Millennials (those born 1981-2000) face some fairly tough financial... You're reading the blog post Financial tips for Millennials who want to get on the housing ladder that was written by and first published on Getting Loans and Credit & Managing...

Millennials (those born 1981-2000) face some fairly tough financial challenges today. House prices that are beyond unaffordable – especially in London – combined with poor interest rates on savings and wage growth that rarely rises with inflation can create some serious barriers to positive financial health. Although this is the age group that has been tagged “Generation Rent,” there are still many Millennials who have ambitions to get a foot onto the bottom rung of the housing ladder, regardless. In the current financial climate, accruing wealth and property from a starting point of zero is tough but with the right financial advice Millennials could change the future that has been forecasted for them.

Be prepared to buy with someone else

According to the Institute of Fiscal Studies, house prices in the UK have shot up by 152% over the past two decades. Wage growth has not. Most mortgage lenders will limit the amount available to borrow to four times that of annual salary. According to the Annual Survey of Hours and Earnings, the average UK salary is around £27,000. The average price of a property in the UK? £225,047, according to the Land Registry. So, take the average salary to a mortgage lender and you won’t even get to half the amount you’ll need to borrow to buy the average property. However, if you buy with another person you’ll have much more chance of success. Whether that’s a sibling, a partner or a friend this way you’ll both get a foot onto the property ladder in an affordable way – and sooner too.

Use Help to Buy

It used to be the case that lenders offered solutions to those who had not quite been able to get a deposit together and weren’t going to be gifted one by parents. These were often in the form of a 125% mortgage (i.e. including the deposit) or an interest only mortgage. Today, few – if any – mortgage lenders offer these products and for good reason, as they can place a heavy financial burden on those who are trying to pay them off. However, that does leave rather a gap for anyone without five figures in savings but who is still keen to buy. Help to Buy is the government scheme that has stepped in to fill this gap. You only need a 5% deposit to make an application for a mortgage with Help to Buy – a government equity loan for 20% of the property purchase price will cover the rest. Help to Buy is available for new build properties only, with a purchase price of less than £600,000.

Open a Lifetime ISA

For those under the age of 40 (i.e. all Millennials), a Lifetime ISA offers a tax free savings vehicle that also has the benefit of a government top up. This type of ISA is especially useful for freelancers or anyone who doesn’t benefit from being part of an occupational pension scheme. You can pay up to £4,000 into a Lifetime ISA each year and the government will top up whatever you pay by 25%. The Lifetime ISA is designed to be used either as the deposit for a first home or to pay for retirement – if you opt to use it for anything else then you’ll lose 25% of whatever is in it as a penalty.

Learn how to budget

Key financial advice for any demographic and any generation is learning how to budget. Without this key skill it’s almost impossible for anyone to achieve financial success. Budgeting is simply the balancing of incoming and outgoings to ensure that one doesn’t overwhelm the other. However, there are many different ways to achieve this. One of the most successful is the 50-30-20 rule:

• 50% of your income is allocated to necessities (e.g. bills and rent)
• 30% of cash is put towards financial goals (e.g. saving for a deposit)
• 20% of what you earn goes to the things you want (e.g. festival tickets, new shoes)

Map out a pension and savings now

Getting into the habit of putting money aside for the future is better done sooner rather than later. Old age may seem decades away but that time can quickly pass and there are some pretty expensive events that could take place in between. Sign up to an occupational pension scheme as early as possible – minimal contributions now will build up over time – and get used to putting aside the 20% of what you earn so that you can reach your financial goals. If you’re not great at financial planning and saving then get a little help from technology. The Cleo app, for example, is an AI assistant designed to help you get better with your cash.

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Everyone has heard about tax avoidance and tax evasion... You're reading the blog post Tax Scandals Decoded – Protect Yourself from Fines and Worse! that was written by and first published on Getting Loans and Credit & Managing Money.

Everyone has heard about tax avoidance and tax evasion but very few of us understand the differences and the potentially extreme consequences of getting involved in one of these schemes.

At Solution Loans, we’ve put this article together to let you know what tax avoidance is, what tax evasion is, what to do if you think you may be involved in a scheme and the potential legal consequences. We’ve included a list of hallmarks of schemes to look for as well as details of three of the most common tax avoidance schemes.

