An independent research institute has found that many of those who claim tax credits will be worse off by up to £1,000 per year, following the recent budget.
The Institute for Fiscal Studies has said that the living wage announced by Chancellor George Osborne will not compensate those on low incomes for the cuts made to their tax credits.
Analysing the budget, the IFS called it ‘regressive,’ saying that it took far more from the poor than it did from the rich. IFS director, Paul Johnson, stated that it was unequivocal that tax credit claimants would be worse off following the cuts announced in the budget.
The amount people can earn before their benefits are withdrawn has also been lowered in changes to Universal Credit. Around 3 million families will be affected who will be, on average, £1,000 a year worse off. Johnson said that Universal Credit was intended to give benefits claimants an incentive to work and that this incentive has been reduced.
13 million households will be £5 a week worse off because of the extended freeze in benefits for those adults under the age of 65, as well as local housing allowances and tax credits until 2020.
Whilst the minimum wage has been increased, this means that earnings will increase by an extra £4 billion in total but changes to the cuts to the welfare system account for £12 billion. Paul Johnson said that as a result, there are bound to be more losers than winners.
The budget also included around £14 billion tax increases, offset by £8 billion tax give aways. The minimum wage is to be raised to £9 a hour for the over 25s by 2020, but Johnson described this as a gamble saying that the only way to guarantee higher wages is to increase productivity.
Economic growth in the UK rose by 0.7 per cent during the second quarter of 2015, official figures from the Office for National Statistics (ONS) show.
The rise is, in part, due to a sharp increase in gas and oil production and this is the tenth consecutive quarter that has seen the economy grow.
Living standards are also returning to their pre-economic crisis levels, according to the ONS, with the GDP now ‘broadly in line’ with its level in 2008, just before the UK economy went into recession. GDP per capita refers to the growth of the economy when shared out per person.
Oil and gas extraction increased by 7.8 per cent, its steepest rise since 1989. Tax cuts brought in in March to support the oil and gas industry are responsible for the surge in production, which came despite falling fuel prices.
Whilst the construction industry failed to show any sign of growth, remaining static, the service sector grew by 0.7 per cent, up from 0.3 per cent in the previous quarter. Manufacturing fell by 0.3 per cent
Chief economist at Capital Economics, Vicky Redwood, said that whilst growth is admittedly very uneven, it does look as if production is finally beginning to pick up across the UK.
This latest improvement in economic growth is likely to fuel speculation that Mark Carney, Governor of the Bank of England, will increase interest rates before the end of the year, the first rate rise since before the economic crisis of 2008.
According to Andrew Sentance, former member of the Bank’s Monetary Policy Committee which is tasked with setting interest rates, the UK’s economic recovery is now well established. Mr Sentance believes that the UK economy will grow by 2.6 per cent this year and said that, were he still a member of the MPC, he would vote in favour of rate rises.
Contact-less credit and debit cards are open to fraud, says consumer group Which?
Contact-less cards allow people to pay for products or services without entering their PIN.
As part of their investigation into the safety of contact-less card use, Which? bought a number of low cost card scanners from a popular website. They found that they were able to take important data from a variety of contact-less cards, despite the fact that this data is supposed to be coded in order to protect it. The Which? team then used the data to place orders for a number of items, including a television that cost £3,000 in a well-known online shop.
A spokesman for Which? explained that the card scanners enabled them to unlock data from contact-less cards that they could then use to shop online. Although there is a contact-less card transaction limit of £20, the team were able to use the data to spend limitless amounts online. The spokesman added that the team were surprised by how easy it had been to use stolen data in a mainstream online store, along with false names and addresses.
Which? would like debit and credit card holders to be able to opt out of having contact-less cards. At present, all the leading card providers issue them as standard and do not always allow their customers to choose not to have them, if they wish.
Card readers should not be able to read contact-less cards at a greater distance than five cms. However, some are able to read cards from 15 to 20 cm.
Wrapping your contact-less card in metal foil or keeping it in a foil lined wallet is one way of protecting it from being read illegally, said Which?.
Cardholders who are victims of fraud and have not been negligent with their cards are not usually liable for the losses.
Hundreds of thousands of landlords will be hit by the Chancellor’s plans to scrap mortgage interest tax relief in 2017.
The move, announced in the recent Budget, will mean that many property investors lose 11 per cent of the gross returns from their buy-to-lets.
Should interest rates rise by the end of the year, as Governor of the Bank of England, Mark Carney, has indicated they might, landlords’ losses will be even greater.
Landlords are set to lose 25 per cent of their higher rate tax relief on their mortgages every year for three consecutive years until 2020, when all mortgage interest relief will be restricted to the basic rate of just 20 per cent.
This means that for every £100 in interest on mortgage repayments, landlords will have to pay £80, as opposed to the £55 higher tax rate payers currently pay.
The National Landlords Association has said that the Chancellor’s tax changes could reduce property investors’ net yields from 4.9 per cent to 4.3 per cent, if they are 40 per cent tax payers. Mortgage broker, London and Country, pointed out that on a property worth £160,000 with a mortgage of £120,000, the annual profit of £612 would actually become a loss of £588.
