Everything you need to know about ISAs

An Individual Savings Account (ISA) is a method for you to save up to £20,000 (current limit for the 2018/19 tax year) tax free! You won’t pay tax on any interest on your investment as well as not having to pay any income or capital gains tax on the monies invested.

You can open an ISA lots of different ways including via your; bank/building society, a peer-to-peer lending service, a crowdfunding company, a stock-broker, a credit union, a friendly society and another financial institution.

There are 4 variations of ISA, it is possible for you to put your annual allowance into one of each kind of ISA or split your allowance across some/ all of the other types.

The different types of ISA are;

•Cash ISA
Cash ISA will generally include savings from a bank and building society

•Stocks and shares ISA
A stocks and shares ISA can include shares in companies, unit trust and investment funds, corporate bonds and government bonds.

•Innovative finance ISA
An innovative finance ISA allows for peer to peer lending without the use of a bank, as well as crowdfunding debentures – investing in a business by buying its debt.

•Lifetime ISA
A lifetime ISA can be used to buy your first home or save for later life, you must be over the age of 18 but younger than 40 to open a lifetime ISA. You are only able to put £4,000 into a lifetime ISA each year, the government with add a 25% bonus to your savings (up to a maximum of £1,000 per annum). These funds can be held in cash or within stocks and shares.

You can also open a Junior ISA for your child; this has an annual allowance of £4,000 and can hold stocks and shares or cash.

If you would like to consider opening an ISA or receiving information on which ISA might be more suitable for your own personal needs and circumstances, please contact Sound Financial Management via telephone (01752 207070) or via email (info@sound-financial.co.uk).

Inflation Vs. Cash: What does inflation mean for your savings?

High inflation can cause issues when you’re saving, especially when your bank is only offering you a low interest rate.

What is inflation?

Inflation effects how much your money can buy. Think about 10 years ago, how much did a pint of milk cost? In all likelihood it cost now costs more: that’s inflation.

Rate of inflation

Still not sure what inflation is? Well, if a pint of milk was 48p this time last year and 50p now, you could say that the annual rate of inflation on a pint of milk was just over 4%. If you then expanded that to measure the changes in price of lots of goods and services, you could see how the cost of living in general is going up, or coming down. In the UK we have two main inflation rates: the Consumer Price Index (CPI) and the Retail Price Index (RPI).

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14 Ways To Save Money

Whether you’re a student studying at uni, trying to save for your first home or just saving for that next big purchase, everyone could do with a few helpful tips to save themselves some money. We’ve listed a few changes to your spending habits that can be made to make you more of a successful saver.

Sometimes it can be making little changes that make all the difference when trying to make considerable progress regarding savings or retirement fund building and saving a bit of money here and there can add up considerably over time. Here are 14 areas you can focus on:

1. Utility Bills
Some bills you just can’t get around paying, especially utility bills. But never fear: There are ways to help lower your energy bill in summer, winter, and all year long. Switching is easy and should be done regularly to ensure you’re receiving the best deal available to you. Comparison sites are very helpful and your usage could result in you benefiting from a different style of tariff than you’re already on

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The Main Changes This Tax Year 2018-19

The new tax year began on Friday with a bigger than usual set of changes to income taxes, personal allowances, pensions, buy-to-let taxation and dividend taxation. Here’s what to expect.

Personal allowance
The amount you can earn without paying income tax rises from £11,500 to £11,850, which works out as a tax cut of £70 for most people.
Income tax
The starting point for paying 20% basic rate tax will be £11,850, while 40% tax will start on earnings above £46,350 (up from £45,000).
It’s different in Scotland. The £11,850 personal allowance is the same, but the first £2,000 of earnings after that are taxed at 19% rather than 20%. After that, it’s 20% tax until your earnings hit £24,000, when it rises to 21%. Then above £43,430 the rate is 41%. Both have an upper rate above £150,000; in England it’s 45%, in Scotland 46%.
National insurance
Will be charged at 12% of income on earnings above £8,424, up from £8,164 until you are earning more than £46,350, after which the rate drops to 2%. It’s the same in Scotland.
Auto-enrolment Pension contributions start racking up from this week. From Friday workers must pay a minimum of 3% of salary into a pension (up from 1%), while the employer contribution rises from 1% to 2%.
Buy-to-let landlords
Will only be able to offset 50% of their mortgage interest when calculating their tax bill, compared with 75% before.
Until now you could earn £5,000 in dividends tax-free. This drops to £2,000 for 2018-19.

Source: https://www.theguardian.com/money/2018/apr/06/welcome-to-the-new-tax-year-heres-the-main-changes

Why Is Life Insurance So Important In Your 20s?

In our 20s the last thing anyone wants to think about is getting ill or, god forbid, worse. Although we still feel like we live care-free lives and have no responsibilities, the reality is that we are now financially independent and this comes with certain responsibility not only to ourselves but to others. If you have any loans, a house, significant other or children, you should be looking at life insurance.

