Borrowers are worried about the effect a rise in interest rates will have on their regular debt repayments, according to research published by the Building Societies Association (BSA).
The survey of 2,000 adults shows that around a tenth think that a rise in interest rates would mean that they experience financial problems. The other findings of the survey:
Paul Broadhead, head of mortgage policy at the BSA, said: "Concern from borrowers is natural when it comes to interest rate rises. There are at least 1.85 million homeowners that have never experienced a rate rise, we have a record low bank base rate for so long, it is unsurprising that some people are concerned that a rise in rates will affect their lifestyles and ability to make mortgage repayments. "Our advice to those concerned about interest rate rises is to start thinking about how they will manage the increased costs. This could include creating a household budget, to taking a look at mortgage calculators and rescheduling unsecured loans such as credit cards." Joanna Elson OBE, chief executive of the Money Advice Trust, which runs the National Debtline, said: "Households now have a window of opportunity to re-assess their budgets, look again at their borrowing and think about how they will cope with higher interest rates. It is crucial they take advantage if this and prepare themselves now." Talk to us today about your personal finances.
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The Autumn Statement has been delayed by one day
and will now take place on Thursday 5 December, the Treasury has confirmed. The change of date ensures that the Chancellor George Osborne's Autumn Statement speech to the House of Commons will not take place while Prime Minister David Cameron is out of the country. The Prime Minister will lead a major trade delegation to China at the start of December, which he said is aimed at: "opening the way for British companies to benefit from China's vast and varied markets and preparing the way for a new level of Chinese investment here in the UK." An update on HM Treasury's official Twitter account announced: "Tonight PM says that he will lead delegation to China in early December. As a result Autumn Statement will now be on Thursday 5th December. " The first round of funding for the investment arm of the Government's Business Bank,
designed to stimulate the flow of finance to small businesses,has been announced by the Business Secretary Vince Cable. Outlined in the 2012 Autumn Statement, the Business Bank will consolidate a number of existing finance schemes for SMEs. It will also fund the provision of advice and support for businesses to start-up and grow. The Bank's £300 million investment programme will allocate funds to existing lenders and specialist finance companies, which will then provide debt finance to SMEs. The first wave of funding for the investment programme amounts to £45 million, of which: · £30 million will be allocated to Praesidian Capital Europe; and · £15 million will go to BMS Finance, which has a focus on SMEs with high growth potential and those nearing profitability. Both funds are expected to start lending to SMEs in early 2014. Announcing the funds, the Business Secretary Vince Cable said: "The first investments from the British Business Bank's investment programme will provide choice to smaller businesses looking to secure vital finance to help invest." Mr Cable also announced a new £1 million business-to-business mentoring campaign and a £10 million start-up fund for entrepreneurs in the synthetic biology market. The Skills and Enterprise Minister Matthew Hancock said: "Government has an important role in providing a coherent package of measures to support businesses, but there is also a role for business-to-business support, with successful, growing small businesses talking to others about how exporting, hiring and business planning can take a business to the next level." The cost of goods and services for consumers increased by 2.2 per cent between
October 2012 and October 2013, according to the Office for National Statistics (ONS). The consumer prices index (CPI) 12-month rate of inflation measures the rise or fall in the cost of household goods and services over the past year. CPI fell from 2.7 per cent in September, the first time it has been lower than 2.5 per cent since April. The Bank of England's stated target for CPI inflation is two per cent. The main reasons for the fall in the rate were lower prices for fuel in the transport sector and reduced costs for tuition fees in education. Commenting on the fall in the rate, David Kern of the British Chambers of Commerce said: "The larger than expected fall in inflation will ease pressures on businesses and consumers, particularly at a time when wages aren't rising at the same rate. However while we expect inflation to fall further over the next year, this will not be a smooth process. Some of the October declines are likely to be reversed, especially when energy price increases take effect." The internet has enabled many small businesses to sell internationally, but exporting goods and services can create VAT difficulties.