Buy-to-lets have trebled since 2005, particularly as other types of long term saving schemes have been disappointing, such as pensions.
Property investors have bought almost 1.7 million buy to lets with mortgages, offsetting their costs against rents to get tax relief at their own highest tax rate. Those paying the higher rate of 40 or 45 per cent tax, will see their mortgage tax relief phased out.
However, landlords are still able to claim a number of expenses to offset the income tax they pay, such as the costs of finding a tenant, building and contents insurance, maintenance and repairs following normal wear and tear, furniture, ground rent and council bills.
The pound has risen against the dollar in response to remarks made by the Governor of the Bank of England, indicating that interest rates may rise soon.
Mark Carney’s remarks that the point at which interest rates will rise is getting closer, triggered the pound to increase by one cent against the dollar.
The governor was speaking to Parliament’s Treasury Committee and added that when interest rates are increased, it will be to a limited extent only and at a gradual pace. He gave the reasons for a likely rate rise as the consistent growth of the economy, stabilizing of domestic costs and disinflation imported from overseas.
Mr Carney does not foresee rates rising to historic highs, however, saying that the new normal would still be substantially below the rates seen before the financial crisis of 2008.
Inflation drops to zero
The rate of inflation has fallen to 0 per cent for the second time this year, down by 0.1 per cent from May. The Consumer Prices Index, used to measure inflation, showed that the fall was largely due to lower food and clothing prices and a smaller than expected increase in air fares, when compared with June 2014.
Inflation is expected to remain very low until the end of the year when it should begin to pick up.
The Retail Price Index which is also used to measure inflation, but includes mortgage interest payments, council tax and other housing related costs, is still at 1 per cent, unchanged since May.
Chief economist at economic and financial analysts, IHS Insights, Howard Archer, said that zero inflation was good news, showing that consumer purchasing power is in ‘rude health.’
However, low or zero inflation is usually seen as bad for the economy because consumers often postpone the purchase of non-essential items or services, in the hope that prices will fall.
The debt crisis in Greece has been ongoing for some time now and if you are not planning a Greek holiday this summer, you may be wondering what impact the situation will have on life here in Britain.
Effect on other countries within Europe
If Greece does leave the Eurozone, it will undoubtedly have a knock on effect on politics in other countries within Europe. Anti-austerity parties in Spain are likely to be boosted, German Chancellor, Angela Merkel, is likely to face criticism from many voters unhappy with Greece being ‘let off the hook.’
UKIP here in the UK will find their position strengthened, as will France’s National Front, both of which argue that full integration in Europe cannot work successfully.
Immigration
A Greek exit from Europe could also affect immigration into the UK and other European countries because Greece has, so far, absorbed large numbers of migrants from North Africa and the Middle East. Should Greece leave, its government has already said that it would be unwilling to continue to co-operate with other countries on the immigration issue. Panos Kammenos, Greece Defence Minister, said that his country would ‘flood’ Europe with immigrants if it were forced to pull out of the Eurozone.
Others might follow
If Greece is allowed to leave Europe, other countries that have been bailed out in the past, like Ireland and Portugal, could be forced to question their future.
European markets
Global stock markets will react badly if Greece leaves the Eurozone. Many European countries, as well as the European Central Bank, stand to lose billions.
Potential shift in balance of power between US and Russia Finally, the US appears to be concerned that an exit could see Greece moving closer to Russia, as it seeks aid from the Kremlin. Former German ambassador to Washington, Wolfgang Ischinger, said that Moscow will interpret Greece’s withdrawal as evidence that the Eurozone is in decline.
At the centre of July’s Budget was the government’s plan to cut £12 billion from the UK’s welfare bill. Whether you see it as heralding a significant shift from state reliance to the reward of hard work, or a body blow to millions of struggling households on low incomes, the Budget will, undoubtedly, have a significant impact on the lives of millions of Britons.
Only those households on very low incomes will be able to claim tax credits. Anyone earning more than £3,850 will find that they their Working Tax Credit allowance has been sharply reduced.
Child tax credit and Universal Credit will be limited to the first two children, affecting some 870,000 families. Tax credits and local housing allowances will be frozen until 2019.
The amount households can claim in benefits will be capped at £20,000 for those living outside London and to £23,000 for those living in the capital.
Landlords will also be worse off because of changes to tax relief on mortgage payments. Currently, it is possible to use mortgage interest payments to offset taxable profits from rent. Such tax relief is to be limited to the basic tax rate but will be phased in between 2017 and 2021. Landlords in the more expensive South East, where rents and mortgages payments are likely to be highest, will be hardest hit. Shares in many housebuilding firms have already fallen as investors expect the housing market to become flooded with houses put up for sale by disillusioned landlords.
Housing association tenants who earn more than £30,000 (£40,000 in London) will no longer benefit from cheaper rents but have to pay market rates.
Public sector pay rises will continue to be capped at 1 per cent each year. Directors’ dividends over £5,000 will be taxed.
