Inheritance Tax Update

Important Inheritance Tax Update: From April 2013, anyone leaving 10% of their taxable estate to charity will qualify for a reduced rate of inheritance tax from 40% down to 36%. The reduction is significant and could result in conditions whereby the inheritance tax bill is reduced if donations are increased above the 10% threshold. 

It is important to obtain tax advice prior to writing your Will. Belsize Accountancy are experts in tax planning.

Increased Competition in the UK Banking Sector

Confidence in the major UK banks is at an all time low. Since the Financial Crisis in 2009, bankers have been accused of taking excessive risks and rewarding themselves with excessive pay and bonuses. The integrity of the banking sector has also been called into question following the recent Libor rate scandal and HSBC’s failure to comply with US sanctions over Iran. Last week, Standard Chartered has hit the news with similar allegations that the bank laundered money for Iranian clients. 

The banking sector is clearly in need of a shake up as a strong banking sector could well be a catalyst for an economic recovery. Over the past year or so we have seen some new entrants to the banking sector. Metro Bank opened some new branches in the UK and is slowly expanding its base; the Co-op has acquired 600 branches from Lloyds and more recently, two retailers have entered the scene. Last month, Marks & Spencer launched it’s current account and last week Tesco introduced a range of mortgages. At present the new retailers are not offering anything out of the ordinary. None of Tesco’s deals are the best in their class and buyers will require a 20% deposit while rates range from 3% to 5%. However, the increase in competition is welcome and is healthy for the industry.  

House prices in the UK have fallen in July (with the exception of Central London) and banks are beginning to offer more competitive rates. HSBC are now offering a 2.88% mortgage but buyers must have a 40% deposit. There are concerns over reduced demand for expensive homes in the UK due to the increased taxes proposed in George Osborne’s latest budget. The new 7% stamp duty on properties over £2m together with additional taxes for properties owned through a company will affect wealthy individuals in the UK.

Growth In Co-Operatives and SME’s Required To Boost The UK Economy

There is a growing concern over the antiquated economic structure in the UK whereby more than 90% of the assets are controlled by big business which does little to ensure the long term social and economic prosperity of the Nation. The recent failure of the big banks has provided further evidence of this fact following the Barclay’s Libor rate fixing scandal, failure to promote lending to small businesses, the relaxation of money laundering procedures at HSBC and concerns over excessive pay at Barclays. 

The concentration of wealth in the UK is much greater than on Germany and the gap continues to widen. It is suggested that a key factor behind this is that 40% of the German economy is owned by co-operatives and family businesses, leaving a fairer distribution of wealth and opportunity. 

The challenge for the UK economy is to restart growth and this can be achieved by introducing new policies to promote diversity in the business models. Ownership should not be centralised to a few big businesses. The recent policy of low interest rates backed by Quantitative Easing has not worked. The government would be better placed to provide support to Small and Medium Sized Enterprises (SME’s) and family businesses. These models have proved successful in the past and are more likely to stimulate growth. 

Additional support is required from the banking system in order for this model to be successful. Small businesses are having difficulty in raising the necessary finance to deliver the growth required to stimulate the UK economy.  The opening up of the banking system to new competition is positive and the recent move by M&S into banking is most welcome as is the acquisition of 632 Lloyds branches by the Co-operative bank. Perhaps the increased competition will encourage the necessary lending to SME’s.