Moneysucks Monthly Challenge

Fergus Muirhead visited Pulse FM Radio station in East Renfrewshire to help the team from St Luke’s High School with their Money for Life challenge (read more about the challenge here and their Pounds, Pence and Common Sense campaign.

After the programme he got talking to Zoe Nisbet, who is running the project on behalf of East Renfrewshire Council.

Zoe agreed to take part in this month’s Money Challenge. She, and hopefully a few of her friends, are going to keep a note of everything they spend for a whole month, starting on Monday 20th February. You can read their updates here as they go along and Fergus will be back on Pulse FM after the month is over to find out what they have learned about their spending.

It promises to be a fascinating and fun way of helping to make sure that they are dealing sensibly with their money, but already they are worried about who is going to have to admit to the biggest ‘silly spend’ of the month. Watch this space for details!

Let us know if you want to take part in your own monthly money challenge by leaving a message at the bottom ot this page.

Money For Life Challenge

A team of eager pupils from St.Lukes High School in Barrhead have been successful in reaching the first stage of the ‘Money for Life Challenge UK’, impressing the judges with their fun and educational way to teach money management. The Money for Life Challenge is run by Scotland’s Colleges, it is a competition that helps you to run your own original money management projects, to help benefit the local community. To find out more visit http://www.moneyforlifechallenge.org.uk/

http://www.moneyforlifechallenge.org.uk/

The team from St Lukes naming their project ‘Pounds, Pence and Common Sense’ and are aiming to inform senior pupils about to make the transition onto university of how best to manage their money at this time. They will be doing this by producing four, one hour long radio shows on Pulse 98.4. To date three radio shows have been successfully broadcasted and through different guest speakers a range of topics have been covered. The shows have featured UWS financial advisor, young scot and Fergus Muirhead. The last show of the series on Thursday 23rd January will have students or recent graduates on sharing their money stories with the team.

Some of the team have agreed to take part in a challenge that Fergus Muirhead set us. We will be recording what we spend for one month. Weekly blogs will be appearing on his site and we will conduct another radio show when the challenge is over to hear all about it!

Pupils will be in with a chance of winning a place in the UK grand final, however the competition is very fierce so we need all the support we can get. We will keep you updated as you can vote for our project once we have completed our last radio show. In the meantime please like our facebook page: http://www.facebook.com/pages/Pounds-Pence-and-Common-Sense/238464162890688

Are we fooling oursleves with interest-only loans?

Over the last ten years or so more and more of us have been switching our home loans to interest-only, where all we do is service the loan every month by paying interest. In some respects we’re renting the property since we are not repaying the money we borrowed to ‘buy’ it and we are effectively gambling on the fact that increasing capital values will give us a bit of equity when we come to sell. And of course the upside in the short term is that our monthly home loan bills are smaller. At a time when money is tight generally this can be a great help.

The facility to repay a mortgage on an interest-only basis has helped tens of thousands get their feet on the first rung of the housing ladder where otherwise it would have been too expensive to do so – and allowed others to trade up during the boom years. Not that this is always a good thing with hindsight since there is no question that this in part fuelled the ridiculous rise in house prices we have seen over the last couple of decades.

Now a new report from the Intermediary Mortgage Lenders Association suggests that this method of repaying a loan – or not repaying the loan as the case may be – could become obsolete if new Financial Services Authority rules are implemented.

The FSA is concerned that people who take on interest-only mortgages are in effect taking on larger mortgages then they can realistically afford to repay and that extra checks on affordability at the point or purchase will make sure that new borrowers will only take on debt that is repayable. Critics of these new rules argue that they will make it more difficult for lenders to justify arranging new loans on an interest-only basis and that by default we will all end up with repayment mortgages going forward – increasing our monthly outgoings but ensuring that we repay our debt as we go along.

The important thing to remember if you are arranging your mortgage on an interest-only basis, or indeed have already done so, is that at some point you will need to convert it to repayment, meaning that your mortgage payment period is likely to be much longer than you originally considered – unless you are able to cope with a big jump in monthly payments when you switch to repayment.

It could be, of course, that you are happy to continue with an interest-only loan because you can show that you have some money coming to you to repay your loan at some point in the future – from other savings or from an inheritance, or perhaps from the sale of an interest you have in a company you run. If that is the case then even if the new rules do come into force it is likely that lenders will continue to offer interest only mortgages in these circumstances

Would you credit it?

