Our ...May 2015 Newsletter
With the election only 2 days away and the relentless political debates reaching fever pitch, we hope our newsletter provides you with a little light reading!
We have a beginners guide to investing (including some useful reminders for seasoned investors) an overview of the Help to Buy ISA, how to take advantage of the Rent-a-Room tax allowance and lastly some news on the home front, we’re delighted to introduce a new member to the JJFS team and acknowledge the endeavours of one of our stalwarts!
We hope you enjoy the articles and find them useful.
In this issue:
- The Help to Buy ISA
- The Rent-a-Room Tax Break
- 10 Tips for New Investors (and a reminder for seasoned ones!)
- Introducing Elaine Freeman
- Congratulations to Jane
The Help to Buy ISA
Later this year the Government will be introducing the Help to Buy ISA to assist first time buyers save a deposit for their first home. Savers will receive £50 from the Government for every £200 saved, up to a maximum of £12,000 (i.e. a maximum tax break of £3,000). Classed as a cash ISA, the Help to Buy ISA is subject to the usual restrictions as well as a number of additional controls and features:-
- The proceeds must be used as deposit on a first home (up to the value of £250,000, or £450,000 in London) which will be the main residence of the account holder
- Savers will need to make an initial deposit of £1,000
- The maximum monthly contribution is £200
- The Government’s contribution is received at the point the ISA is converted to a deposit
- It is limited to one ISA per person therefore a couple can save double the amount towards the cost of their first home
- It is available to anyone aged 16 or over
- Note that you will not able to save into both a cash ISA and a Help to Buy ISA in the same tax year. Therefore if you have already contributed to a cash ISA this tax year, you will have to wait until next April to start your Help to Buy ISA.
The Help to Buy ISA will be available for 4 years although once opened, there is no time frame for holding the ISA or cashing in the funds for a deposit.
For more information please contact your usual JJFS contact or call 01789 263257 or email firstname.lastname@example.org
The Rent-a-Room Tax Break
Although this has been an option for some time, we were speaking to a client recently who is looking to make some extra income by taking in a lodger.
If you have a spare room in your home, then the government’s rent a room scheme allows you to earn up to £4,250 year tax free.
The scheme permits owner occupiers or tenants to rent out a furnished room or entire floor to a lodger, as long as it is the occupier’s main residence and is permitted under the mortgage or tenancy agreement.
If the rental income is less than the threshold then the tax relief is automatic and you don’t need to declare it by way of a tax return. But if you exceed the threshold you will be liable for tax and you have two options. You can either choose to opt into the scheme and pay tax on your rental income minus the allowance, or you can decide not to opt in and pay tax on your rental income minus any related expenses – as you would per a normal rental business.
The biggest advantage of opting into the scheme is that you can earn £4,250 a year absolutely tax-free – but this is outweighed by the fact that you cannot claim any expenses related to the letting. So if you have to spend a lot of money repairing wear and tear or replacing a boiler, you won’t be able to deduct any of that expense against the rental income. You can however, opt in and out from year to year which may be helpful if you can foresee a potentially large expense looming – but you will need to inform HMRC. More information about the scheme and renting out a property in general can be found on the Gov.UK website.
10 Tips for New Investors
Successful long-term investment is not all about buying low and selling high, although that is always a good principle to bear in mind. Share prices can be susceptible to many unpredictable external factors ranging from politics to the weather, and investing can feel a bit like negotiating a minefield. Which is why it‘s always good to go back to basics – after all, markets may rise and fall but the rules of successful investment remain constant.
1. Buy what’s right for you
Just because an investment works well for somebody else doesn’t mean it is necessarily right for you. Consider your own situation – your future liabilities, investment goals, timeframes and, most importantly, your appetite for risk – and then make your own decision.
Spread your risk by diversifying your portfolio across a mixture of asset classes, industry sectors and areas of the world. If you put all your money into a single asset class, sector or company, your portfolio becomes vulnerable and performance is likely to be volatile. However, mixing it up means that, when the value of one asset is falling, another might be rising and could help to compensate.
3. Invest for the long term
It is hard work – and almost certainly pointless – trying to ‘time’ your investment so you buy right at the bottom and sell right at the top. Similarly, trying to make short-term profits by constantly buying and selling investments is an expensive, high-risk strategy. Instead, look to target your portfolio at quality companies or funds and then allow them the time and space they need to grow.
4. If an investment has risen substantially, take another look
An old rule of thumb has it that ‘when your investment doubles, sell half’. Short-term sentiment in stockmarkets can drive values to artificially high levels, in which case you might decide to cash in while you can.
5. Never buy what you do not understand
Some shares or funds might sound very exciting – and perhaps straightforward – but if you don’t really understand exactly what the company does or how the fund works, steer clear.
6. Know when to say goodbye
If a holding has performed particularly badly compared with its peers, you should consider cutting your losses and selling it altogether. It may well be better to sell out and reinvest the proceeds into a better-quality alternative than to sit around hoping to recoup your loss.
7. Do not become emotionally attached
If a holding has worked well for you, don’t feel you have to stick with it if it starts to underperform. You should look at every existing investment with clear-headed objectivity and, when it is time to sell, do so with a clear conscience.
8. Be your own person – do not follow the herd
It can be difficult to ignore hype and euphoria whipped up by the media and other investors but just because ‘everyone else is buying’ doesn’t mean it is a sure thing or that it’s right for you. (Consider the dotcom boom of the 1990s during which companies promised much and delivered little or nothing). It’s hard to swim against the current but always take a step back and consider not only what you are buying, but why.
9. Review your portfolio regularly
Your portfolio should have been constructed to meet objectives based on your existing needs and your goals for the future. However, over time, your needs and circumstances can change – as indeed can the markets – and your portfolio may require the odd tweak to make sure it keeps up. Review it regularly and make sure it stays on track.
10. Do not believe everything you read or hear
Headlines on television, in the newspapers and on the internet and social media can initially be just as misleading with regard to finance and investment as they are to, for example, sport or celebrity gossip. Try not to be distracted by day-to-day ‘noise’. Instead, make sure you keep a clear head, remain focused on your objectives and take advice from a qualified professional to ensure you are making the most of your investment portfolio.
For assistance with your own investment plans or portfolio, please contact your usual JJFS contact or call 01789 263257 or email email@example.com
Introducing Elaine Freeman
We are delighted to welcome Elaine Freeman who joined the JJFS team on 13th April. Elaine will be assisting Simon and Helen with administrative support on the employee benefits side of our business, specifically Life Assurance, Income Protection, Critical Illness Cover and Private Medical Insurance. Originally from Lincolnshire, Elaine has been in the Stratford area for over 15 years. She is very organised with a good eye for detail and we have no doubt she will be a great asset to the team. Elaine has a very creative side, with a particular talent for flower arranging, and is currently Secretary of the local Flower Club.
Congratulations to Jane!
The gruelling 10km course involves mud runs, trail runs, lake swimming and some rather daunting obstacles, but the team completed the entire course and raised £1,000 for Children with Cancer UK.
Usually known for her perfect coiffure and manicure, Jane endured aches, pains, blisters, scraped knees and a layer of mud that apparently took several days to completely remove!
However, undaunted by the challenge and buoyed by their inspiring achievement, Jane has just announced that she intends to take part again next year……!
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