The UK Government has put a lot of resources into clamping down on both tax evasion and tax avoidance. HMRC, which oversees the collection of taxes, has referred increasing numbers of cases of both evasion and avoidance to the Crown Prosecution Service, making 1,135 referrals in 2015/16.

What’s the difference between tax avoidance and tax evasion?

One of the key areas of confusion is the difference between tax avoidance and tax evasion.

Simply put tax evasion is completely illegal and is the name given to the practice of not paying taxes by not reporting income or by reporting expenses not legally allowed. This kind of activity is basically a form of fraud that could land you in prison and with very hefty fines. Between 2017 and 2018, the average prison sentence for tax evasion increased from just over three years to four years as the government continued their clampdown.

Tax avoidance is bending the rules, exploiting loopholes and using complex company structures to minimise tax liabilities. A hallmark of many of these schemes is that they involve money leaving businesses and going through a series of transactions either through other businesses or intermediaries that are unnecessary and then coming back again.

So, is tax avoidance legal?

The short answer is, it depends. These schemes often work within the letter of the law but not its spirit. The Government, specifically HMRC, are working hard to ensure these schemes don’t work and either involve a lot of work that comes to nothing or is actively penalised when HMRC take those involved to court and recover the money for the treasury.

Why would I get taken to court for involvement in a tax avoidance scheme?

HMRC set up something called the Disclosure of Tax Avoidance Schemes (DOTAS). This makes anyone involved in or promoting a Tax Avoidance Scheme disclose it to HMRC. Each known tax avoidance scheme has a number that must appear at the top of your tax return. HMRC take a dim view of anyone failing to disclose a scheme. If you’re just the business using such a scheme, penalties start from £5,000. If you’ve devised the scheme and fail to report it the penalties can be up to £1 million.

What can I do if I’m involved in tax evasion?

If you’re involved in tax evasion then you should stop immediately and consult a lawyer and reputable accountant about what to do next.

How do I know I’m involved in a tax avoidance scheme?

HMRC publishes a list of known schemes here. As mentioned above, if a scheme is complex and involves multiple businesses for no reason other than to avoid tax then this is likely a Tax avoidance scheme. Other things to look for are:

1. It sounds too good to be true (i.e. for no real effort or reason you avoid paying tax)
2. There is no real economic activity or risk involved (such as an investment)
3. The scheme consists of money going around in a circle through other businesses or intermediaries
4. A third party or the scheme’s promoter provides funds to make the scheme work
5. Known tax havens are involved
6. Offshore companies are involved (or offshore trusts)
7. There are confidentiality requirements

What are some specific examples of tax avoidance schemes?

Tax avoidance schemes come in a huge variety of different shapes and sizes. Here are three examples:

Job board tax avoidance scheme

This is one of the more common tax avoidance schemes. It is used by contractors to avoid paying tax and national insurance contributions.

Land Tax & Stamp Duty tax avoidance scheme

This scheme was used to avoid Land Tax and Stamp Duty by abusing rules on gifting and unlimited companies.

The Gift Aid tax avoidance scheme

This scheme was a high-profile one-off involving a charitable trust set up to help avoid tax via gift aid. The charity involved was shut down by the Charity Commission. The scheme famously involved cycling pro Bradley Wiggins.

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The UK economy is going through a challenging period.... You're reading the blog post Unsecured lending is down but so too are secured loan default rates that was written by and first published on Getting Loans and Credit & Managing Money.

The UK economy is going through a challenging period. With destabilising factors, such as Brexit and a rise in interest rates for the first time in a decade, the lending market in particular is an interesting place to be right now. The ongoing change and the fluid nature of influences such as the EU referendum and global political events have created a number of trends in both unsecured and secured loan lending.

The amount of unsecured consumer lending has dropped

According to figures from the Bank of England, the amount of unsecured lending to consumers fell in the first three months of 2018. The drop was significant too, with a fall of almost 40% recorded in the Bank of England statistics. This reduction has been attributed to a significant slow down in the volume of approvals of unsecured credit (e.g, personal loans) by lenders. Successful credit card applications, for example, were down by 26.2%. Other forms of unsecured lending dropped by 13.2%. The reasons behind the trend are thought to be a lack of appetite for risk on behalf of unsecured lenders. In reality this translates to lenders who are less willing to approve applications where there is any doubt at all over whether a borrower might potentially be able to repay.