Research from MoneySupermarket has shown that over one in six people missed a payment for at least one bill in the last 12 months, potentially putting their credit profiles at risk.

With many consumers expected to apply for a personal loan or credit card this year, the research found that around three million people had missed a credit card bill in the last year. It also suggested that council tax is another bill regularly unpaid, as 1.9 million people missed a council tax payment. Mobile phones, personal loans, broadband, Sky and gas and electricity bills were also high up on the list as payments most missed.

The Scots and Welsh were the biggest culprits for missing a bill payment with 22 per cent neglecting their finances, while people in the East Midlands were the least likely to miss a payment, with almost 9 out of 10 not missing a payment on any major bill within the last 12 months.

These missed payments can have a dramatic effect on your credit rating but can also lead to the loss of promotional rates on the card, which can be a costly mistake, as Kevin Mountford, from MoneySupermarket, points out. “Missing your first payment on a 12 month 0% credit card deal would cost an additional £300 in interest over the 12 months if you moved on to an average credit card rate of 17.29 per cent. Therefore, prioritising your monthly obligations and setting up a direct debit for the most vital bills is a must for those who tend to forget to pay on their deadline.

“Missing a payment could also have a knock-on effect for future applications such as credit cards and mortgages. Those applying for a credit card need to prove they can make regular and stable payments and any black marks against a credit profile would hinder chances of being approved. For those who have missed payments affecting their credit file, MoneySupermarket has a SmartSearch credit profiling tool which matches applicants with the most suitable products based on their individual credit score, but does so without leaving a footprint on the applicant’s file.”

Repayments on credit cards and other financial transactions such as mortgages and use of overdraft facilities are all recorded on your credit file. The majority of household bills and government related fines and payments aren’t recorded but contract mobile phone payments are, so it can be very easy to get caught out by not paying bills on certain products, especially if you are not aware of the consequences of your actions.

If you are worried about what might be on your credit profile then you can very easily check it by getting in touch with www.equifax.co.uk or www.experian.co.uk. It’s a useful exercise ahead of any credit application you are going to make.

Rachel Hair’s 1st Money diary – Revisited

For those of you who missed the introduction to the series of Money Diaries for Musicians, here’s an opportunity to read the first one again, wirtten after Rachel had spent some time touring with her trio in Belgium.

Welcome to the first ‘episode’ of Rachel’s Diary. What follows below is Rachel’s account of a recent trip to Belgium with some tax questions that it raised for her. We have then answered these questions for Rachel but in a way that we hope will benefit all musicians who have an uncomfortable relationship with HMRC (otherwise known as The Revenue!). Find out more about Rachel and her music at www.rachelhair.com or http://tinyurl.com/6fzw5uu

I was over in Belgium last week with the Rachel Hair Trio playing a set as part of the “Gaelic Crossroads” concert in Lommel, near the Dutch Border. What a trip….we were so well looked after and the gig was almost a sell-out.
We received a good fee for the trip on top of all our expenses (flights, accommodation, transfers) being covered so financially, as well as musically, the trip was a great success.
As usual we, or rather I on behalf of the trio, got paid in Euros, having invoiced my agent who then in turn invoiced the promoter with his fee on top of ours (how much we pay our agent may be the subject of a future piece!)
Since I am the financial brains of the organisation (difficult to believe I know) it’s normally me who gets paid and then I pay the other pair, normally emailing them an official “receipt” (if that’s the right term) to confirm that I’ve paid them for the stated gigs. If work is done in the UK I normally pay them by BACS from my own account, but more often than not if we work outside the UK we get paid in cash, so I pay them cash.
Right now the euro is very strong against the pound so we really appreciate getting paid in Euros. The race is then on between the three of us to try and find the best buy-back exchange rate. Once I’ve exchanged the Euros I keep the bureau de change receipt stating what the exchange rate was so I can add my fee in pounds into my accounts.
When travelling we ate while at the airport on the return journey in Brussels, and I kept the receipt for this having paid in Euros. When putting it into my accounts I normally would take the final exchange rate that I got for changing my fee when back in the UK and work out what I spent in pounds, putting that amount into my account.
However on occasions I’ve used my credit card and then looked at my bank statement for what their exchange rate was and put that in, when paying my card.

So here are my questions from last week:

Is it okay to work with exchange rates at the time we get back or should I look for rates on a specific date, or historically?

Do I need to make a note in my accounts of exchange rates each time we change money, or is the receipt enough evidence?

