The Great Debate UK

What happened to taking responsibility for our own actions?

Rachel Mason is public relations manager at Fair Investment. The opinions expressed are her own.

A recent survey by Moneysupermaket.com has found that the zero per cent introductory offers on credit cards are getting longer while the rates that kick in once the period is over are getting higher, and now consumer groups are arguing that banks should be held accountable for luring poor innocent people into debts they cannot repay.

Yes, the banks should be more sensible, because this is exactly how they got themselves into a mess the last time, but what happened to taking responsibility for our own actions? Just because someone offers you ‘credit’ doesn’t mean you should take it – if you don’t have the money, don’t spend it.

Sadly, it is the same everywhere – we live in a blame society. If something goes wrong, it must be someone else’s fault.

Most days, some ridiculous story will surface where kids have been banned from playing conkers in case they lose an eye (because eye loss as a result of conkers is common place) or skipping in case they fall over and break their neck (again, death by skipping is a serious issue) and we all cry ‘it’s health and safety gone mad!’ but let’s face it, we have brought it on ourselves.

These ‘no win, no fee’ accident claims, where people sue their employer because they dropped a box on their own head, or their local council because they fell over their own feet have created a ‘scaredy cat’ society where no organisation will do anything that might leave them open to be sued.

Rubbish rates – what is a saver to do?

-Rachel Mason is PR manager at Fair Investment Company. The opinions expressed are her own.-

The base rate is going to be stuck at 0.5 percent for years to come, according to experts, so where does that leave savers?

Yes, the base rate needs to be low for any real economic recovery, and many mortgage holders can’t believe their luck, with many seeing their payments plummet. But there is always a flipside, and with a low base rate comes low savings rates.

With inflation up at 5 percent (as measured by the Retail Prices Index) it is impossible to get a savings account that even maintains the value of your money, let alone increases it, so what should savers do in such a low rate environment?

Well, unfortunately, since National Savings and Investment’s withdrawal of its tax-free index-linked certificates, virtually all savings accounts are paying interest rates below RPI inflation.

So what can you do? Well, if you are looking for a purely cash account, realistically, the only way of securing a relatively reasonable rate on your savings is to go for a fixed rate savings account – the best ones at the moment are offering around 3.15 percent, when fixed for one year, and 4.90 percent when fixed for five years.

With a fixed rate, you know where you are for the entire term, whereas often with variable rate accounts, providers offer what seems like a good deal but they can pull the rate at any point, so you may only get the advertised rate for a few months. If you can afford to leave your money alone for a few years, it may be well worth fixing for a longer period of time, because analysts are predicting interest rates to stay low for some time.

VAT rise – is it really that bad?

Rachel Mason is public relations manager at Fair Investment Company. The opinions expressed are her own.-

So the new coalition government is putting VAT up from 17.5 percent to 20 percent on January 4 2011 and the country is up in arms, but is it really that bad?

Okay, in an ideal world, taxes would be low and public services would be top quality, but sadly, the world we live in is not like that. The Institute of Economic Affairs (IEA) says Britain’s real debt is already 4.8 trillion percent – six times higher than the official figure of 772 billion pounds – and the simple fact is we need to pay it back, and to do that, the government needs to raise tax and cut spending.

A rise on income tax would have been a very unpopular move, so the government really only has one option left – VAT.

As George Osborne said, “This single tax measure will by the end of this Parliament generate over £13bn a year of extra revenues. That is 13 billion pounds we don’t have to find from extra spending cuts or income tax rises.”

Considering what VAT actually is, the reaction to the rise has been disproportionate. For a start – did anyone really notice a big difference when Labour cut VAT to 15 pounds? No? Well, we probably won’t notice a difference when it goes up by the same amount.

Nothing is certain but death and taxes

-Rachel Mason is public relations manager at Fair Investment Company. The opinions expressed are her own.-

If there is one thing in this life you can be sure about it is that you are going to be taxed a lot. You can’t escape it. You are taxed on your income, then you are taxed on the money from your income that you have already been taxed on when it becomes savings, then you are taxed on your pension, which is made up of cash that you have already been taxed on, and then there’s road tax, car tax, council tax, VAT, stamp duty….the list goes on.

And then of course, just when you thought you couldn’t be taxed anymore, you get taxed on any profit you make when you sell any assets – assets bought with money that’s already been taxed! I am talking of course about the tax that’s the talk of the moment – capital gains tax.

The new coalition government is planning to increase capital gains tax from its current rate of 18 per cent to 40 per cent or possibly even 50 per cent, a move that aims to stop ‘fat cats’ from taking their income as capital gains (the 18 per cent capital gains tax rate is lower than their 40 percent income tax rate) and that is all very well, apart from the fact that it is going to hit millions more, the vast majority of whom are certainly not fat cats.

Those due to be hit hardest are second home owners, landlords, and sadly, older people in care homes. According to a report in the Telegraph this week, any person who moves into a nursing home but continues to own their former family home could be liable to pay capital gains.

This is because, after three years of living in care, the nursing home is deemed the person’s primary residence and their former home is designated as a “second property”. This means that if the person is then forced to sell their home, for example, to pay for their care home fees, they will be liable to pay capital gains if their home has increased in value.

Is this fair? Well, no, it’s not. We already live in a society where people are being encouraged to save and then hit when they do, and now we have a situation where old people, many of whom have worked all their lives to own their own home are being taxed for this hard work simply because they cannot look after themselves anymore.