For VAT purposes you need to know whether you are selling goods (physical things), or services (something you cannot physically touch eg: downloaded software), as the rules vary for goods as opposed to services. You also need to know where your customer is based - in an EU country or elsewhere and whether the customer is a VAT registered business. When you sell goods to other businesses in the EU or in other countries you can normally charge the zero-rate of VAT on the sale. This means you can recover VAT on any related input costs. However, you need to show that your customer was VAT registered and the goods physically left the UK. Getting the paperwork right is essential. The rules for international services are more complicated as they depend on the place of supply of the service, which varies according to the type of service supplied and who it is supplied to (business or non-business customer). UK businesses selling to private customers in other EU countries must charge UK VAT. Where the customer is a business in another EU country, in most cases the customer accounts for the VAT in their own country, so the UK supplier does not charge VAT and the reverse charge procedure applies. Whether you sell goods or services to VAT-registered businesses within the EU you must complete an EC sales list (ESL). If you only supply services, or your total goods and services sales do not exceed £35,000 per quarter, you may submit the ESL every quarter, otherwise you must submit monthly ESLs. Certain low-volume exporters can apply to the Taxman for permission to submit annual ESLs. The ESL can be submitted in paper form on VAT 101, or online through the HMRC website, but it must contain the following details:
Limited Company Sole Trader/Partnership
Companies are governed by the companies Acts. A company must:
However, annual accounts are necessary for the Inland Revenue tax returns. Companies may have greater borrowing potential. They can use current assets as security by creating a floating charge. Sole traders and partners are unrestricted in the amount and purpose of borrowings but cannot create floating charges. Shares in a company are generally transferable – therefore ownership may change but the business continues. Incorporation does not guarantee reliability or respectability but gives the impression of a soundly based organisation. Personally, there may be prestige attached to a directorship. The unincorporated business does not carry the same prestige. Tax is payable on director’s remuneration paid via PAYE on the 19th of the following month. If applicable, higher rate tax is paid by shareholders on dividends under the self-assessment rules. Corporation tax is payable 9 months after the year-end. For a sole trader or partnership, tax is generally paid by instalments on the 31 January in the tax year and the 31 July following the tax year. Tax for 2009/10 is payable:- first payment on account on 31 January 2010, second payment on account on 31 July 2010, with any final balance due on 31 January 2011. Losses in a company can only be carried forward to set against future profits. Losses generated by a sole trader or a partner can be set against other income of the year or carried back to prior years. For profits up to £300,000 tax is charged at 21% (2010/11). Profits are taxed at 40% on taxable income in excess of £37,000 and at 50% over £150,000 (2010/11). There is both employer’s and employees’ national insurance payable on directors salaries and bonuses. The NI charge is greater than that paid by a sole trader/partner. HM Revenue & Customs (HMRC) has kicked off its Real Time Information (RTI) awareness campaign
and will be writing to more than 1.4 million employers over the next month. RTI is due to start in April 2013, and will change the way that employers report on and send PAYE data to HMRC. By October 2013, all employers and pension providers will have to use RTI, as it is vital for Universal Credit to work. A pilot of the scheme was launched in April 2012, and participants have been providing details of tax, national insurance and other salary deductions in real time as opposed to at the end of the tax year. For RTI to work all employers will have to prepare, which is why HMRC is launching its campaign now. Measures that employers will have to take include:
when Real Time Information becomes a reality, is now less than six months away. "The letters going out to employers include a useful help sheet, which tells them what to do to get ready for the change. Employers should read that and take action such as speaking to their payroll software provider or payroll service provider and checking their employee data is accurate. "Employers in the pilot who are already using RTI are telling us how straightforward and easy to use it is once you prepare. The Importance of a Partnership Agreement
If you and your partners don't spell out your rights and responsibilities in a written partnership agreement, you'll be ill-equipped to settle conflicts when they arise, and minor misunderstandings may erupt into full-blown disputes. How a partnership agreement helps your business A partnership agreement allows you to structure your relationship with your partners in a way that suits your business. You and your partners can establish the shares of profits (or losses) each partner will take, the responsibilities of each partner, what will happen to the business if a partner leaves and other important guidelines. Don't be tempted to leave the terms of your partnership up to local laws. Because they were designed as one-size-fits-all fallback rules, they may not be helpful in your particular situation. It's much better to put your agreement into a document that specifically sets out the points you and your partners have agreed on. What to include in your partnership agreement Here's a list of the major areas that most partnership agreements cover. You and your partners-to-be should consider these issues before you put the terms in writing: • Name of the partnership. One of the first things you must do is agree on a name for your partnership. You can use your own last names, such as Smith & Wesson, or you can adopt and register a fictitious business name, such as Hammersmith and Kensington Home Repairs. If you choose a fictitious name, you must make sure that the name isn't already in use. • Contributions to the partnership. It's critical that you