Should I be putting a note of the Euros I got paid as well in notes to my accounts?

What happens if we are investigated and HMRC discover that we have been paid different amounts for the same gig because we all got different exchange rates when we changed money?

Moneysucks? spoke to Graham Faulkner, tax partner at Chartered Accountant Abercrombie Gemmell and asked him for his take on Rachel’s issues. We agreed, first of all, that Rachel has done a good job in the way she deals with the other members of her trio. Too often we hear of musicians who get paid for work and pass out cash to the others involved without any paperwork changing hands .This leads to confusion and can cause issues with HMRC since, if we take the situation Rachel described above, in the absence of receipts showing that Rachel has paid the other members of her band then HMRC could think that all of the money paid to Rachel by her agent was her income, and tax it accordingly.
Graham thinks that the most important thing for Rachel to do in her dealings with the revenue is to create a clear paper-trail for them to understand. “In Rachel’s circumstances, the key consideration will be to keep sufficient records to tie in the actual exchange rate when preparing her tax return. I would have thought that simply retaining the paperwork from the Bureau de Change would be sufficient. At this level, I would not overcomplicate matters by worrying about notes in your accounts regarding the rates.”
In terms of the exchange rate differing day to day, Graham reckons this is not really a problem as long as Rachel’s paperwork confirms the amount she received but says that help is available on this issue. “HM Revenue & Customs publish monthly lists of the official exchange rates for use in preparing tax returns, and these can be found at http://www.hmrc.gov.uk/exrate.”
Graham is not too worried about any variation in amounts paid to different members of Rachel’s trio. “Similarly, it is less important to marry up exchange rates between the band members, provided that the amounts are being returned to HMRC in accordance with the actual amounts received on exchanging the Euros on your return to the UK.”
So all in all it looks as though Rachel has grasped the basics of this issue and if she takes Graham’s advice on board her tax return should be easier to complete next year.
Graham does raise one other important issue that is relevant to musicians, and others, working abroad. “One consideration that should not be overlooked is the potential taxability of these earnings in the relevant European jurisdiction. Strictly, I would expect you to be liable to Belgian tax in relation to your activities there.”
This raises the spectre of the ‘double taxation agreement’ and the need to understand where tax is due to be paid when you work overseas. We’ll come back and look at this one in more detail next time!

Do you know where your money is?

Right, here we go. No long lists of New Year resolutions for 2012. Just one simple message that will help you no end with your money this year.

Get involved!

Don’t let everything happen passively. It’s your money and you need to take control of it all and it starts by taking an interest:

What rate am I paying on my mortgage?

Can I find a better rate?

Is my house insurance competitive?

Should I take back that faulty TV that I just put up with because I don’t really understand my rights?

Are my tax payments up-to-date?

What income will my pension give me and when?

Could I borrow more cheaply than I am at present?

How much am I spending every week? And why?

Can I afford that new car I really want?

I could go on but you get the picture by now. Make 2012 the year you start to take an interest in your money and to make it work a bit harder for you.

That’s all.

The tax clock is loudly ticking

The end of January tax deadline is looming again and self-assessment taxpayers now only have a couple of weeks to return tax forms to HMRC – or face a £100 fine.

As well as filing a return by the end of this month, any tax due for tax year ended 5^th April 2011 needs to be paid along with the first half of this year’s potential tax bill. Failure to make payment of tax that is due by this date will result in interest being charged on the amount due.

Around nine million taxpayers submit a tax return every year and two thirds of these returns are now filed on-line. Many of us leave the filing of our return to the last minute and this caused around one million people to have to pay a fine last year.

If you are new to on-line returns then you need to register first of all and you can do this at www.hmrc.gov.uk. When you have registered you will receive an activation code through the post and this allows you to go on-line and file your return. Given the state of the postal service at the moment due to the weather time is now at a premium and if you have still to register you need to do it now!

If you still prefer the old fashioned method then HMRC need to have received your return by 31^st January.  You can take your return to a tax office up to that date if you don’t trust the postal service but in a neat little twist HMRC won’t issue you with a receipt to prove you delivered it on time if you hand deliver, leaving yourself open to the possibility of a fine.

New Year, New Rules

So that’s it over for another year and all you have to remind you of Christmas 2011 is a hangover, a few extra pounds round the middle and a few pounds missing from your wallet – oh and perhaps a credit card bill that you expect to drop through the letterbox any day now.