Unsecured lenders are becoming more cautious

Whether as a result of a slower economy or a weaker consumer environment, lenders are not as willing as they once were to agree to credit for consumers where there might be some risk. It’s also thought that unsecured lenders – in particular, credit card lenders – are more cautious in the wake of the Financial Conduct Authority’s voiced concerns about credit card debt.

Unsecured consumer lending is the lowest since the recession

In terms of whether this trend is likely to continue it’s worth noting that the availability of unsecured loans to consumers has dropped by the highest rate since the Bank of England’s records began in 2007. Unsecured lending rates have fallen more quickly than at any point since the recession, and this is part of a trend that was also evidenced, and accelerating, back in 2017.

Rates of secured lending are much more stable

According to the Bank of England quarterly credit conditions survey the drop in unsecured lending rates is not being reflected in the secured loans lending sector. In the first quarter of 2018, those lenders that participated in the Bank of England’s survey reported unchanged secured loan availability. Secured credit is lending, such as mortgages, where an asset – such as a property – is provided as security for a loan. Lenders have less risk to bear where there is an asset, which could explain why the secured lending sector has not seen the same change as in unsecured lending.

Default rates for secured lending are lower too

This is a trend that is expected to continue with a reduced number of defaults on lending right across the secured loans sector.

Can you still borrow under these conditions?

Yes. Whether you’re looking for secured or unsecured borrowing, there are still applications being approved by UK lenders. If you’re planning on making an application for either of these types of finance then there are a number of ways in which you can prepare to give yourself the best possible chance of success.

• Check your credit report. Amend any mistakes, ensure you’re on the electoral roll and make sure your personal information (such as addresses) is up to date. If your credit report is connected to that of another person you once shared a credit account with, but now no longer see, then ask for a notice of disassociation so that their credit behaviour won’t affect your credit score.
• Pay off other debts first. One of the key factors that lenders will bear in mind is whether a potential borrower already has an unmanageable level of debt. Reducing, or paying off, any existing debt will help to improve your credit score and make you a more attractive lending prospect.
• Make sure any borrowing you’re applying for is affordable. Affordability is a key criteria in the lending sector today, whether secured or unsecured. When you make an application for a loan or mortgage, calculate how you’re going to handle the repayments and whether you’ll still be able to ensure that your other expenses are covered.
• Apply for the right loan and to the right lender. Different lenders have different requirements when it comes to approving an application or not. Choosing the right loan product with the lender best suited to you as a borrower can make all the difference.

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The Marriage Tax Allowance was introduced in April 2015... You're reading the blog post How to claim Marriage Tax Allowance to get another £230 per year that was written by and first published on Getting Loans and Credit & Managing Money.

The Marriage Tax Allowance was introduced in April 2015 and is designed to benefit couples who are either married or in a civil partnership. It’s essentially free money and is available even where one partner has passed away – and yet around 1.5 million people in the UK have yet to claim it. Whether it’s a simple reluctance to make a claim for the allowance or a lack of awareness that it’s actually available, if you are married or in a civil partnership and you’re not claiming then you could be losing out on £230 a year. 

What is the Marriage Tax Allowance?

It essentially allows couples to share a small percentage of their individual personal allowance between them. The tax free allowance is the amount that everyone in the UK is entitled to earn free of tax every year. For the 2017/2018 tax year it is £11,850. Those couples who are entitled to the Marriage Tax Allowance can transfer 10% of the allowance from one partner to the other (£1,190).

Who is entitled to the Marriage Tax Allowance?

It’s available to anyone who was born on or after 6 April 1935 and who is married or in a civil partnership. The allowance is not available to couples who are simple cohabiting. There are two key conditions to note for the Marriage Tax Allowance:

1. One of the partners in the relationship must be a non-taxpayer. So, their income for the year must be less than the personal allowance.
2. The other partner in the relationship must be a basic rate taxpayer. The allowance is not available to anyone who is a higher or additional rate taxpayer.

It doesn’t matter if you’re living abroad as long as both partners get a personal allowance. Having a personal pension also won’t affect entitlement to the allowance.

What if one of the partners has died?

As of 29 November 2017, it’s still possible to make a claim for the Marriage Tax Allowance even if one partner in the relationship has died. As long as the above conditions are met it’s highly likely that the claim will be successful.