Today, we prioritize our technology and our pets, taking out policies to cover loss and damage to our phone and ensuring vets bills are covered for our furry friends. These are generally the first considerations when thinking about insurance, but why are we not considering ourselves? The main reason is that we don’t get educated to the importance of personal insurance, if you get ill and can’t work, you will most likely seek additional help from your parents or a home care service, which could be costly. Having insurance will absorb some of this financial burden and avoid eating into savings. The mind-set in the UK is also hindered by the NHS, because we have our healthcare provided the financial implications of becoming ill aren’t something we would consider an issue, our initial care is covered and we tend not to think about the ripple effect that could be caused due to illness. Potentially having to pay out of a new phone or an operation for man’s best friend is worrying and costly, thus insurance is an instant thought.

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Why You Shouldn’t Keep Your Money In Your Current Account

I’m sure I’m not the only one that makes the mistake of keeping all their free cash in their current account, but did you know that doing this can actually be losing you money?

Inflation Vs Cash FTSE Graph

Okay, no need to panic your bank isn’t stealing from you but in relative terms, your money is decreasing in value when you leave it sitting in your current account. Over the past 10 years, inflation (red line) has more than doubled the performance of cash (green line). This means that despite any growth a cash holding might have received during this time, in real terms the value of this saving would be halved.

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What You Need To Know About Workplace Pensions

Like many young people the thought of retirement is a far off dream for me, so when talking about workplace pension I tend to half-heartedly listen. The truth of the matter is that we should start putting money aside for later life as soon as possible, and the work place pension scheme set up by the government is the easiest way for you to start doing this. Starting a pension pot now will ensure you see as much growth as possible from your invested money, with the aim of ensuring you are financially stable in your retirement.

So what is a workplace pension?

A workplace pension is a pension scheme set up by your employer; a percentage of your pay will be deducted every payday and placed into the chosen scheme. In most cases your employer will also contribute into the scheme for you.

Employers are legally obligated to provide a workplace pension scheme for their employees; this is called ‘automatic enrolment’. If you meet the following requirements, your employer must enrol you and make contributions to your pension:

• You’re classed as a ‘worker’ – you have a contract or other arrangement and receive payment for the services you provide (this does not include limited company arrangements)
• You’re aged between 22 and your state pension age (visit Gov.UK to find out what your state pension age is)
• You earn at least £10,000 a year
• You usually work in the UK
However, there are exceptions to your employer automatically enrolling you, if you don’t meet the previous criteria or any of the following, but this does not mean you aren’t eligible to opt-into the scheme:
• If you’ve given or been given notice to end your employment
• You already have a pension arrangement with your employer
• You’re a director without an employment contract and employ at least one other person
• You’re a limited liability partnership
• You’re from another EU country and are in a EU cross-border pension scheme
• If more than 12 months before your enrolment date, you decided to leave a pension previously arranged by your employer
• You have evidence of your lifetime allowance protection
• You receive a one-off payment from a workplace pension scheme

If your income is low (below £490 per month/ £113 per week) your employer isn’t required to contribute.

When you are automatically enrolled your employer will need to notify you in writing. This letter should include information regarding your joining date, the type of scheme and which company runs it, how much is being contributed, how you can opt-out and how tax relief may apply to you.

Your employer cannot dismiss or discriminate against you for being in a workplace pension scheme, they are also not able to encourage or force you to opt out.

If you decide to change jobs your pension still belongs to you. Regardless of If carry on paying into the scheme or not, the money will remain invested and you’ll receive the pension when you reach the scheme’s pension age. Your pension will not automatically be paid into the same scheme, so ensure you keep all you pension details and either combine your schemes or keep a record of them. You will be able to join a new scheme with your new employer and can continue to contribute to your old scheme if you wish.

Want more information? Check out our website www.sound-financial.co.uk or give us a call on 01752 207070

DISCLAIMER: Seeking professional and personalized advice is always recommended. Your financial needs and circumstances are completely individual to you and you should treat them as such by seeking advice from an investment professional. Independent financial advisers have the ability to recommend products from all areas of the financial market and will provide you with a clear guide to establishing everything you need to make a smart investment that suits you.

Guide to Investing

Creating and maintaining the right investment strategy plays a vital role in securing your financial future. Whether you are looking to invest for income or growth, we can provide the quality advice, comprehensive investment solutions and ongoing service to help you achieve your financial goals.

Whatever stage of life you’ve reached and whatever your plans are, you’ll want your money to earn the best return possible without taking undue risk. That’s why it’s important to invest in a way that’s right for you and that will meet your goals.

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Key things to do in your 20s and 30s so you retire wealthier

In your 20s and 30s, you possess one of the most valuable assets to retiring rich — time, and although it’s not in the fore front of most of your minds, contributions to a retirement account at this age will provide a lifetime worth of growth. Even minor contributions during your 20s and 30s will create a higher pay out in retirement than if you were to make bigger contributions in your 40s and 50s.

Luckily for most 20 and 30 year olds, your minor contributions (which can potentially help you reach £1 million or more by the time you retire) don’t even have to come out of your pocket, wit workplace pensions, your small contributions can build to something substantial in the long run.

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