Second cost of living payment

Back in May 2022, the then Chancellor Rishi Sunak announced a package of support measures targeted mainly to the most vulnerable members of society. One of the main measures was the Cost of Living support package to help over 8 million households in receipt of mean tested benefits. 

These households were set to receive a payment of £650 before the end of the year with the DWP making the payment in 2 lump sums. The first payment of £326 was made in July and it has been confirmed that the second payment of £324 will be made in November.

The money will be paid between 8 November and the 23 November. The second payment will automatically be paid into the bank accounts of those eligible in England, Scotland, Wales and Northern Ireland who receive a qualifying benefit, meaning they will not need to do anything to receive the money.

Some individuals who are not on a qualifying DWP benefit may still be eligible for the £324 payment as HMRC are also making payments to those who receive tax credits and no other eligible benefits.

The Work and Pensions Secretary, Chloe Smith said:

‘Millions of families will soon see a £324 cash boost as part of our extensive £1,200 support package, helping to raise incomes and manage the rising cost of living.’

An additional one-off payment of £300 will also go to the over 8 million pensioner households across the UK who receive the Winter Fuel Payment. This amount will be paid in addition to any other one-off support a pensioner household is entitled to.

The Winter Fuel Payment is not taxable and does not affect eligibility for other benefits. The government will make these payments directly to households across the UK. This money will be paid out as top-up to pensioner households annual Winter Fuel Payment in November / December.

Notifying cessation of self-employment

Any taxpayers that have ceased to be self-employed must notify HMRC of their change in status. There are a number of steps that must be followed if a taxpayer ceases trading as a sole trader or if they are ending or leaving a business partnership.

Taxpayers must send in a Self-Assessment return by the relevant deadline and will need to work out their trading income, allowable expenses and any capital allowances. Taxpayers must also determine if they have any Capital Gains Tax (CGT) to pay.

They may also be able to claim back any overpaid tax or National Insurance. It is also important to check if there is an entitlement to tax relief by way of entrepreneurs’ relief, overlap relief and / or terminal loss relief. There are also other reliefs available that may reduce the amount of CGT due.

Taxpayers that owe tax or National Insurance and have difficulty paying it, may be able to negotiate an agreement with HMRC for more time to pay. In addition, where a VAT registration was in place this will also need to be cancelled and anyone who employed staff will need to close their PAYE scheme and submit final payroll reports.

Right to Buy home scheme extended

The Right to Buy scheme has been available in various guises since it was first launched in the 1980s and following a relaunch in 2012. In essence the scheme gives qualifying social tenants the opportunity to buy their rented home at a discount.

There is a maximum discount of 70% of the value of the property and a number of conditions must be met to use the scheme. The Prime Minister announced, on 9 June 2022, that the scheme is to be extended to housing association tenants. This move that could benefit some 2.5 million tenants renting their homes in this way.

The government will work closely with the housing association sector on the design of the scheme and has also pledged to build a new social home for every one sold.

The government will also change the rules to incentivise those who are claiming Universal Credit to save for a deposit. Currently, welfare rules taper the amount of Universal Credit received when the claimant’s savings exceed £6,000, and it stops entirely when savings exceed £16,000.

The government have also committed to launching an independent review of access to mortgage finance for first-time buyers, with the aim of making it easier for this group by widening access to low-cost, low-deposit finance such as 95% mortgages.

Mortgage interest on rented property

Under new rules that came into effect from April 2017 the tax relief on mortgage costs for residential landlords was restricted to the basic rate of tax. The finance costs restriction was phased in over a number of years and is now fully in place since 6 April 2020. This means that all finance costs, such as mortgage interest on rented properties, are disallowed as expenses and any tax relief is restricted to the basic rate of tax (20%) tax reduction.

The definition of finance costs include interest on mortgages, loans – including loans to buy furnishings and overdrafts as well as alternative finance returns, mortgage fees and other costs and discounts, premiums and disguised interest. No relief is available for capital repayments of a mortgage or loan.