How do the numbers work?

In total, anyone applying for the Marriage Tax Allowance now could be entitled to up to £900. This is broken down into the allowances over the past four years, as it’s possible to backdate a claim for the Marriage Tax Allowance over this time. In 2015, the allowance was worth £212, in 2016 £220 and in 2017 £230. When added to the £238 for the 2018 tax year the total is £900. Much larger than the average cash loan. And you don’t have to repay it!

How can you apply for Marriage Tax Allowance?

The applications process is fairly simple and you can do this via HMRC. The person who is the non-taxpayer will need to provide a form of ID from the list and both partners will need to be able to access National Insurance numbers. It’s important to note that it’s the non-taxpayer who must make the application, as they are effectively asking HMRC to transfer 10% of their personal allowance to their partner. If the application is made by the taxpayer then this will be the wrong way around and may need to be done again.

The Marriage Tax Allowance – other points to note

• The allowance will only apply for the years that you’re eligible. So, for example, if one partner’s income goes above the basic rate tax threshold in a tax year then the couple will not be eligible for the allowance in that year.
• Non-taxpayers come in all shapes and sizes. For example, you could be at home looking after children, working part time, retired, caring for relatives or not currently in work because of your health. As long as your income stays below the correct level of personal allowance you’ll be able to claim.
• The correct level of personal allowance for non-taxpayers will be 10% below the limit – so, you must have at least a £1,190 difference between your total earnings for the year and the top limit of the personal allowance. If you go over the personal allowance by a little you can still claim but not for the full amount.
• A successful claim results in HMRC sending out a cheque for the amount. This is processed automatically after the application is made.

Currently, 2.7 million people in the UK benefit from the Marriage Tax Allowance but there are still 1.5 million who are eligible but who haven’t claimed. It’s worth checking to make sure that you’re not missing out on quite a substantial pay out.

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Many columnists and commentators believe that food banks shouldn’t... You're reading the blog post All you need to know about accessing one of the UK’s food banks that was written by and first published on Getting Loans and Credit & Managing...

Many columnists and commentators believe that food banks shouldn’t even exist. But, as Guardian columnist Owen Jones wrote recently, “benefit cuts and an unjust social order have left hundreds of thousands hungry in one of the richest countries in the world.” In the UK, the use of food banks has jumped by 52% – we are using them four times as much as we used to. Regardless of where your politics lie in terms of what has caused this situation, it’s clear that more Britons have become more reliant on food handouts. In fact, in 2017, around 1.3 million food parcels were handed out by the Trussell Trust alone. But what are food banks, who benefits from them and how do they actually work?

What is a food bank?

Food banks are usually staffed by volunteers and are set up to provide those in need with food essentials. The food that is distributed via food banks comes mostly from donations, often from members of the public. These are collected at donation points around the country, at churches, supermarkets and schools for example. The donations are sorted by volunteers at the food bank and then parcelled up and distributed to those who need them the most.

How do you get access to a food bank?

You need to have a food bank voucher. These are issued by people such as social workers and health visitors as well as staff at schools. They are given to those who are identified as being in a state of crisis and unable to buy these provisions on their own. The food bank voucher entitles anyone with one to three days worth of supplies. Where a voucher hasn’t been automatically given, it’s also possible for those who feel they need access to a specific food bank to start the process.

• Contact your local food bank. Every food bank will be able to provide a list of referral agencies through which you can obtain a voucher.
• Contact one of the referral agencies. You will have the opportunity to show why you need help from the food bank and then you will be issued with a food bank voucher.
• Take the voucher to the local food bank. You will get three days worth of nutritious food, as well as the opportunity to sit down with volunteers and potentially get some advice about your situation.

What does a food bank parcel contain?

This varies but the Trussell Trust, for example, will provide three days’ worth of nutritionally balanced, non-perishable tinned and dried foods. This could include a very wide range of different produce, including cereal, rice, biscuits, UHT milk and fruit juice. Many food banks also provide other items with food parcels, such as essential toiletries and hygiene products. Those who are eligible to receive a food bank parcel will sit down with a volunteer and go through the options in terms of dietary requirements to ensure that none of the food that is handed out goes to waste.

Are food banks purely about the food?