Seeking solutions for IT firms during economic crisis

-Steve Wagner is Managing Director at Fair Web Solutions. The opinions expressed are his own.-

There can be no doubt that the recent global financial crisis has affected all areas of the economy and even though initially the likes of manufacturing companies and property development companies appeared to be the most affected, every business has had to take notice and consider what initiatives they can put in place to minimise the damage.

So what impact has this had on both internet and software development? And should businesses be scaling back investment in these areas or be looking to make strategic advances through continuing investment?

Since the dot-com bubble burst the internet has enjoyed continued growth in both technological advancements and global exposure with more people than ever having access to fast internet via broadband.

Further to this, data on browsing habits has demonstrated that consumer confidence in all the key demographics has also grown to the point where internet banking, social networking, streaming media, blogging, podcasts, mobile applications and wireless have embedded themselves firmly into many consumers everyday lives.

This transition from traditionally offline to online transactional activities has resulted in continued growth in demand and remuneration for web-based professionals such as developers, designers and marketing specialists (SEO, PPC, etc.) which has seen little impact to date from the current economic climate.

Whether this continues remains to be seen but, given that the evolution of the web is showing no signs of slowing and is instead enjoying one of the most exciting periods of transition, there is justifiable evidence to be positive.

Could VCT changes spell trouble for the economy?

-Rachel Mason is public relations manager at independent financial service providers Fair Investment Company. The opinions expressed are her own. -

Investing in start-ups can be risky, but vital for a healthy economy, so in 1995, Venture Capital Trusts were introduced by the government to encourage people to invest in small, growing UK companies.

To counter the risks involved, the government made VCTs attractive by offering 30 percent up front tax relief on investments of up to 200,000 pounds each tax year, they also made the dividends on VCTs free from income tax and capital gains tax, and any gains from the sale of VCTs free from capital gains tax.

This meant that many investors started putting their money into VCTs, giving small businesses in the UK a boost and giving themselves a nice tax break on their investments.

But now, there is talk that qualifying rules for VCTs will change, making VCT investments riskier and this is bad for business and bad for investors.

Currently, VCT rules require VCT managers to invest 70 percent of the fund’s assets in qualifying companies within three years from the issue of shares which means the VCT can keep 30 percent in cash. Then, of that 70 percent, 30 percent must be invested in the firms’ ordinary shares.

The new proposals are that this 30 percent is raised to 70 percent which means a total of 49 percent of the fund’s assets must be invested in a firm’s shares compared 21 percent now, which obviously makes investing in a VCT a whole lot riskier.

Tax year end – are you ready?

Rachel Mason is public relations manager at independent financial service providers Fair Investment Company.The opinions expressed are her own. Reuters will host a “follow-the-sun” live blog on Monday, March 8, 2010, International Women’s Day. Please tune in.-

With the end of the tax year fast approaching, now is the time to make sure all your finances are in order and that you are maximising all the annual allowances, reliefs and exemptions available.

Make the most of your ISA allowance – aged 50 and over, you’ve got an extra 3,000 pounds! You can’t carry your ISA allowance over into the next financial year, so if you haven’t made the most of it – use it, or you’ll lose it. The current limit is 7,200 pounds – all of which can be invested into a stocks and shares ISA or up to 3,600 pounds can be invested into a cash ISA with the remainder in stocks and shares.

But for those aged 50 and over, the limit is £10,200, £5,100 of which can be invested in a cash ISA.  This new limit, which came into force in October 2009, will be extended to all other ISA investors from April 6th 2010.

If you haven’t used your allowance, now is the time to do it, especially as Easter falling early means the last working day of the tax year is actually April 1st. Cash rates are pretty awful at the moment so it is worth looking at the range of stocks and shares ISAs available – choose from income or growth or a combination of the two,  paying close attention to the level of risk you are willing to take.

If you have already used your ISA allowance, but want to improve the administration, performance, fund range, or charging structure, you can still do an ISA transfer. If you have a stocks and shares ISA you can transfer into another stocks and shares ISA, if you have a cash ISA, you can switch to another cash ISA or you can transfer into a stocks and shares ISA. But, once you have moved a cash ISA into stocks and shares ISA, you can’t move it back. One half of a couple? Invest in the name of the one who pays the least tax

Pensioners feel pinch from low rates

- Sharon Bratley is chartered financial planner at Fair Investment. The opinions expressed are her own. -

What does the decision by the Bank of England to keep interest rates at a record low of 0.5 percent mean for the average Briton in retirement?

Well, unfortunately things are not looking good for pensioners at the moment. The official rate of inflation may be on its way down, but in real terms inflation remains high, particularly for pensioners. This time last year, the cost of everything from gas and electricity to a loaf of bread cost less than it does today, and despite falling inflation, prices are slow to come down from their peaks of late last year.

Take energy bills for example – there are millions of pensioners living in fuel poverty, yet it is only in the last few weeks – as the summer months approach – that energy companies are finally bringing down their prices – although still at a fraction of the rate that they increased at.

Add to this the fact that RPI, which pensions are linked to has fallen to below zero, and it is no surprise that many pensioners rely on other savings and investments to supplement their incomes, which is why the failure to increase the base rate will come as a further blow to pensioners.

This time last year the base rate stood ten times higher than it is today at five percent, and savings account rates reflected this. But as the average no notice savings account rate is now 0.65 percent (according to Moneyfacts.co.uk), pensioners who are having to rely on their savings are finding themselves left high and dry.

Since interest rates tumbled from their heights of last year we have seen a change in both the economy and the way that consumers treat their finances. In recent months investment houses have been inundated with new applications for investment products as consumers turn their backs on conventional deposit accounts offering low returns.