Christmas is the biggest spending frenzy of the year and there is an opportunity now that it is over to reflect on your finances for the coming year. New Year resolutions come and go and most of us promise to make better use of our money in the year that is in front of us – as well as promising to make more time for ourselves and lose a bit of weight and exercise more and stop smoking and not drink as much and spend more time with the kids and learn another language and…..

Make this year the year you resolve to be efficient with your money – and resolve to keep that resolution! Make it the year you stop wasting money – and that’s not the same as stopping spending by the way!

By not wasting money you need to make sure that you are paying as little as possible to borrow money, paying as little as you can for the bills you need to pay every month, and making as much as possible from the money that you have invested. Oh, and doing it all tax efficiently into the bargain.

So to start you off here are five things that you can do this year to make sure that your money is well looked after in this New Year. Let’s start with the one that sounds easiest but is likely to be the most difficult.   

 

1. Plan! 

 

Managing your money effectively doesn’t just ‘happen’. You need to have some sort of a plan. What is it that you want to do with your money and your life, and when do you want to do it?  The new house or car or retirement at 50 won’t just appear and the mortgage won’t pay itself every month.

You need to plan for them.

The starting point is to sit down and work out what you’re trying to do, and when. There are no right or wrong answers to this one, and everyone will have different priorities. You might not even know all of the answers yet, it would be surprising if you did. But you need to ask the questions.

We’ll be looking at this area in a lot more detail as the year goes on but for now start the process. Start to think about what it is you want and when you want it.

 

The plan is not a one-off action, but will evolve over time. You won’t sit down one day for half an hour and say “That’s it then, that’s my financial future sorted, thank goodness I won’t have to think about that again for a while!”

There are things that you can do that will make a difference immediately:

 

2. Ditch the expensive debt! 

 

Make 2012 the year that you get sensible with your credit cards. Credit cards are great when used properly – and remember that as well as offering a sensible way to pay they can also offer protection if something goes wrong with the goods or services you are buying.

 Look for a credit card with 0% interest. Once that interest free period ends try to switch any balance to another card that offers the same. Remember that the money you owe the credit card company is the total balance on your account, not the amount you pay them every month so if you are going to use a credit card pay it off as quickly as you can.

 

3. Work out a sensible budget! 

 

Work out how much you need to spend every month on essentials and stick to that budget. For the next month keep an accurate note of everything you spend. Be honest! This is the starting point for your budget. Make sure you include the monthly cost of things that you pay annually like house or car insurance.

Most us get into trouble because we’re faced with unexpected expenses and don’t have any savings. Try to save a little every month – you can only do this once you’ve started the budget above – and keep it in a separate account so that if something turns up that you need to spend money on in a hurry you won’t have to borrow.

 

 

4. Check out your mortgage rat!e

 

If you have had your mortgage for a while it will be worth looking around to see if there is a better rate available. Lots of lenders will pay your costs for you if you move your mortgage to them. Start off by asking your existing lender if they have any other deals as this may be an easier option than moving to a completely different lender. Remember to check to terms of any new deal. There’s no point saving a bit of money now only to find that you’re tied in and can’t move if your circumstances change.

 

5. Bank on the best account!

 

Lots of current accounts pay very little, and many pay no, interest on your savings. Any cash that you have left at the end of the month should be moved to a savings account with a higher rate of interest. And on the subject of savings rates make sure you look around for the best rate you can find for your money. Inflation is creeping up again and you need to have your money in an account that is paying a rate of interest better than the rate of inflation to make sure you are not losing out.

 

 

Rachel’s tax questions answered – and how!

Elaine Guthrie, of Chartered Accountants Abercrombie Gemmell(www.agca.co.uk), has been looking at Rachel’s tax queries. Here are her suggestions:

In order for expenses to be offset against your income for tax deductibility, you have to look at the expenditure being incurred and whether it is incurred “wholly and exclusively” for the purposes of the business. So, the cost of a train ticket to get to and from a gig would be incurred by Rachel “wholly and exclusively” for the purposes of her business. Without the train ticket, Rachel would not be able to get to and from the gig and would therefore not receive any income.

Where it gets slightly more complicated is when there is a mixed element of usage. So, for example, telephone bills often have a business and private element to them. In these circumstances, we look at the element of business use and private use and apportion the costs based on these. So, for example, Rachel could apportion her telephone call based on the number of calls made/received by her or the number of minutes she spends on the phone for business/private use.