These changes have affected many higher rate and additional rate taxpayers and particularly those with highly leveraged properties, i.e., loans form a significant part of property values. The rules also mean that relevant taxpayers are pushed into paying higher tax rates than previously was the case. This could mean losing some or all of their personal allowances as well as restricting the amount of tax relief on money invested in their pension.

The finance cost restrictions apply if you are a UK resident individual that lets residential properties in the UK or overseas, a non-UK resident individual that lets residential properties in the UK or if you are involved with a partnership that lets properties or are a trustee or beneficiary of a trust liable for Income Tax on the property profits.

Interestingly, landlords of furnished holiday lettings are not affected by the restriction on finance costs.

Protecting your personal data

The next time you receive a request, by phone, text, or email, that requires you to take an action or verbally disclose information about yourself or your finances, alarm bells need to ring.

Criminals now use every means at their disposal to obtain details that will enable them, ultimately, to cause you financial harm. For example, they might:

  • Pretend they are the tax office and offer you a tax refund or threaten you with legal action if you do not pay tax, you apparently owe.
  • Pretend you have inherited from a distant relative and all you need to do is send them certain personal details.
  • Call your mobile or landline using automated software and offer you some form of reward, financial penalty, or legal action unless you immediately select a number on your keypad.

With your personal details, name, address, etc., they can pretend they are you and borrow money in your name. With your bank details they can transfer money from your bank account.

Criminals can do this from the comfort of their homes, all they need is a computer. And so, be cautious when responding to any request for personal information or bank details. If in doubt, do not respond. Instead, contact a trusted adviser, call the tax office or your bank using contact details published on official websites.

Debt respite scheme launched

A new scheme, aptly named Breathing Space, was launched 4 May 2021.

Breathing Space will give those facing financial difficulties space to receive debt advice, or mental health crisis treatment, without pressure from creditors or mounting debts.

Under the scheme, people will be given legal protections from their creditors for 60 days, with most interest and penalty charges frozen, and enforcement action halted. They will also receive professional debt advice to design a plan which helps to get their finances back on track.

And recognising the link between problem debt and mental health issues, these protections will be available for people in mental health crisis treatment – for the full duration of their crisis treatment plus another 30 days.

People across England and Wales who are struggling to repay their debts could be eligible, and the Government expects 700,000 people to benefit in the first year of the scheme.

Most debts will qualify for this new scheme including credit and store cards; personal and payday loans; overdrafts; utility bills, rent and mortgage arrears; and government debts like tax and benefits.
 

The Mortgage Guarantee Scheme

One of the measures announced at the Budget was the introduction of a new Mortgage Guarantee Scheme to help home buyers purchase property. The scheme was officially made available from Monday, 19 April 2021. The new scheme is designed for prospective home buyers who only have a small deposit and are therefore unable to obtain mortgage finance. Under the scheme, lenders will be able to offer new 95% mortgage products.

The scheme is open to first time buyers and home movers across the UK. Home buyers can purchase properties valued at up to £600,000 and both new-build and existing properties are eligible. The scheme will initially run until 31 December 2022. The government has confirmed that the end date for the scheme will be reviewed and may be extended.

The government will provide lenders with the option to purchase a guarantee on the top- slice of the mortgage (over 80%). Lenders will also take a 5% share of net losses above this 80% threshold. This will help to ensure that lenders are not incentivised to originate poor quality loans. Lenders will also need to pay the government a commercial fee for each mortgage in the scheme. The mortgage guarantee will be valid for up to seven years after the mortgage is originated.

There will be a cap on the size of the government’s contingent liability under the scheme of £3.9 billion although this is not expected to impinge on delivery of the scheme. The scheme is similar to a previous Help to Buy: Mortgage Guarantee Scheme that closed to new applicants on 31 December 2016.