and your partners work out and record who's going to contribute cash, property or services to the business before it opens - and what ownership percentage each partner will have. Disagreements over contributions have doomed many promising businesses. • Allocation of profits, losses and draws. Will profits and losses be allocated in proportion to a partner's percentage interest in the business? And will each partner be entitled to a regular draw (a withdrawal of allocated profits from the business) or will all profits be distributed at the end of each year? You and your partners may have different ideas about how the money should be divided up and distributed, and each of you will have different financial needs, so this is an area to which you should pay particular attention. •Partners' authority. Without an agreement to the contrary, any partner can bind the partnership without the consent of the other partners. If you want one or all of the partners to obtain the others' consent before binding the partnership, you must make this clear in your partnership agreement. • Partnership decision-making. Although there's no magic formula or language for divvying up decisions among partners, you'll head off a lot of trouble if you try to work it out beforehand. You may, for example, want to require a unanimous vote of all the partners for every business decision. Or if that leaves you feeling fettered, you can require a unanimous vote for major decisions and allow individual partners to make minor decisions on their own. In that case, your partnership agreement will have to describe what constitutes a major or minor decision. You should carefully think through issues like these when setting up the decision-making process for your business. • Management duties. You might not want to make ironclad rules about every management detail, but you'd be wise to work out some guidelines in advance. For example, who will keep the books? Who will deal with customers? Supervise employees? Negotiate with suppliers? Think through the management needs of your partnership and be sure you've got everything covered. • Admitting new partners. Eventually, you may want to expand the business and bring in new partners. Agreeing on a procedure for admitting new partners will make your lives a lot easier when this issue comes up. • Withdrawal or death of a partner. At least as important as the rules for admitting new partners to the business are the rules for handling the departure of an owner. You should set up a reasonable buyout scheme in your partnership agreement. • Resolving disputes. If you and your partners become deadlocked on an issue, do you want to go straight to court? It might benefit everyone involved if your partnership agreement provides for alternative dispute resolution, such as mediation or arbitration. As you can see, there are many issues to consider before you and your partners open for business -- and you shouldn't wait for a conflict to arise before hammering out some sound rules and procedures. As a general rule, assets owned by spouses in joint names are treated by the Taxman
as shared equally by both partners, and any income produced will be taxed accordingly. But where actual ownership of an asset differs from 50/50, a married couple can elect to be taxed on their actual share of any income it produces. However, until 2011 the Taxman would not accept an election for unequal ownership in respect of bank accounts. His view was that any interest a joint account produced must be declared and taxed on a 50/50 basis because the money in joint accounts is equally accessible to both spouses. In practice, where both spouses pay in and withdraw money from an account, it can be virtually impossible to say how much of the balance belongs to each. This means it’s also impossible to say how much interest each is entitled to. This problem can be overcome by spouses agreeing how much money in an account belongs to each of them. Use our draft agreement to indicate who is the beneficial owner of the money in your joint bank accounts and thus the extent to which interest is taxable on each of you. When you make an agreement you can submit a Form 17 election stating how the interest is to be allocated for tax purposes. A Form 17 can be viewed and downloaded from the HMRC website Download here. A Form 17 must be sent to the Taxman within 60 days of the date of declaration. This deadline will not be extended for any reason. Send a copy of the agreement with the Form 17. Following the recent announcement of headline settlement between the FSA and the major high street banks-Barclays, HSBC, Lloyds and RBS, there are going to be many businesses which are suffering financially because they had to enter interest rate swap schemes that are not now in their best interest.
Borrowers may not have fully understood or taken financial advice as to they where getting into at the time. Other businesses may have been given no option other than to have entered the scheme at the time. Most of these businesses are paying high interest rates that will make survival harder in times of low interest rates. When a loan was taken out with a swap, the interest rate is in effect fixed at a certain level. On reviewing the practice, the FSA found what it described as “serious failings” in many such agreements. Swaps became popular before the 2008-2009 downturn in the economy as they where offered by the Banks as protection against a possible rise in interest rates. They took many forms such as swapping variable for fixed rates and capping rates, and included complex financial products common within the financial markets but not suited to the “real” economy. This is the area of concern where Borrowers may have felt compelled to take a swap and told that if they did not they would not get the loan. It is felt that Banks may have failed in their duty to explain the concept of swapping rates properly. The rate of interest and the swap may simply have been imposed by the lender and a separate swap provider acting together, something tat the Borrower may not have realised. Most swaps where akin to modern “Casino Style” that Banks used instead of the face to face High Street transaction with someone the Borrowers knew and trusted. This is a welcome development for many businesses and I feel that if you where involved in changing from variable to fixed rates on the advice of the Banks. |