revenue is confident that tax is owed it will demand the sum in writing. A time limit for a response will be set and if this is not met then the taxman will issue a fine and also charge additional interest. If this is still ignored the debt will be referred to a private debt collection agency.

What can I do to protect my money?

The best advice is to maximise the use of mainstream, clear-cut tax-efficient investments such as pensions, a maximum of £40,000 of your income can go into a pension each year and your full ISA allowance of £15,000. Avoid complex schemes such as film investment vehicles, which the Revenue has successfully challenged. Individuals can also set themselves up as a company if they have multiple sources of income on a contract basis. They create a “personal services company” or PSC. Clients pay the PSC instead of the individual and the individual pays only corporation tax at 20 per cent under £300,000 and 21 per cent above. The individual then takes dividends as income or winds the company up after a few years to access the money. This approach can help individuals avoid the highest rates of income tax.

For advice contact me on 01896 757734 or email This email address is being protected from spambots. You need JavaScript enabled to view it. Fraser Brydon - Money Matters

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