No, many food banks have evolved to provide a helpful infrastructure to those who use them. That could simply be company or someone to listen, as well as directing people in need to the various charities and organisations that might be able to help them.

Who uses food banks the most?

This tends to change annually. However, some statistics from the Trussell Trust from 2016/2017 provide some insight into those who were the most frequent visitors to the food bank during that year. During those 12 months, 39% of visitors to the food banks were single men, 13% were single mums with children, 12% were single women and 9% were couples with dependent children. In that year 87% of those who used the Trussell Trust’s food banks were born in the UK and only 3.7% were asylum seekers.

Why do people need food banks?

Although living on a chronically low income can be a factor in driving people towards using a food bank this is not the only influence. Researchers have found that it’s often some kind of “shock” that ends up pushing an individual or family into a place where a food bank is the only choice. This could be a rent increase, for example, or the removal of a benefit payment. We are using food banks today much more than we ever have before, even in the wake of the lean years of the 2008 financial crisis. In 2010-11, the Trussell Trust gave out 61,500 food parcels but in 2017 this had risen to 1.3 million.

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According to the credit ratings agency Experian, one in... You're reading the blog post Could my partner’s credit rating affect my ability to get credit? that was written by and first published on Getting Loans and Credit & Managing Money.

According to the credit ratings agency Experian, one in six people have had their loan prospects harmed as a result of someone else’s credit report. The research revealed that a partner – or ex partner – who has a bad credit history could have a serious impact when it comes to applying for credit. From former spouses through to university housemates, there are many people who come into – and out of – your life who have the potential to make getting credit more difficult.

Who could adversely affect your ability to get credit?

Anyone with whom you have shared a credit account in the past. For many people that’s an ex partner or spouse but it could also be a housemate or a sibling.

How does someone else’s credit score affect your own?

If you have formerly shared the responsibility for some credit with someone then you will continue to share a link when it comes to credit information too. Joint financial activity will mean that your credit file becomes associated with that of another person. As a result, when you make an application for a loan/credit, the lender will have the option to look at your credit history and also at the credit report of the person you have become associated with.

Does your credit file contain their credit information?

No. When a lender makes a search of the credit file they will see only the information that relates to that particular person. However, there will also be a note that indicates there is another credit file connected to this one. So, a lender can also go and retrieve the financial information of the associated file. If it’s information that flags up a potential risk to the lender (for example, missed debt repayments) then there could be some hesitation when it comes to lending to the original applicant.

What can you do to protect yourself?

Experian research also found that one in three people now rate being good with money above good looks when it comes to finding a potential partner. This focus on financial dexterity is a sensible place to start when it comes to avoiding a situation where your credit history is being adversely affected by a partner or an ex partner. But there’s also a lot more that you can do, including:

• Have a frank conversation about cash. The earlier you do this, the better for the relationship and for your own financial future. Establishing financial compatibility can not only help to avoid a negative credit situation in future but could be the key to working towards a relationship that helps you reach your own money goals.
• Make sure you know exactly how and when your credit report could become linked to that of another person. Everything, from applying for a mortgage with a partner through to setting up a joint account with a sibling you’re sharing a home with could create financial association. If you’re not sure whether that’s going to be the case then ask before you sign anything.
• Swap your credit scores. It may seem like pretty personal information but honesty is the basis to any good relationship and secrets tend to cause issues, especially when it comes to money. So, swap your credit scores early on so you can see whether this person is a good match for you financially or whether there is something in their credit history that means there could be a potential problem in future.
• Act quickly when a relationship breaks down. Although it can be an emotional time it’s important to protect yourself financially. For example, you will need to start monitoring transactions closely in any shared accounts to ensure that payments aren’t being made or cash withdrawn without your knowledge. It is also a good idea to settle any outstanding joint debts that you have as quickly as you can, where possible so that there are no remaining ties.
• Break your financial connections ASAP. You can apply to each credit agency for an official notice of disassociation that will cut the financial tie between you and whoever else you may have once shared a credit account with. This will ensure that, in the eyes of any lender you make an application to, your credit report is not linked to anyone else’s.

Having a different credit rating to your partner doesn’t have to mean the end of the world for your relationship. It’s important to be honest and open about where you are financially to lay the foundations for making things work. And, if things come to an end, to ensure that you can both go your separate ways unencumbered.

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