SBA Financial - Solving the financial puzzle... ...piece by piece

Monthly Update - July 2010

Have you claimed your Capital Tax Allowance?

This could save you thousands of pounds in tax. All you need to qualify for this tax allowance is to be able to answer yes to these simple questions.

Do you own a commercial property?
Is the commercial premises worth at least £75,000
Has the capital tax allowance been claimed before?

If the answer to these three questions is yes, then you should be able to make a full claim, if you don’t know the answer to question 3, don’t worry because this can be easily checked out for you.

Typically the tax savings we have seen on £50,000 commercial premises are around £2,750, on a £500,000 premises around £31,500 and on a £1,000,000 savings of £70,000 so don’t delay if you think you may have a claim get in touch with us now!

Cash deposits rocket 275%

In June 2010 David Doulton MD of Fair Investment Company reported From February to March, deposits into cash accounts had rocketed by 98% and by April, they had increased by a further 89% which means a three month rise of 275%. He said "What we are seeing is savers' reaction to the current market situation where the FTSE is bouncing up and down, and the base rate is stuck at 0.5% and not likely to change anytime soon.

No wonder that David was so upbeat in reporting these figures, he also reported "Most of the fixed rate cash plans on our site, particularly the five year plans, have seen a major boost in popularity, with savers willing to lock in their cash for increasingly larger periods of time”.

As I warned in my last email I see this trend all over the place with the greedy banks pushing this sort of rubbish onto the unsuspecting customer. Don’t be fooled by these people, Cash deposits are fine for short term cash but they are not the place for the medium to long term and certainly never tie your money up for 5 years with no way out of it.

This is just madness driven by the fears of the movements in the stock markets. Instead look for a balanced approach that casts the net wide and captures the best of all types of investments for you, which is actually tailored to meet your needs and your wants.

It is rare that you will ever be right to invest all of your money and it is just as rare that you will be right to put it all into cash accounts or bonds. What is needed is professionally constructed investment strategy that uses asset allocation to meet your needs and balances them with your own attitude for investment risk.

Save on your credit cards

Recently reported was the fact that AA Financial Services and MBNA are removing the heavily criticised repayment practice of applying any money you pay to reduce your credit card bill to the cheapest debt first, leaving the more expensive debt to rack up and cost you more than it should. The Government has outlawed this practice, known as ‘negative payment hierarchy’ from the end of the year. But both AA and MBNA are taking the initiative and applying the change from September 1st, four months earlier than they need to. This is good news, as MBNA provides cards for a number of credit card providers, so it will have a big impact in the market.

While they should be applauded – at last – for making the change to help their customers, the majority of other card companies are still not playing fair when it comes to the order of payments. Nationwide, Saga and Virgin are the other companies already applying these fair payment terms, the rest are lagging far behind.

At the moment, the best cards for balance transfers are with Yorkshire Bank Gold MasterCard, which offers 0% on balance transfers for 16 months, with a fee of 3% of the balance transferred. After this, the rate goes to a typical rate of 16.9% APR. However, it’s only available to existing customers, which might mean that a lot of people don’t qualify.

The next best offer is probably the Barclaycard Platinum Card which is offering 0% on balance transfers for 15 months, with a fee of 2.9% of the balance transferred, and the rate goes to a typical 16.9% APR.

For purchases, you can get 0% deals for 12 months with the Barclaycard Platinum with Purchase Visa, and the Sainsbury’s Finance Mastercard for Nectar Card Holders – both of which revert to a typical APR of 15.9%. As the name suggests, you have to have a Nectar card to get the Sainsbury’s Finance offering, but there are no extra hurdles for the Barclaycard Platinum.

If you have purchases on your credit card and a balance you have transferred, now would be a good time to look at switching your cards to get a better deal – and pay off your balance sooner.

Why single share ownership is so risky

The Gulf of Mexico spill, with its environmental and economic impact as well as the tragic loss of life, has obviously been a material negative for BP. Of course the financial cost has been and will continue to be huge but the massive drop in their share price is actually far too excessive. Yes it’s a major problem, but why is the financial pain so over the top?

The main reason BP's share price is so poor is the sustained hostile rhetoric from Washington. This has led to concerns that BP will be unfairly targeted for political reasons, overriding the due process of US law. The political and media pressure will also remain intense and will not abate until the well is sealed, which is not likely until the end of July or later.

The fact is that with high possible gains, comes high possible losses and this is why I am not a great fan of single share ownership. I was asked by a client back when Northern Rock was going through its troubles “Steve do you think they are worth a punt as the price is so low”?

My reply was “I can’t tell you if they will survive, not even a top stockbroker can do that, it is just an educated guess, but yes they are worth a punt if you are happy to risk losing all of the money you put into them”?

As it was he decided not to take the punt and was glad he did in hindsight. The golden rule with investing in my view is play around with anything that you can afford to lose. The money you can’t afford to lose should be held in a diverse asset allocated portfolio that is actively managed by professionals because it is not hard for them to obtain an above average return with below average risk. (If they do their job right).

Tax Freedom Day

Adam Smith Institute Tax Freedom Day http://www.adamsmith.org/tax-freedom-day/
Tax Freedom Day answers the very basic question: ‘how much are Britons actually paying for government?’ It is calculated by comparing general government tax revenue with the Net National Income (NNI). The total of all government tax revenue – direct and indirect taxes, local taxes and National Insurance contributions – is calculated as a percentage of NNI at market prices. This year it comes to 40.9 percent. That percentage is then converted to days of the year, starting from 1st January. The first day of the year that Britons work for themselves rather than the taxman is Tax Freedom Day.

Check the table to see how this day has changed over the years. I always knew that 1963 was a great year, as it was the year I was born, of course 1964 was even better, but as my wife pointed out, that was most likely because that was the year she was born.

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If you would like to find out more about the topics covered in this month’s newsletter, please contact us or come along to one of our regular seminars all of the details can be found on our Seminar Calendar.

The information contained within, including references to taxation, legislation, regulation, or any other issues are correct at time of going to print.