For a deduction for use of home as office, this is slightly more complicated. There are a number of ways to calculate the use of home as office deduction. HMRC have advised that they believe a deduction of £2 per week to be sufficient to cover additional costs associated with working from home. However, it is possible for Rachel to claim more than £2 per month provided she can justify this. Generally speaking, the most popular method of calculating the use of home as office is to consider the number of rooms Rachel’s house has. If Rachel had 5 rooms in her house and used 1 of these rooms for business purposes, then 20% of the costs would be available for her use of home as office calculation. Thereafter, Rachel should assess her business use of the room in question. If she used the room 25% of the time for business purposes, then she would be able to claim 5% of her total household bills against her business income (this represents 20% x 25%).

Care needs to be taken when claiming a deduction for use of home as office. For those individuals who own their houses, making a claim for 100% business use of one room of their property would render that room a business asset. As such, if they were to sell their house, the room would not qualify for Principal Private Residence Relief and as such may be subject to capital gains tax.

Turning to Rachel’s car, she is able to claim a deduction for the business use of her car in one of two ways:

Method 1: Rachel could claim 45p (40p pre-6 April 2011) per mile for each business mile travelled for the first 10,000 miles followed by 25p per mile thereafter.

Method 2: Rachel could bring her car into her business as a capital asset. This would allow capital allowances to be claimed on the value of the car together with the yearly running costs of the car for example road tax, MOT, repairs. However, care needs to be taken if Rachel has private use of the vehicle as only the business use element of the car would be an allowable deduction for tax purposes. Therefore, if Rachel used the car for business purposes 75% of the time, then she would only be able to claim 75% of the running costs of the car as a tax deduction.

Both of the above methods are worthwhile and Rachel should take care to ensure that she opts for the method that suits her best. It should be noted that Rachel cannot opt for different methods each year – she needs to choose one method to use consistently.

Rachel notes that she may purchase assets from time to time if they are required for her business. If these assets provide an enduring benefit to the firm, Rachel would need to claim capital allowances on them. Care needs to be taken when purchasing musical equipment. If the asset is likely to appreciate in value, it may be detrimental to claim capital allowances which would be clawed back on the disposal of the asset at a later date.

Rachel should include the total amount she receives from promoters in her income and include a deduction for her expenses at the same time.

If Rachel were to purchase a ball gown for an event, she may be able to claim a deduction for this. However it is necessary for Rachel to show that this purchase was for business purposes only. Therefore, Rachel should not wear the ball gown for any private purposes, but only for business purposes.

Rachel will be able to claim a tax deduction for any consumables used in her trade such as strings, reeds and so forth.

One little tip I would give to Rachel is this: keep twelve envelopes – one for each month of the year and pop your receipts into these throughout the year. It helps save a lot of time sorting them out at the end of the year!”

Broken camera, or broken contract?

Q. I purchased A Canon IXUS 120IS camera from Camerabox in June 2010 with a 2 year’s full warranty and a lesser 5 year one. My camera is now 18 months old has developed a few faults shuts down error 32, stores pictures up-side down and the picture jumps around when focusing. Within 2 years I am supposed to send camera to them for repair and get instructions from their web site not successful yet as I write this. I cannot reach their site directly but do when I put it on a search. I hear they were in administration in June. Is this still the case? My camera still produces good pictures I just have to keep re switching it on and orientate every picture. Should I return it to them at address I received when I bought it? Can you shed any light on their current status, or give me any advice please.
Geoff Whitby

Your question raises a few interesting points. Firstly, as far as I am aware Camerbox is indeed in administration and there is little chance of you getting money back from them. That doesn’t mean all is lost however and there are two options with regard to the payment you made, depending on how you paid for the camera. If you used your credit card then you may be able to make a claim from the credit card company under Section 75 of the Consumer Credit Act. This allows you to claim against the credit card company (and some debit cards) if the contract is broken as it may have been in this case if the camera is indeed faulty. For a claim under Section 75 to be valid the goods need to cost more than £100 and less than £30,000.

If you used a debit card than you may be able to ask your bank to deal with a refund by way of a ‘chargeback’ on the card. This effectively allows the transaction to be reversed. If you want to claim using this method then you should speak to your card provider in the first instance.

As far as the warranty is concerned my first question would be to ask who was providing it I would also want to ask who is providing the 2-year Warranty – Camerabox or Canon? If the former then you are out of luck but if it is Canon then it may be that you could send the camera back to them and ask for their opinion, especially if the fault is not something that you would expect from a camera less than 2 years old.

I hope this helps

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