The scheme is available from lenders on high streets across the country, with Lloyds, Santander, Barclays, HSBC and NatWest already launching mortgages under the scheme and Virgin Money following next month.

Commenting on the launch of the scheme, the Chancellor of the Exchequer, Rishi Sunak said:

'Every new homeowner and home mover supports jobs right across the housing sector but saving for a big enough deposit can be hard, especially for first time buyers.

By giving lenders the option of a government guarantee on 95% mortgages, many more products will become available, boosting the sector, creating new jobs and helping people achieve their dream of owning their own home.'

Passports – expensive items

Many families will be organising UK holidays this year and so passports may be left in draws for 2021.

But when the market for overseas holidays opens up, better check that your passports still meet that important “6 months before they expire” condition if you don’t want to be turned back when you check in for your flight.

If travelling to the EU, you need to have at least 6 months left on an adult or child passport (not including Ireland).

Currently, charges to renew will vary depending on the way you apply. Unsurprisingly, applying online is cheaper than filling out a form.

Current charges are:

How you apply Online By paper form
Adult (16 and over) standard 34-page passport £75.50 £85
Adult (16 and over) 50-page frequent traveller passport £85.50 £95
Child (under 16) standard 34-page passport £49 £58.50
Child (under 16) 50-page frequent traveller passport £59 £68.50
Passport for people born on or before 2 September 1929 Free Free

You’ll pay a different fee if you apply for a passport from another country. 

What is pensions credit?

Pension Credit is an income-related benefit made up of 2 parts – Guarantee Credit and Savings Credit.

Guarantee Credit tops up your weekly income if it’s below £173.75 (for single people) or £265.20 (for couples). You may still be eligible if you have savings, a pension or your own home.

Savings Credit is an extra payment for people who saved some money towards their retirement, for example a pension.

You may not be eligible for Savings Credit if you reached State Pension age on or after 6 April 2016. You do not pay tax on Pension Credit.

What you'll get:

  Guarantee Credit per week Savings Credit per week
Single people Top up to £173.75 Up to £13.97
Couples Top up to £265.20 Up to £15.62

You might get more if you’re a carer, severely disabled, responsible for a child or young person, or have certain housing costs.

Use the Pension Credit calculator on the GOV.UK website to work out how much you might get.

If you get Guarantee Credit you’ll also qualify for other benefits such as Housing Benefit, Council Tax Reduction, Cold Weather Payments and help with the costs of NHS services. 

Unravelling the jargon: what is a support bubble?

The following notes are copied from the GOV.UK website. At first glance, it would appear that the definition of a support bubble should be fairly easy to grasp. Don’t hold your breath.

Basically, a support bubble is a close support network between a household with only one adult in the home (known as a single-adult household) and one other household of any size.

Once you are in a support bubble, you can think of yourself as being in a single household with people from the other household. It means you can have close contact with that household as if they were members of your own household. Once you make a support bubble, you should not change who is in your bubble.

Continue to follow social distancing guidance with people outside of your household or support bubble. This is critical to keeping you, your family and friends as safe as possible.

You can form a support bubble with another household of any size that is not part of a support bubble with anyone else if you:

  • live by yourself – even if carers visit you to provide support
  • are a single parent living with children who were under 18 on 12 June 2020

You can form a support bubble with one single-adult household who are not part of a support bubble with anyone else.

The government recommends that you form a support bubble with a household that lives locally wherever possible. This will help to prevent the virus spreading from an area where there might be a higher rate of infection.

From 14 September, if you form or continue in a support bubble, you cannot then change your support bubble. It does not have to be the same support bubble you may have been in previously.

If anyone in your support bubble develops symptoms or tests positive for coronavirus, follow the stay at home guidance.

If you share custody of your child, and you and your child’s other parent are in separate bubbles, members of both bubbles should stay at home if someone develops symptoms. This is critical to controlling the virus, as it will help to stop it spreading across multiple households.