The good news is that the minimum wage, renamed the Living Wage, will increase to £9 per hour by 2020.
House prices are rising at their slowest rate for two years, says the Nationwide building Society.
Annual house price inflation dropped by 1.3 per cent in June to 3.3 per cent, from 4.6 per cent in May. In June 2014, the annual inflation rate of house prices was as much as 11.8 per cent.
Whilst the annual inflation rate of homes continued to rise, albeit more gradually across most of the UK, prices in Wales and Scotland actually fell over the last twelve months, according to the Nationwide.
From May to June, house prices fell by 0.2 per cent across the UK. The average price of a home in Britain is now £195,055.
Chief economist at the Nationwide, Robert Gardner, said that the growth of house prices is still more than that of earnings but that the gap between the two was closing. Annual wage growth increased to 2.7 per cent during February, March and April, in contrast to November, December and January, when it stood at 1.9 per cent.
House price growth is particularly slow in the capital where, according to a survey done by LSL, a property services group, prices have fallen by 22 per cent since the end of last year in some parts of central London.
The slowdown in the growth of house prices is not confined to London, according to Robert Gardner. Nor does it seem to be driven by the London housing market.
Economists are not predicting a general cooling of the housing market, however. Matthew Pointon of Capital Economics, said that prices are still rising, albeit more gradually, and that the demand for housing is increasing once again.
Chief economist at IHS Global Insight, Howard Archer, said that whilst he was surprised by June’s dip in prices, he still expects prices to rise steadily during the second half of this year, predicting an increase of 6 per cent.
Energy customers have been paying too much for gas and electricity, according to the Competition and Markets Authority (CMA).
The big six: EON, EDF Energy, Scottish Power, NPower, British Gas and SSe, charged their customers a total of £1.2 billion more than they would have done had they been operating in a competitive market, the CMA said.
The report published by the CMA was the result of a yearlong investigation into the energy market.
Customers who bought both gas and electricity from their provider would save £160 a year by switching.
Households spend an average of £1,200 on energy every year. For those on very low incomes, this often represents 10 per cent of their overall expenditure. Those on low incomes without qualifications, living in rented accommodation or over 65, are most likely to be on an expensive variable rate, having failed to switch to a cheaper tariff.
Had the energy market been more competitive between 2009 and 2013, said the CMA, households would have paid around £1.2 billion less in energy bills, while small businesses would have paid £500 million less in total. The big six energy suppliers knew that large numbers of their customers were inactive and exploited them through their pricing policies, the CMA said.
Citizen’s Advice found that those who have a prepayment meter are often charged the highest tariff. Ofgem found that these people are also often charged by the energy company for the fitting of the meter.
The CMA has suggested a number of courses of action, one of which is to place a cap on the price of energy while the current market is reformed. However, the government has already said that it does not think a price cap is an appropriate course of action.
The price of gas has risen by 125 per cent during the past decade. Electricity prices have increased by 75 per cent over the same period.
Chancellor George Osborne announced over the weekend that he has identified how he can make £12 billion savings to the welfare bill, the bulk of which will be announced in his forthcoming budget.
Savings will be made by removing subsidies for social housing and lowering the cap for benefit claims to £20,000 per year, for those living outside London, and to £23,000 for those who live in the capital. Approximately 89,000 households across the UK are likely to be affected by the new cap on benefits which, says the Treasury, will save taxpayers £1.67 billion over the next five years.
George Osborne also confirmed that tax credits payable to households on low incomes will be cut but that this will be offset by reduced taxes. Tax credits are currently ‘very expensive,’ said the Chancellor, costing over £30 billion and often leading to ‘a merry go round,’ as people pay taxes and then claim the equivalent back through the benefit system.
Housing subsidies are likely to be removed from households with a joint income of more than £30,000 per year outside London, and £40,000 within the capital. The move will mean that social housing tenants pay an extra £70 a week on average in rent. 340,000 households are likely to be affected, saving the Treasury up to £250 million a year by 2019.
The taxpayer will no longer fund BBC television licences for the over 75s which must, instead, be paid for by the BBC itself. This move is likely to save the Treasury around £65 million per annum. It is thought likely that Osborne may use Wednesday’s budget to announce that the TV licensing law will be changed, to enforce those watching only BBC iPlayer and not live television to buy a licence in a bid to appease the BBC.
For a typical loan of £30,000.00 over 120 months with a variable interest rate of 19.56% per annum, your monthly repayments would be £598.34.
Including a Product Fee of £2,400.00 (8% of the loan amount) and a Lending Fee of £807.00, the total amount repayable is £71,800.20.
Annual Interest Rates ranging from 11.88% to 29.38% (variable). Maximum 50.00% APRC. The loan must be paid back by your 70th birthday. Read more.
Think carefully before securing debts against your home may be repossessed if you do not keep up repayments on your mortgage or any other loan secured against it. If you are thinking of consolidating existing borrowing, you should be aware that you may be extending the terms of the debt and increasing the total amount you repay.
